By Kieran K. Meadows
What a difference a year makes.
Jobseekers may not feel better, but if you ask economists, things are not nearly as bad as they thought they might be.
“Looking forward and looking backward, we’re better off than most people would have imagined at this point,” said Barbara Byrne Denham, an economist for Eastern Consolidated, a real estate investment company.
Just over a year since the financial crisis plunged New York into the depths of recession and uncertainty, some economists are now cautiously optimistic about next year’s outlook. They predict a moderate turnaround in mid-2010. While conceding there’s a long road ahead to a full recovery, they point to some encouraging signs the economy is stabilizing. Some say this is largely the result of government intervention.
“The government came in and bailed out the financial firms and they are major employers in New York City,” said Ken McCarthy, an economist for Cushman Wakefield, a real estate services firm. “The financial sector is coming back more quickly than anybody expected.”
After being propped up over the last year by the feds, Wall Street to estimated to make $59 billion in profits in 2009—its highest ever—and a complete U-turn from huge losses of $11 billion in 2007 and $42 billion in 2008.
On Thursday, the Independent Budget Office reported fewer job losses and higher tax revenues than it had originally projected. “We expect New York City job losses to be far lower than we anticipated last spring,” said Ronnie Lowenstein, the director of the IBO.
The revised report forecasts the city to lose 157,200 jobs from the peak of employment in August 2008 through mid-2010—much fewer than the 254,500 lost jobs from the earlier report. “That’s a huge difference,” Lowenstein said.
The construction sector has also showed signs it’s slowly improving. Work began at $3.9 billion worth of projects in the third quarter of 2009, twice that of the year’s first three months, according to an analysis by the New York Building Congress.
The state Department of Labor reported that the city’s jobless rate was 10.3 percent in October, unchanged from September. “After deteriorating for months, the city’s unemployment rate appears to be stabilizing,” said Comptroller William C. Thompson, Jr. in a statement.
Despite encouraging signs, the city is not close to being out of the woods yet. Unemployment is likely to come down very slowly, said Rae Rosen, an economist with the Federal Reserve Bank of New York. She says banks are rebuilding capital, which limits their ability to make loans to businesses. With less access to credit, small businesses, which are traditionally engines of recovery, have been unable to create jobs.
Moreover, the unemployment rate will likely inch higher until it levels off at least six months from now, after we shed another 50,000 to 75,000 jobs.
To counteract this trend in 2010, Jonathan Bowles, the director of the Center for an Urban Future, says city officials should focus on diversifying our economy to depend less on Wall Street. “We need to identify areas where there’s substantial opportunities for growth,” he said, citing the tech and creative sectors. “We attract the most talented and creative people,” which is “a core strength,” he said.
New Yorkers should hope the city follows the footsteps of the national economy. On Friday, more evidence revealed the U.S. is turning the corner toward recovery faster than expected. The U.S. unemployment rate dropped from 10.2 percent in October to 10 percent in November—perhaps not a significant drop, yet symbolic after a year of awful economic news.
“Positive job growth at the national level will be a huge boost in morale overall,” Denham said, building confidence on Wall Street and on the part of consumers, which can help accelerate the city’s economic recovery into the new year.