From The NYT: Wall Street Bailout May Moderate City’s Downturn In fall 2008, after Lehman Brothers collapsed and other Wall Street firms seemed ready to topple, New York appeared to be headed for a brutal recession, one that would rival the worst downturns in the city’s history. Now city officials and private economists are busily revising their forecasts with a drastic change in tone. The... [more]
From The NYT:
Wall Street Bailout May Moderate City’s Downturn
In fall 2008, after Lehman Brothers collapsed and other Wall Street firms seemed ready to topple, New York appeared to be headed for a brutal recession, one that would rival the worst downturns in the city’s history.
Now city officials and private economists are busily revising their forecasts with a drastic change in tone. The gathering consensus is that the recession is nearly over in the city and, largely because of the enormous amount of federal aid poured into the big banks, the toll on New York will be much less severe than most had feared.
Not only will the job losses in the city fall far short of the vicious recession that wracked the metropolitan area in the early 1990s, economists and analysts say they will also not measure up to the losses in the shorter, shallower recession that surrounded the 9/11 attacks. Where once the projections called for employment in the city to decline by as many as 300,000 jobs, they now estimate the losses will be about 200,000 jobs.
Nobody is playing down the damage that the financial crisis has caused in the city. The unemployment rate hit 10.6 percent in December, more city residents are unemployed than at any time in at least 34 years, and the city and the state are cutting services to bridge growing budget gaps.
But the primary measure of the local impact of a recession has always been how many jobs it wiped out; on that score, this recession has been significantly milder in New York than in the rest of the United States. The most closely watched forecasters now expect the city to follow the nation out of recession in the next few months without having suffered as much as other large cities in big states like California, Florida and Illinois.
“We’ve been surprised, too, that the city economy hasn’t been hit harder than it has, given that Wall Street was at the center of the financial crisis and panic,” said Mark Zandi, chief economist for Moody’s Economy.com. “Of course, there have been lots of layoffs on Wall Street, but not nearly as significant as in past recessions.”
Mr. Zandi said he expected the job losses in the metropolitan area to end within a couple of months and to amount to less than 4 percent of the region’s total employment at the peak of the last boom. By contrast, the nation lost more than 6 percent of its jobs over the last two years.
City officials agree. Mayor Michael R. Bloomberg and his lieutenants have been telling audiences that the recession will cost the city 100,000 fewer jobs than they had forecast a year ago.
They have also pointed to other signs that the city weathered the crisis better than the nation. Tourism fell off only slightly last year and declined much less than in some other big cities, like Chicago. Housing prices have declined less than in most other regions. Office vacancy rates, though they have doubled in the last year, are still lower than in most other large American cities.
“It’s certainly been a very surprising result for New York,” said Ken McCarthy, managing director of New York-area research for Cushman & Wakefield. “The total jobs loss has been a lot less than anyone expected and less than the rest of the country.”
And the city appears poised to track the national recovery more closely than in the last two recessions, when the city kept losing jobs for 12 to 18 months after the nation began to recover, Mr. McCarthy added.
“It’s certainly not going to be a 12-month lag,” he said “If there’s any lag at all, it’s going to be three to six months.”
Why has New York fared so much better than many feared?
Economists say the hundreds of billions in loans and aid the federal government pumped into the city’s banks fueled a quick reversal of Wall Street’s fortunes. That turnaround saved thousands of high-paying jobs and the controversial bonuses that go with them, averting a sharper drop in tax collections and consumer spending that would have resulted in even more layoffs.
“A lot of us had expected there would be 60,000 or 70,000 jobs lost directly in the financial services sector,” said James Parrott, an economist with the Fiscal Policy Institute.
“Then there would have been a spillover effect,” he said, referring to the widely accepted idea that each job on Wall Street supports two others in and around the city.
Instead, employment in financial companies in the city has declined by only about 30,000 jobs, and some big banks have been hiring again. Some analysts say they think that some of the biggest banks in New York, like JPMorgan Chase and Goldman Sachs, have emerged from the crisis in stronger relative positions than they held two years ago.
“To some degree, the city’s financial services sector has been strengthened by the crisis,” Mr. Zandi said.
“A lot of financial institutions in a lot of other parts of the country have evaporated,” he said, leaving the big banks in New York to fill some of the lending void.
Through the infusions of capital into its banks, New York has been the biggest beneficiary of the federal assistance of the last two years, Mr. Zandi and other economists said.
“One could argue that no city in America got as much government help as New York City,” Mr. Zandi said.
Citigroup alone received $45 billion in aid. JPMorgan Chase borrowed $25 billion, and Goldman Sachs and Morgan Stanley got $10 billion each. But each gained far more from the Federal Reserve’s policy of holding interest rates at very low levels for all of last year, helping them to amass record annual profits.
“The bailout was substantial, and it had a profound effect on Wall Street,” Mr. Parrott said. “It didn’t prevent substantial losses, but they would have been greater without it.”
For a change, New Yorkers have no reason to complain about sending far more of their tax dollars to Washington than they get back, Mr. Parrott said. He said he thought it was possible that New York recovered all of the surplus in its balance of payments to the federal government over the years.
“The magnitude of the bailout has been so great,” Mr. Parrott said, “that it will have wiped out whatever cumulative surplus we’ve seen so far.”
Whether that is true, economists agree that the course of this recession was radically altered by the federal aid the banks received. Few are ready to say that the recession is over in the city, but they expect the recovery, slow and halting as it may be, to begin soon.
“I think it’s too soon to say, Was that all?” said Ronnie Lowenstein, director of the city’s Independent Budget Office. But she said she believed that people would look back on the recession that began two years ago and see that “at the end of the day, it wasn’t as sharp a contraction as some people had anticipated.”
Ms. Lowenstein, whose agency was updating its forecast of the city’s financial condition for release this week, said she did not foresee the overall job loss being significantly larger than the 157,000 jobs in its last forecast. But she and other economists said they expected the city’s employment decline to be revised early this month to be slightly larger than the current official estimate.
Okay...have at it...
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Response by printer
almost 16 years ago
Posts: 1219
Member since: Jan 2008
moderator: please move this to the 'fiction' section. we all know that NYC is going to hell in a handbasket. Banking is over and done with - no one will ever make money here again. And that whole part about NYC being better off than most other parts of the country is hogwash - we all know that NYC will follow the exact same trajectory as places like Sacramento, LV, Phoenix and Florida.
Sure sales volume has been strong for 8 or 9 months, and prices have been steady to slightly higher, but its all a mirage. just those pent up buyers from '07 - well, the few that haven't lost their jobs or had their wealth evaporate. we will run out of those any day now, i'm sure of it. and then...watch out.
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Response by waverly
almost 16 years ago
Posts: 1638
Member since: Jul 2008
Well, that wouldn't be the first time the NYT was referred to as fiction (or probably the last).
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Response by printer
almost 16 years ago
Posts: 1219
Member since: Jan 2008
please amend. that final sentence should read: ...wachz outz
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Response by marco_m
almost 16 years ago
Posts: 2481
Member since: Dec 2008
thats good to hear. only thing is that until the jobs actually come back and banks start accepting restricted stock as a down payment, manhattan RE is toast!
printer and waverly, you are brave men. Bearers of good tidings are much despised on the SE boards.
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Response by printer
almost 16 years ago
Posts: 1219
Member since: Jan 2008
yep, it is a sad commentary that news that fewer people will be unemployed is looked upon negatively by so many on this board who are looking to capitalize on the misfortune of others.
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Response by marco_m
almost 16 years ago
Posts: 2481
Member since: Dec 2008
spare us your fake rightousness. the real estate game is about self interest..just like any other business.
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Response by waverly
almost 16 years ago
Posts: 1638
Member since: Jul 2008
Hey, 100,000 less jobs lost would be HUGE for NYC on many levels.
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Response by somewhereelse
almost 16 years ago
Posts: 7435
Member since: Oct 2009
"we all know that NYC is going to hell in a handbasket. Banking is over and done with - no one will ever make money here again. And that whole part about NYC being better off than most other parts of the country is hogwash - we all know that NYC will follow the exact same trajectory as places like Sacramento, LV, Phoenix and Florida."
Ah.... strawmen! The last gasp of the desperate bull!
"the world didn't blow up, so our 'there will be no crash' claims - even though there was a crash - were right!"
i love it!
Ignored comment.
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Response by somewhereelse
almost 16 years ago
Posts: 7435
Member since: Oct 2009
> so many on this board who are looking to capitalize on the misfortune of others.
Oh wait, THIS is funny... are you trying to pretend the bull scam was based on RIGHTEOUSNESS?
The lying brokers... they were "helping the people", right?
The folks rallying for home prices pushing beyond affordability...all for the greater good, right?
Calling folks who didn't own "bitter renters"... thats just charity right.
I love it!
Not only were the bulls stupidly incorrect, now they're pretending they were doing it for the good of all!
What hypocrites!
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Response by waverly
almost 16 years ago
Posts: 1638
Member since: Jul 2008
How did you get any of that from what was posted? I know you believe those things, but what prompted those statements here?
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Response by alanhart
almost 16 years ago
Posts: 12397
Member since: Feb 2007
Yeah, what waverly said, and also you forgot to blame the teachers.
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Response by bjw2103
almost 16 years ago
Posts: 6236
Member since: Jul 2007
And those awful unions and Democrats.
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Response by alanhart
almost 16 years ago
Posts: 12397
Member since: Feb 2007
No, no, that's already embodied in "teachers"
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Response by alanhart
almost 16 years ago
Posts: 12397
Member since: Feb 2007
But I predict a Charlie Rangel post soon.
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Response by waverly
almost 16 years ago
Posts: 1638
Member since: Jul 2008
Poor Charlie may have a little more time on his hands now...
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Response by WideStance
almost 16 years ago
Posts: 41
Member since: Sep 2008
yes us bulls were stupid - I was stupid over 2 million time$ last year.
Somewhereelse - how much money did you make paying rent to your landlord?
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Response by somewhereelse
almost 16 years ago
Posts: 7435
Member since: Oct 2009
> I was stupid over 2 million time$ last year.
Yes, we know, you lost $2 million on your lousy RE investments.
> Somewhereelse - how much money did you make paying rent to your landlord?
Hmm... I estimate that I only had to pay about 5% of what my moron landlord lost on the apartment over the last 2 years!
See, putzfitz, we told you.. .you should have listened!
Moron called 15% up right before it went 25% down!
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Response by somewhereelse
almost 16 years ago
Posts: 7435
Member since: Oct 2009
"How did you get any of that from what was posted? I know you believe those things, but what prompted those statements here? "
Waverly... you seem to be a bit confused here.
I was responding to someone else's posts... you know, the one I quoted in my response....
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Response by sisyphean
almost 16 years ago
Posts: 152
Member since: Jul 2009
Waverly - TY for another excellent post. I very much enjoy your contributions on SE. You have a keen eye for news that punctures the conventional wisdom and I like that.
As for the article that began this post, I agree with much of it. NY is NOT a "sand state," and I'm skeptical that we will experience the severity of the problems that have plagued other parts of the country for many of the reasons laid out in this article.
Nonetheless, before we stage a ticker tape parade to salute the end of the recession and hail the bailout for our salvation, I'd add a few caveats. Zandi's comment, “Of course, there have been lots of layoffs on Wall Street, but not nearly as significant as in past recessions" needs at very least a footnote. To the best of my knowledge NYC has been bleeding Financial Service jobs for many years - so to say there are less than in the past ignores the fact that you are starting from a smaller base. In absolute numbers the loss of FS jobs may be less than in past recessions, but it wouldn't surprise me at all if the numbers were greater percentage-wise this time around. (I have not looked at the data though, so I won't swear in blood.)
I don't follow the numbers that closely, and so I will fall back on "anecdotal" data which I usually question, but when I moved to NYC twenty years ago, FiDi was almost exclusively Fi, and there was no "Jersey skyline." Since I've been here, most of the new development (as well as conversions of existing office buildings) in FiDi has been residential, and a very large number of FS jobs have moved across the Hudson to the Jersey skyline.
Last Fall, the Empire Center for NY State Policy (part of the conservative Manhattan Institute) released a report stating that educated middle- and upper-class New Yorkers were leaving NYC in droves because of the high cost of living and high taxes. (Such gloom and doom and anti-tax sentiment got lots of play on SE at the time.) Of course, the Empire Center didn't explain themselves very well, since two of the main states to receive this outflow were NJ and CT - Both of which have a tax burden and a cost of living as high or higher than NYC. I'd argue that a lot of those FS folks moved to NJ because that's where the FS jobs are now, and they can buy a suburban home west of the Hudson and drive into their job on the Jersey side of the Hudson even though they might pay higher taxes. (A friend of mine works over there in FS and she says most of the workforce lives in NJ and not NY.)
While there's something to be said for the NY REGION including NJ and CT (as opposed to NYC) remaining the Financial capital of the U.S. and the world, this does erode the NYC and NYS tax base.
Beyond that, the views on NYC unemployment being relatively benign compared to past recessions may be through rose colored Dolce & Gabbana sunglasses - the knockoff kind that you buy from pirate vendors on the street. That is to say, that the general consensus among statisticians is that the "underground" economy has expanded significantly since the 1960s when the factory economy (employing the bulk of the workforce) had payrolls carefully regulated by the government collecting unemployment insurance. With the decline of factory employment in the past few decades a lot more workers are 1099 or completely undocumented, and are largely ineligible for Unemployment Insurance - as such they don't count in most government Unemployment statistics.
Data indicates that before the recession the overwhelming amount of financial wire transfers between the U.S. and Mexico flowed South. Lately scattered evidence indicates that the flow now goes in both directions since many Mexican immigrants are out of work and ineligible for unemployment benefits. All this is to say that unemployment may be significantly worse than the last time, but the government data may not show it since we don't have the means to accurately measure what goes on in the "underground" economy. So take the unemployment figures for NYC with a grain of salt.
Of course, as I observed in slightly different form in another thread, I doubt Mexican immigrants represent a very large segment of the NYC RE market. Unemployment among white, male, middle-aged college graduates has ticked up a few percentage points, but the overwheming majority still have jobs and are capable of buying RE.
moderator: please move this to the 'fiction' section. we all know that NYC is going to hell in a handbasket. Banking is over and done with - no one will ever make money here again. And that whole part about NYC being better off than most other parts of the country is hogwash - we all know that NYC will follow the exact same trajectory as places like Sacramento, LV, Phoenix and Florida.
Sure sales volume has been strong for 8 or 9 months, and prices have been steady to slightly higher, but its all a mirage. just those pent up buyers from '07 - well, the few that haven't lost their jobs or had their wealth evaporate. we will run out of those any day now, i'm sure of it. and then...watch out.
Well, that wouldn't be the first time the NYT was referred to as fiction (or probably the last).
please amend. that final sentence should read: ...wachz outz
thats good to hear. only thing is that until the jobs actually come back and banks start accepting restricted stock as a down payment, manhattan RE is toast!
http://select.nytimes.com/mem/archive/pdf?res=F30E12FF3559177A93C5A9178AD85F408385F9
printer and waverly, you are brave men. Bearers of good tidings are much despised on the SE boards.
yep, it is a sad commentary that news that fewer people will be unemployed is looked upon negatively by so many on this board who are looking to capitalize on the misfortune of others.
spare us your fake rightousness. the real estate game is about self interest..just like any other business.
Hey, 100,000 less jobs lost would be HUGE for NYC on many levels.
"we all know that NYC is going to hell in a handbasket. Banking is over and done with - no one will ever make money here again. And that whole part about NYC being better off than most other parts of the country is hogwash - we all know that NYC will follow the exact same trajectory as places like Sacramento, LV, Phoenix and Florida."
Ah.... strawmen! The last gasp of the desperate bull!
"the world didn't blow up, so our 'there will be no crash' claims - even though there was a crash - were right!"
i love it!
> so many on this board who are looking to capitalize on the misfortune of others.
Oh wait, THIS is funny... are you trying to pretend the bull scam was based on RIGHTEOUSNESS?
The lying brokers... they were "helping the people", right?
The folks rallying for home prices pushing beyond affordability...all for the greater good, right?
Calling folks who didn't own "bitter renters"... thats just charity right.
I love it!
Not only were the bulls stupidly incorrect, now they're pretending they were doing it for the good of all!
What hypocrites!
How did you get any of that from what was posted? I know you believe those things, but what prompted those statements here?
Yeah, what waverly said, and also you forgot to blame the teachers.
And those awful unions and Democrats.
No, no, that's already embodied in "teachers"
But I predict a Charlie Rangel post soon.
Poor Charlie may have a little more time on his hands now...
yes us bulls were stupid - I was stupid over 2 million time$ last year.
Somewhereelse - how much money did you make paying rent to your landlord?
> I was stupid over 2 million time$ last year.
Yes, we know, you lost $2 million on your lousy RE investments.
> Somewhereelse - how much money did you make paying rent to your landlord?
Hmm... I estimate that I only had to pay about 5% of what my moron landlord lost on the apartment over the last 2 years!
See, putzfitz, we told you.. .you should have listened!
Moron called 15% up right before it went 25% down!
"How did you get any of that from what was posted? I know you believe those things, but what prompted those statements here? "
Waverly... you seem to be a bit confused here.
I was responding to someone else's posts... you know, the one I quoted in my response....
Waverly - TY for another excellent post. I very much enjoy your contributions on SE. You have a keen eye for news that punctures the conventional wisdom and I like that.
As for the article that began this post, I agree with much of it. NY is NOT a "sand state," and I'm skeptical that we will experience the severity of the problems that have plagued other parts of the country for many of the reasons laid out in this article.
Nonetheless, before we stage a ticker tape parade to salute the end of the recession and hail the bailout for our salvation, I'd add a few caveats. Zandi's comment, “Of course, there have been lots of layoffs on Wall Street, but not nearly as significant as in past recessions" needs at very least a footnote. To the best of my knowledge NYC has been bleeding Financial Service jobs for many years - so to say there are less than in the past ignores the fact that you are starting from a smaller base. In absolute numbers the loss of FS jobs may be less than in past recessions, but it wouldn't surprise me at all if the numbers were greater percentage-wise this time around. (I have not looked at the data though, so I won't swear in blood.)
I don't follow the numbers that closely, and so I will fall back on "anecdotal" data which I usually question, but when I moved to NYC twenty years ago, FiDi was almost exclusively Fi, and there was no "Jersey skyline." Since I've been here, most of the new development (as well as conversions of existing office buildings) in FiDi has been residential, and a very large number of FS jobs have moved across the Hudson to the Jersey skyline.
Last Fall, the Empire Center for NY State Policy (part of the conservative Manhattan Institute) released a report stating that educated middle- and upper-class New Yorkers were leaving NYC in droves because of the high cost of living and high taxes. (Such gloom and doom and anti-tax sentiment got lots of play on SE at the time.) Of course, the Empire Center didn't explain themselves very well, since two of the main states to receive this outflow were NJ and CT - Both of which have a tax burden and a cost of living as high or higher than NYC. I'd argue that a lot of those FS folks moved to NJ because that's where the FS jobs are now, and they can buy a suburban home west of the Hudson and drive into their job on the Jersey side of the Hudson even though they might pay higher taxes. (A friend of mine works over there in FS and she says most of the workforce lives in NJ and not NY.)
While there's something to be said for the NY REGION including NJ and CT (as opposed to NYC) remaining the Financial capital of the U.S. and the world, this does erode the NYC and NYS tax base.
Beyond that, the views on NYC unemployment being relatively benign compared to past recessions may be through rose colored Dolce & Gabbana sunglasses - the knockoff kind that you buy from pirate vendors on the street. That is to say, that the general consensus among statisticians is that the "underground" economy has expanded significantly since the 1960s when the factory economy (employing the bulk of the workforce) had payrolls carefully regulated by the government collecting unemployment insurance. With the decline of factory employment in the past few decades a lot more workers are 1099 or completely undocumented, and are largely ineligible for Unemployment Insurance - as such they don't count in most government Unemployment statistics.
Data indicates that before the recession the overwhelming amount of financial wire transfers between the U.S. and Mexico flowed South. Lately scattered evidence indicates that the flow now goes in both directions since many Mexican immigrants are out of work and ineligible for unemployment benefits. All this is to say that unemployment may be significantly worse than the last time, but the government data may not show it since we don't have the means to accurately measure what goes on in the "underground" economy. So take the unemployment figures for NYC with a grain of salt.
Of course, as I observed in slightly different form in another thread, I doubt Mexican immigrants represent a very large segment of the NYC RE market. Unemployment among white, male, middle-aged college graduates has ticked up a few percentage points, but the overwheming majority still have jobs and are capable of buying RE.