Yves here. Every big city has its own economic dynamics, and New York has some distinctive ones: the importance of Big Finance, tourism, and Broadway. IMHO, another key industry, health care, is often omitted. A non-trivial number come from outside the state or even outside the US for treatment. For instance, wealthy Arabs will come to Bangkok for fairly routine surgeries like stents, but cancer? New York City’s top hospitals are the preferred venue. The article admittedly does mention the big blow that the loss of medical research grants would have on New York’s teaching hospitals. Speaking of cancer, friend’s wife, a Mongolian who studied in Chinese private schools, got her MD in Japan, and then an PhD at Yale (so yes, fluent in four languages) has been a cancer researcher for decades at one of these institutions. Will her work be on the chopping block?
This piece recounts how most major New York City sectors were doing well at the start of the year, but some of the internals, as traders like to say, are flashing warning signs.
Readings from other parts of the US and cities around the world welcomed.
By Greg David. Originally published at THE CITY on March 18, 2025
A SoHo retailer advertises a big mark-down along Broadway, Sept. 19, 2024. Credit: Ben Fractenberg/THE CITY
New York City is stuck in the middle of two crosscurrents that will determine whether the local economy will continue to grow this year or plunge into a recession.
Big Wall Street bonuses, strength in tourism and a huge increase in jobs last year are in a tug of war with consumers cutting back on spending, Trump administration policies that deter visitors from coming to New York and federal budget cuts that could cost thousands of jobs in the coming months.
And with the mayor’s race underway, the administration of Mayor Eric Adams sees the glass as overflowing — and his opponents as more than half empty.
“The numbers don’t lie: New York City keeps breaking jobs records,” said Jeff Holmes, a spokesman for the city Economic Development Corporation. “With this administration’s focus on pro-family, pro-housing, and pro-business policies, it’s no surprise that there is more economic opportunity than ever. Combine record jobs with new Census data showing that our population grew by 122,000 over the last two years, and it’s clear that New York City is strong and thriving.”
City Comptroller Brad Lander, who is running against Adams for mayor, disagrees.
“Data show signs that businesses and households alike are bracing for the fallout of the new national posture,” he said in an economic report issued last week. “Trump’s trade wars risk worsening the affordability crisis at a time when New Yorkers are already confronting high rents and struggling to keep up with the costs of everyday goods.”
Data released in the last week shows the strength of the economy at the moment. The good news began with huge bonuses paid out by Wall Street this winter.
The payouts, which comprise a large share compensation at securities firms, appear to have jumped 37% this year according to the latest economic report from Lander, which would make the bonuses total more than $45 billion. Wall Street accounts for 27% of state and 7% of city tax revenue, meaning the bonuses are funneling billions of income tax dollars into state and city coffers.
Hotel occupancy topped 70% in both January and February, up slightly from last year, and the revenue per room jumped by almost 10% as a result of strong demand.
Attendance on Broadway has surpassed 2019’s record audiences for most weeks since November. Trends on the Great White Way exemplify the importance of tourists to the city’s economy, since visitors account for almost two-thirds of Broadway theatergoers.
In addition, job growth was especially strong last year. The state labor department on Thursday increased the total gain for the year by slightly more than 40,000 to a record 4.84 million jobs, with significant increases in the high-paying financial and professional services sectors.
TV and film jobs recovered from last year’s strikes much more sharply at the end of the year than previously reported, and media jobs cuts were slightly less than thought. Nevertheless, the broad information sector remains 15,000 jobs below the 2022 peak of 245,000.
The one Achilles’ heel of the job landscape is that two-thirds of last year’s increase came from low-paying health care positions.
While all those indicators are strong, trouble lies ahead. Consumer sentiment is weakening, yellow lights are flashing about summer travel, Wall Street’s expectations of another banner year haven’t been fulfilled and the Trump administration cancellation of billions of dollars in research grants is almost certain to lead to big job losses soon in the city.
While local retail sales are not tracked, sales tax revenue has been subdued for the last eight months, the Lander report noted. Restaurants seem to have been particularly hard hit. National numbers for consumer sentiment and February sales paint a particularly bleak picture, which is likely to be the same for New York.
“Many owners say their business is down compared to last year,” said Andrew Rigie, executive director of the New York Hospitality Alliance. They cite the economic uncertainties created by Trump’s economic policies and, given the strength of tourism, signals a cutback by locals.
While the city’s tourism agency New York City Tourism + Conventions predicted in December that the number of visitors this year would break the 2019 record of 67 million, that forecast now seems in doubt.
Delta, Southwest Airlines and American Airlines all reduced their expected revenue predictions for the beginning of the year, with travel dropping for the lowest fares and within the United States.
Worse, Trump policies are angering many potential international visitors, who are crucial to New York because they stay longer and spend more than domestic tourists.
Especially problematic for New York is the growing anti-American sentiment in Canada sparked by Trump’s demands that it become the 51st state could cost New York dearly, since Canadians are the second largest group of international visitors to the city.
New bookings to the United States from Canada have declined about 20% since Feb. 1 compared with the year-ago period, according to Forward Keys, a flight ticketing data firm.
Wall Street was supposed to give a jolt to the city’s economy this year as the 2024 Republican victory would result in a major tax cut bill boosting profits and spurring stock market gains. The Trump administration anti-regulatory attitude would spur mergers and acquisitions, a key source of profits for securities firms.
Instead, worries about what tariffs would do to inflation and economic growth have sent the major stock market indices down about 10%, which is called a correction. The M&A wave, which would be worth billions in fees to securities firms, has failed to materialize as economic uncertainty has paralyzed corporate decision making.
The Trump downsizing of the federal government could see pink slips given to the 52,000 New York City residents with federal jobs. But an even bigger number could come from research grant cutbacks which fund thousands of jobs in the city.
Statewide, the National Institute of Health provides over $3.5 billion to more than 250 entities with much of the funds going to the state’s leading biomedical, cancer and other health care research. The Greater New York Hospital Association said that the move to eliminate funds for overhead could lead to a reduction of $850 million.
While no specific estimates of the impact in New York are available, John Hopknis University in Baltimore, laid off 2,000 workers last week because of the squeeze.
“The impact of these cuts will be far-reaching,” a group of business leaders wrote the state’s congressional delegation in urging them to restore the money and fight additional cuts. “Our members rely on these institutions to build a qualified workforce and to conduct critical research that drives industry innovation.”
NYC is facing an ordeal of 1,000 cuts, beyond what was mentioned…..work-from-home during Covid has made a structural destruction of demand for high-rent commercial buildings.
In my circle, the only person who regularly (more then 3x a week) goes into the office anymore is my litigator sister-in-law. My brother is in charge of a corporate legal team, and they are all 100% remote with office hours as an individually as-needed basis.
and beyond other obvious trends….having a high-density, “downtown/midtown” tourist area isn’t special anymore. Of course nothing literally is the same as Midtown Manhattan. But with downtown areas revitalized all over the country over the past 30 years, it makes a difference on the margins. A family’s semi-annual NYC trip gets replaced with an annual trip and a second trip closer to home. Instead of a Manhattan convention, an event organizer picks Nashville because it’s “good enough” but much cheaper, etc.
I hope NYC can pivot back to being a “more normal” city without much disruption—-even 1999 NYC seems like a whole different world compared to the NYC of today. Back then, a buddy lived in Astoria for $550/month for roomy 1 bedroom apt. in a walk-up—2 minutes walking distance from the N train station! And we’d gently mocked him on living in the wilderness since he was on the other side of the river
Agglomeration benefits matter – i.e. the density and interconnections of urban areas. Big, well interconnected cities always seem to thrive and grow, even when their original economic purpose has gone long past its sell by date. New York, London, Shanghai, Moscow, Rome, Tokyo, have all survived and thrived through sometimes multiple series of economic changes and/or catastrophes over the centuries. Having lots of people in a fairly small area, constantly interacting, seems to enhance productivity in a way that often defies measurement. Its very hard to otherwise explain why cities like London or Paris continue to grow and dominate economically, long after the initial reason for their existence has passed into history. This pattern repeats itself all over the world at a smaller scale – its hard to see otherwise why so many countries end up with hugely over-expensive and oversized capital cities that seem to defy logic, constantly attracting people and capital when there are far cheaper alternatives.
So in the long term I’d expect New York to remain one of the worlds great cities. I think remote working – which is undoubtedly here to stay to some extent – will cause some changes – probably to the benefit of attractive small towns and rural areas. But its hard to see it resulting in a large scale loss of economic strength. Former great cities of the past – like Kyoto or Kaifung or Samarkand or Shiraz – tend to fall back only in relative terms, and then usually only if they lose political power.
RE: “…probably to the benefit of attractive small towns and rural areas.”
As someone from a rural area attractive to these NYC PMC types, I can assure you that having people moving in after paying way above the asking price on a property, often sight-unseen, is NOT to the benefit of the rural people already living there. It eventually forces out many of the locals who can no longer afford the increased taxes and cost of living.
“I can assure you that having people moving in after paying way above the asking price on a property, often sight-unseen, is NOT to the benefit of the rural people already living there.”
“People” is doing a lot of work there. Much has been said about firms buying up property.
And some of those who are individuals are just buying an asset…not a home.
I agree with your general sentiment but I think your last sentence is key.
I think we are at a point in human history where certain “unassailable” cities may suddenly be in big trouble. Tipping points from non-linear climate models are increasingly in line with what we’re seeing in real time. Before it was considered “something to consider” I was thinking London is doomed a LOT faster than people think: on the order of 2 generations, not 200 years.
I realise this is a personal view, and the data about the “cold spot” near Greenland with all it may encourage re climate variation in the UK etc, but I’ve thought for a while we should be preparing for moving our capital to somewhere further north and definitely 50 metres higher. At the very least we should be PREPARING a city in that area, just in case…….it would be either on higher ground northi of Birmingham or in the prime location of North of Nottingham, encompassing the already merging former mining towns there.
It might also dampen down a lot of destructive regional politics.
I remember some discussions about the growing number of empty NYC storefronts BEFORE Covid.
Louis Rossman had a whole series of YouTube videos 4-6years ago where he walks neighborhoods showing the massive vacancy rate combined with the crazy high asking rent.
The reasons behind empty storefronts can be quite complex. Sometimes, in a rental downturn, owners keep them empty in order to maintain the notional capital valuation of the property – renting out at even a slightly reduced rate can trigger a revaluation of a property which can impact on solvency and/or the ability to raise money on the capital valuation of the building.
It can also be tied to the specifics of local zoning or other regulations – it can be a way to pressurise local governments to alter zoning regulations to whatever it is the owners favour. Sometimes its simply a matter of small retail units (which are often put in to satisfy zoning ordinances) being something of a headache to deal with in commercial or residential blocks. I know several examples of where managers left ground floor retail units out of simple laziness. The rents weren’t worth the work involved.
It didn’t and doesn’t seem like a cyclical problem. That much can be seen.