CRAIN’s reports: After more than a year in which Greenhouse IT couldn’t land a single sales meeting, the company has finally gotten its foot in the door at city businesses over the past three months to pitch its workstation, server and network-management services.
“The good news is, companies are ready to talk,” says Simon Binder, managing partner. “The bad news is, they’re still reluctant to make decisions.”
Local executives like Mr. Binder are frequently turning to the phrase “cautious optimism” to describe the glimmers of light they see in the recovery. Yet when the rebound here is compared with what’s happening in the rest of the U.S., a brighter picture emerges: New York City has capitalized on growth in a mix of industries that were never crushed by the recession in order to bounce back faster than the country as a whole.
News last week that the U.S. recovery is losing momentum raised fears of a potential “double-dip” recession. That could crimp the city’s progress, of course, since New York’s fortunes are ultimately tied to the nation’s. But tourism is thriving, office vacancy rates have started to drop, and the five boroughs added jobs at a brisker clip than the rest of the country in the first six months of the year. The city has even managed so far to sidestep many of the public-sector layoffs that are thinning state and municipal work forces nationwide.
In the first half, the city economy grew by 1.7% (or 51,500 jobs), compared with 0.6% for the U.S. (593,000 jobs), according to an analysis of state Department of Labor data by real estate services firm Eastern Consolidated.
One reason the city has topped the nation: It relies less than other metro areas do on construction and manufacturing, which have been battered throughout the U.S. in the downturn.
On the flip side, New York was buoyed by gains in restaurants and retail trade, which both were boosted as business travel to the city picked up. Retail outlets recorded the largest gain of any city sector, showing a 10,500-job spike through June, while restaurants added 7,000 jobs, Eastern Consolidated reports.
Restaurateur David Kostman, co-founder and CEO of Nanoosh, has actually used the downturn to expand his roster of hummus eateries from one to four, spurred in part by the availability of cheaper space.
“For the last year, the big chains didn’t grow, and a lot of the banks were shutting down,” Mr. Kostman says. “We were able to get premier locations—and the prices were significantly lower.”
Securities firms shed 2,700 jobs in the first half, but the losses likely would have been much steeper had it not been for the federal government’s billions of dollars in bank bailouts, which ended up having a disproportionate impact on the city. And the overall finance sector recovered strongly, bolstered by a strong showing in real estate, which added 3,200 jobs. (Real estate has not held up nearly as well nationally, dropping 25,100 jobs through June.)
NEW YORKERS ARE FINDING JOBS
While the city and the U.S. share an unemployment rate of 9.5%, New York’s rate is more of a positive indicator. The city has shaved a full percentage point off its unemployment rate despite the fact that its work force has grown by 7,900, or 0.2%, since its previous peak in June 2009. Meanwhile, the nation’s work force has fallen by 1.9 million, or 1.2%, since its last peak in May 2009, as the unemployed have grown discouraged and given up looking for jobs.
“It’s a very good thing to see New York’s unemployment rate falling even though the labor force is growing,” says Marisa Di Natale of Moody’s Economy.com. “It means people coming back into the labor force or moving into the city are actually finding jobs.”
Plenty of indicators beyond the employment rolls point to New York’s relative health.
Hotel occupancy rates are up—checking in at nearly 90% in May, up from a low of 68% in the first quarter of 2009, according to Colliers PKF Consulting USA. The average price per room is still below prerecession levels, but the growth in occupancy comes despite a surge of hotel openings over the past 18 months.
“Throughout the downturn, we lost ground in individual business travel and business groups,” John Fox, a Colliers senior vice president, says of the New York hotel market. “And that’s where we’ve seen a lot of this recovery [lately].”
The city’s commercial office market has also started to rebound, says Ken McCarthy, managing director for New York area research at Cushman & Wakefield. Midtown south, downtown and midtown Manhattan boast the three lowest vacancy rates in the nation—9.3%, 9.9% and 11.5%, respectively, according to Cushman’s data.
Because the city lost a smaller proportion of its jobs in the downturn than the nation did, and because there was little significant new construction during the boom, local vacancy rates are below the national average of 14.8%, Mr. McCarthy adds.
Apartment rentals are surging, an indication that New Yorkers are confident in their ability to land jobs and that more people are moving here to seek work, says Economy.com’s Ms. Di Natale. She also notes that in the first quarter, the Case-Shiller Condo Price Index rose by 1.6% in the New York area—the only area in the country that posted a gain, according to Fiserv and Economy.com.
While news that the city is outstripping the U.S. on many economic fronts is positive, it’s also relative.
“We’re mostly ‘outperforming’ by ‘not doing as badly,’ ” says James Brown, chief economist at the state Department of Labor.
A truly robust recovery here will depend on the strength of a national rebound that now appears to be losing steam. For retailer Robert Schwartz, signs of hope started to appear in March, after the recession had taken a 20% chunk out of sales at his three Eneslow specialty shoe shops. Customers are starting to return, he says, but they’re buying only what they need, not what they want.
“It’s incremental daylight, not exponential daylight, because we were looking at numbers that were horrific,” Mr. Schwartz says. “It’s cautious optimism, not a real optimism.”
OPINION: “Increased jobs = increased consumer spending = increased tax revenues = reduced government subsidies = stronger profits = a stronger economy”, says Leonard Steinberg head of the Luxuryloft team and managing director of Prudential Douglas Elliman.