America’s Economy Can’t Thrive Without New York City
(Bloomberg Opinion) -- Everyone has seen the map by now. The one of the United States, overlaid with cases of Covid-19 or deaths because of it. Clearly, New York City is the epicenter of the outbreak, accounting for at least 21,000 of the more than 100,000 coronavirus deaths across the country.
The high concentration in one small part of the East Coast creates the temptation to label the coronavirus as a distinctly New York problem, especially as the City That Never Sleeps remained shut down while the rest of the state and country started the gradual process of reopening. Last week, its residents were also subjected to a curfew as protesters marched across boroughs to speak out against systemic racism and police brutality after the killings of George Floyd and other black Americans.
Calling it a New York issue would be a mistake. The most difficult question confronting the nation’s elected leaders is how to balance the health and safety of the citizenry on one hand and preventing unnecessary damage to the world’s largest economy on the other. The New York City metropolitan area looms large in that calculation. Data from the Bureau of Economic Analysis put in stark relief just how much New York powered the U.S. economy during its longest expansion in history and provide a crucial starting point to understanding how a lasting bite to the Big Apple could hinder hopes for a swift nationwide recovery.
As New York City embarks on its reopening today, these figures and others indicate that what’s good for getting New York healthy and bustling again is to the benefit of the rest of the country as well.
The New York City metropolitan area, which encompasses Newark, Jersey City and surrounding areas in New York, New Jersey and Pennsylvania, does a lot of heavy lifting for the U.S. economy as a whole. The nominal gross domestic product of the area is $1.8 trillion, or 9.62% of the overall output of America’s metropolises. That’s slightly higher than it was in 2009, even though smaller metro areas like Charlotte, Denver, Portland and Seattle grew faster during the expansion. Its next closest competitors are Los Angeles, which makes up 5.7% of all metro area GDP, and Chicago at 3.74%.
On its own, the New York City economy would be the 10th largest in the world, bigger than the likes of Canada, Russia, South Korea, Australia and Spain. The metro area has a population of more than 20 million people, bigger than any other region in the U.S., but much smaller than any of those aforementioned countries.
New York is nicknamed the “Finance Capital of the World” for a reason. The industry accounted for almost $500 billion of the area’s GDP in 2018, far and away the biggest share. That might be a problem as the region looks to bounce back from the coronavirus pandemic: An analysis by software firm LaborIQ by ThinkWhy, which ranks U.S. employment markets, found last month that New York’s finance industry won’t fully recover until 2026. Jobs were already down about 8% this year, and the lockdown seems destined to cause a domino effect for industries like real estate and insurance.
The good news for New York’s economy: It’s more diversified than it was during the last recession. Because the 2008 crisis was so heavily concentrated within the finance industry, the city has learned to live with a lower share of bankers and traders. In their place, jobs tied to professional and business services, information, and education and health have boomed in New York. To complement demand from this professional class, jobs in leisure and hospitality surged more than any other over the past decade, as did employment in construction and other services.
If the often-cited “strength of the U.S. consumer” is what will drive America’s recovery, the residents of New York and its surrounding states are critical. Massachusetts, Connecticut, New Jersey and New York rank second, third, fourth and fifth in per capita personal consumption expenditures, respectively. Moreover, when looking at the percent change in per capita PCE from 2009 to 2018, New York ranks second only to North Dakota and its shale boom.
New York City is far more diverse than the U.S. as a whole, no matter how you slice it. Still, job losses since mid-March have been heavily concentrated among the area’s black and Latino residents, which is a similar trend across other large metropolitan areas. New York’s Latino population has been hit particularly hard relative to the rest of the country, with more than 70% reporting loss of employment income, a greater share than any city except Detroit, Los Angeles and Riverside, California. Separate data from Homebase shows hours worked by hourly employees is down in New York City more than any other metro area.
New York City constantly vies with Orlando for the top spot among most-visited U.S. cities, making tourism and related jobs a crucial component of the region’s economy. The coronavirus pandemic has decimated travel across the board. Hotel occupancy, which usually ramps up to about 85% in March, instead tumbled to 30.6% this year. Preliminary estimates suggest hotel room nights sold fell in March about 63% from a year earlier. And New York’s lockdown wasn’t even in effect for that entire month, suggesting April’s figures will most likely be even worse.
The Port Authority of New York and New Jersey runs the three aforementioned airports and is considering a loan from the Federal Reserve to make up the loss in revenue. So, too, is the Metropolitan Transportation Authority, which runs New York City’s subways, as well as other train systems that connect commuters in towns surrounding the city. The MTA faces a severe $8.5 billion potential deficit this year, and it’s not hard to see why — it projects just a fraction of the ridership for the rest of 2020, which would cost the system $3.8 billion in just a moderate scenario.
The beleaguered subway system already had to contend with years of insufficient revenue and deferred maintenance, which has led to frequent delays, system malfunctions and general rider frustration. If New York City is to return to its former glory after more than two months of lockdowns, it will need residents to feel safe and comfortable getting around as they did before. In 2019, more people took MTA transportation than the next 11 largest U.S. transit agencies combined.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.
Elaine He is Bloomberg Opinion's data visualization columnist in Europe, focusing on business and markets coverage. Before joining Bloomberg, she was a graphics editor at the Wall Street Journal and the New York Times.
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