March 25, 1999
H. Carl McCall
Office of the State Deputy Comptroller for
the City of New York
City Enjoys Best Two-Year Employment Growth on Record
The last two years have proved to be the best years
on record for employment growth in New York City. Between December
1996 and December 1998, total employment increased by almost 165,000
jobs (on a seasonally adjusted basis). The next best period was
1968-1969, just before the all-time employment peak in the local
Employment revisions released in March show that
recent growth was much stronger in New York City than originally
estimated, primarily in 1997. Most of this revision was centered
in local government education programs. Private sector employment
was about 10,000 jobs lower than previously estimated.
Nonetheless, the private sector still grew by almost
75,000 jobs, or 2.6 percent, in 1998. The growth in government
employment was flat, following an increase of over 12,000 jobs in
1997. Thus, total employment in New York City increased by 75,000,
or 2.1 percent, after a record setting increase of 90,000,
or 2.7 percent, in the year ending December 1997.
Recent employment growth has boosted the number
of jobs the City has recovered since the 1989-92 recession to 316,000
by February 1999, or 85 percent of what had been lost. The
share of jobs recovered by the Citys private sector is considerably
higher (97 percent) than this since the government sector has
declined since 1993. As shown in Figure 1, while the jobs lost during
the recession were spread throughout the local economy but centered
primarily in trade, the service sector has accounted for most of
the replacement jobs.
Employment in the City can be grouped into export,
local market, and government sectors. The export sector consists
of industries that provide goods or services on a national or international
level, thereby bringing income into the City. Local markets are
those that service the needs of residents and businesses here in
Job growth in the export sector, which had surged
to 51,800 or 4 percent in the year ending December 1997, eased back
to 39,200, or 2.9 percent, in the year ending December 1998.
As shown in Figure 2, export sector growth has been more volatile
since the end of the early 1990s recession.
Business services continued to lead the sector,
with job gains of 16,900, primarily due to computer software and
temporary help agencies. However, two of the areas that contributed
to the large gains of 1997 securities and culture and media
slowed considerably in 1998 (see Figure 3). The instability
in the financial markets helped hold the job growth in the securities
sector to 7,300 compared to 11,900 in 1997. A slowdown in movie
production was chiefly responsible for the slower employment growth
in culture and media 6,300 jobs in 1998 compared to 11,700
in the prior year. The electronic and print media areas showed somewhat
better growth in 1998.
Employment growth in professional services increased
at the best rate since the late 1980s (11,400 jobs) reflecting the
increased demand for the Citys lawyers, accountants, consultants,
and engineers. The Citys continued popularity as a tourism
destination has kept hotel occupancy high and encouraged hotel renovations
and construction, leading to 700 additional hotel jobs.
Banking employment was essentially unchanged in
1998, marking the first pause in a decade long decline. Over one-third
of the Citys banking jobs have disappeared since 1988. Insurance
industry losses slowed in 1998, to 800 jobs; nonetheless this industry
continues to follow a long-term downward trend. Real estate and
investment firms added 2,400 jobs.
Manufacturing employment, which actually interrupted
its post-World War II slide with a small gain in 1997, returned
to job losses in 1998. Employment declined by 5,100 jobs, driven
down by a 4,600-job loss in apparel, the worst decline in this area
since 1990, largely due to the impacts of lower import prices from
Local Market Sector
In general the local market responds to job and
income gains in the export sector. Job growth in this sector has
also been somewhat stable since the recession, averaging about 29,000
jobs annually from 1993 through 1997. The 35,600 jobs gained between
December 1997 and December 1998 were somewhat above trend and almost
matched the gain in the export sector.
Retail trade employment grew somewhat faster in
1998, increasing by 9,400 jobs or 2.4 percent, its second best
performance in the 1990s. Restaurants accounted for 3,800 jobs,
although this was about one-third less than last years gain.
Apparel stores added 3,000 jobs, the best increase for this sector
in over ten years.
After several years of slowing due to consolidations,
the growth of managed care, and government cutbacks, growth in health
service employment rose to 8,400 jobs in 1998, up from a 6,000 gain
in 1997. Nonetheless, future growth in the medical sector will remain
constrained by these trends. Social services gained 5,600 jobs in
1998, reflecting an increased reliance by the City on private providers
in such areas as foster care and homeless services.
Reflecting the hot real estate market, and the
increased demand for renovations, construction employment grew by
7,900 jobs or 8.2 percent. This was the best growth in construction
since the mid-1980s building boom, and the fastest rate of growth
of any major industry in the City. In general, construction trends
in the City have paralleled those in the surrounding region.
Government employment was flat in 1998 following
an increase of 12,400 jobs in 1997. This is a reversal of the downsizing
that occurred from 1994 through 1996, when 43,200 government jobs
Downstate Drives Statewide Employment Growth
Most of New York States employment growth
continues to come from the downstate regions (see Figure 4), although
upstate has improved slightly. Overall State employment grew by
2 percent or 162,000 jobs on an average annual basis in 1998.
In the downstate region, New York City grew by 2.4 percent
or 82,000 jobs, Nassau-Suffolk grew by 2.5 percent or 28,000
jobs, and Westchester-Rockland by 2.4 percent or 12,000 jobs.
These areas represent three-quarters of the total statewide increase
in employment, but less than two-thirds of the employment base.
The four major upstate metro areas Albany,
Buffalo, Rochester, and Syracuse together grew by 1 percent
or 18,000 jobs in 1998, stronger than originally reported prior
to the recent revisions, especially in such industries as manufacturing,
construction, and services.
Services accounted for most of the growth across
New York State in 1998. While business services grew everywhere,
health services did much better downstate. Likewise, construction
grew rapidly in all areas, but trade performed better downstate.
Wall Street Performed Better Than Initially Expected
After earning a record $12.2 billion in 1997, Wall
Street profits declined by 20 percent to $9.7 billion
in 1998. Even so, earnings in the last two years have been the highest
on record. Profits derived from underwriting activity continued
to increase in 1998, as did fees from merger and acquisition activities,
although in both of these areas most of the business occurred in
the first half of the year. However, while revenues rose by 17.3 percent,
expenses rose by 20.8 percent, primarily driven by higher interest
expense and compensation to employees.
As a result of the decline in profits last year,
we estimate that Wall Street bonuses fell to $11.3 billion
in 1998 from $12.3 billion in 1997. However, such record-breaking
levels of bonuses are still having profound effects on revenue collections
in New York City. Personal income tax withholding collections have
risen by 13.7 percent during the first eight months of FY 1999,
which include the months of December through February when many
bonuses are paid, after growing by 17.7 percent in all of FY
1998. Although year-to-date business tax collections have declined
from last years levels, they are much higher than originally
forecast by the City because of the attainment of higher Wall Street
profit levels than had been expected.