New York State Assembly
Click here for press release on Economic Report
October 9, 2002
EDWARD M. CUPOLI, CHIEF ECONOMIST
September 11th, A Year Later:
An Economic Update
The national economic outlook has dimmed in recent months as various economic
indicators have deteriorated. Most of the State's economic weakness is found
in New York City, which continues to feel the results of a national recession,
poor stock market performance and the attacks of September 11th. Those sectors
and regions of the State economy that performed best in the boom of the late
1990's are now suffering most. The economic effects of September 11th were
New York State Economy
Larger than expected declines in wages and employment have resulted from the
national recession and the September 11th attacks. The economic decline has
been in most sectors of the economy and in most areas of the State. Seven out
of every ten jobs lost statewide in 2001 Q4 were lost in New York City. While
wages declined in New York City, the remainder of the State grew slightly.
- New York City Gross City Product fell 3.9 percent in 2001 Q4,
declined 3.3 percent in 2002 Q1, and decreased 1.3 percent in 2002 Q2
(Source: New York City Office of the Comptroller). At the same time, U.S.
GDP grew 2.7 percent in 2001 Q4, grew 5.0 percent in 2002 Q1, and
increased 1.3 percent in 2002 Q2.
New York State Wages
- Wages fell 2.8 percent in the fourth quarter of 2001, after
no growth in the third quarter and a 3.2 percent growth in the second
- In percentage terms, the wage decline in the fourth quarter of 2001
was the largest since 1950.
- The wage loss in Manhattan surpassed statewide totals, while outside
of New York City wages grew slightly.
- More than seven of every ten dollars of State wages lost in the fourth
quarter of 2001 occurred in Manhattan below 14th Street.
- Withholding from wages declined 1.4 percent in the second quarter of
2002, following a 10.8 percent decline in the first quarter, and a 0.3
percent decline in the fourth quarter of 2001.
- State wage data that are available from the U.S. Bureau of
Economic Analysis show that wages declined 2.6 percent in 2001
Q4 and 2.3 percent in 2002 Q1.
- If trends continue State wages in 2002 will show the first
annual decline since 1991. This will also be the largest decline
in State wages in sixty years.
- Wage growth in 2003 could also be lower than the NYS Assembly
Ways and Means Committee's March 2002 forecast of 5.6 percent.
New York State Employment
- Recent data reveal a bleaker picture of employment loss in the immediate
aftermath of September 11th.
- About three out of five jobs lost in New York State in the fourth quarter
of 2001 were in Manhattan.
- One out of five jobs lost in New York State in the fourth quarter of 2001
were below 14th Street in Manhattan.
- Small businesses with less than 100 employees accounted for nearly
one-third of the State's wage losses and nearly one-half of the State's job
- The decline in employment growth between 2000 Q4 and 2002 Q2 was similar
in different parts of the United States.
- The employment decline in NYC was significantly worse.
- Recent data from the Covered Employment and Wages Program of the Bureau
of Labor Statistics (ES 202) shows that the job loss in the fourth quarter of
2001 was over 200,000. This is a much larger drop than the 122,000 decline in
the NYS Assembly Ways and Means Committee's March 2002 forecast.
- New York State ranked 43rd in employment change for the first eight
months of 2002.
- Manhattan Vacancy Rates
- In the third quarter of 2002 the vacancy rate rose in
Manhattan due to rising vacancies in midtown, while vacancy
rates downtown and in midtown south were stable.
- The office vacancy rate downtown increased faster than both
midtown and midtown south from the third quarter of 2001 until
the third quarter of 2002.
- The office vacancy rate downtown more than doubled since
the third quarter of 2001, increasing by 7.0 percentage points
through the third quarter of 2002. This compares to a 4.6
percentage point increase for midtown south and a 2.8 percentage
point increase for midtown.
- Manhattan Office Space Reopened (Tenantwise.Com, July 2002)
- 14.3 million square feet, or 59.6 percent of the 46.5 million
square feet of Class A office space was destroyed in Lower
Manhattan on September 11th.
- Of the 34.3 million square feet of all Lower Manhattan office
space damaged on September 11th, 17.6 million square feet (or
51.2 percent) is now reopened.
- Relocation (Tenantwise.Com, July 2002)
- Of 608 firms that were located in buildings damaged or destroyed
by the attack of September 11th, 180 were private firms with over
10,000 square feet of office space.
- Of the 180 firms that were effected by the damage and destruction:
- 64 (35.6 percent) moved to midtown Manhattan;
- 18 (10.0 percent) moved to other locations in downtown Manhattan;
- 76 (42.2 percent) retained their existing downtown location;
- 12 (6.7 percent) moved to New Jersey; and
- 10 (5.6 percent) moved to other locations outside New York State.
- Although there has been some recovery in tourism since the September
11th attacks, hotel and airline revenue continues to show significant
declines compared to the prior year.
- Restaurant revenue, on the other hand, remains strong relative to
other tourism-related spending, and never entered negative territory
after the attack.
- Hotel revenue in New York City had a deeper trough than the rest of
the nation and continues to show a larger drop than the rest of the country.
- Securities Industry Profits (Securities Industry Association, September 2002).
- 2000: $21.0 billion (record high).
- 2001: $10.4 billion (decline of 50.4 percent).
- 2002 forecast: $8.1 billion (decline of 22.1 percent), revised down by $3.6 billion from a month ago.
- 2003 forecast: $10.0 billion (growth of 23.5 percent).
- Securities Industry Employment (Securities Industry Association, September 2002)
- U.S. - August 2002: 722,000 (decline of 6.3 percent over previous year).
- NYC - August 2002: 172,300 (decline of 9.6 percent over previous year).
- Further hiring freezes or job losses are likely as gross revenue is expected to decline 16 percent in 2002.
United States Economy
- The Blue Chip Economic Indicators raised its consensus forecast for 2002 real GDP growth from the 2.3 percent reported in September to 2.4 percent in October.
- The Blue Chip consensus forecast for 2003 was lowered from the 3.2 percent reported in September to 3.0 percent.
- The new forecast for 2002 is still higher than the NYS Assembly Ways and Means Committee's March 2002 Economic Report forecast of 1.5 percent while the forecast for 2003 is lower than the Economic Report forecast of 3.7 percent.
- S&P 500
- October 3, 2002 level: 819.0, down 45.6 percent from the historical high of 1,506.0 recorded in August 2000.
- Before-tax Corporate Profits increased at an annual rate of 11.1
percent in the second quarter, after rising 29.7 percent in the first
quarter. This was the first increase in seven quarters. This was despite
sizable depreciation allowances ($132.4 billion) provided by the Job
Creation and Worker Assistance Act of 2002, which had the effect of
reducing reported profits.
- Financial market instability. Stock prices have spiraled downward due
to both declining profits and corporate accounting scandals that have led
investors to lose their confidence in corporate books, the regulatory
system, and the financial industry in general.
- Oil prices rose significantly in July (7.0 percent), in August (3.3
percent), and in September (6.4 percent), due mainly to rising international
tensions and the resulting precautionary demand.