New York City Lost a Record 631,000 Jobs to the Pandemic in 2020. So What’s Next?

Yves here. As much as New York City fancies itself the center of the universe, it is less so as a result of the pandemic. That fact makes it a useful indicator of the damage done to central business districts all over the US, as well as heavily tourism-dependent cities. As readers know, I’ve been visiting NYC pretty regularly despite Covid to see my doctors (there’s not much else to do there!) so I have some sense of the changes, even though I’m basically just going to a few regular destinations.

Business hotels are almost entirely closed and tourist hotels have cut way back on their services; mine, which is at a good address, no longer has a doorman and getting the front desk on the phone in the evening is dodgy. Restaurants, even successful and long established ones, keep folding. The streets are busier, and since I first moved to the city in the early 1980s, when the population was lower and the city was just coming out of its fiscal crisis, it doesn’t look as weird to me as it ought to, particularly relative to how dead it was last summer. But Midtown remains at more like weekend activity levels on weekdays, and I shudder to think how dead Time Square must look compared to the old normal. And yes, there are many vacant storefronts, although that had started before Covid thanks to greedy landlords jacking up rents.

In other words, because New York City changes so much, and yet so much superficially stays the same, the adaptations aren’t as disorienting as they ought to be. The city has an air of bravely trying to carry on, like the bizarre outdoor rooms attached to restaurants, as if they really are safer than eating inside. By contrast, on one trip, I was cheered to see people eating outside (admittedly with heaters but nevertheless all bundled up) on Central Park South in 40 degree weather.

I would expect other city centers to have suffered similar levels of damage, but for that to be less important to the total metro area than in the case of New York City.

By Greg David. Originally published at The City on March 14, 2021

Tourism workers take a break on Wall Street, March 10, 2021. Ben Fractenberg/THE CITY

The statisticians closed the books Thursday on the jobs lost in New York City in 2020: 631,000, the largest one-year decline since reliable statistics began being compiled after World War II.

The damage has been so great that local experts on the city’s economy see a difficult effort over several years to regain those positions, whose loss has brought pain to legions on top of a COVID-19 death toll that just passed 30,000, hitting the most vulnerable New Yorkers hardest.

The economic impact has also proved disparate, with sectors like tourism upended, even as Wall Street prospers. Predictions for the city’s long-term and short-term prospects, meanwhile, are in flux as news of vaccination progress mixes with a host of unknowns.

Still, the passage of President Joe Biden’s $1.9 trillion federal aid bill — dubbed the American Rescue Act — has other economists sharply raising their forecasts of how much the national economy will grow this year. Mayor Bill de Blasio and some local executives agree.

“This now supercharges our recovery,” the mayor said Monday as passage of the bill seemed certain. “This is the thing we needed.”

Historic Decline

There is no doubt about how the pandemic has devastated New York’s economy.

The single-year plunge in employment, measured from December 2019 to December 2020, is more than the 620,000 jobs that disappeared in the city’s “Great Recession” that lasted from 1969 to 1977 under mayors John Lindsay and Abe Beame.

The severe downturn following the 1987 stock market crash totaled 350,000 jobs lost. And jobs dipped by 227,000 in 2001-2003 after the bubble burst and 9/11. The city brushed off the Great Recession that followed the 2008 Financial Crisis with a relatively modest decline of 138,000 jobs.

Like the 1969-1977 crisis, one sector accounts for a significant portion of the losses. Then it was manufacturing, which shed 400,000 jobs. This time it is leisure and hospitality — which includes the food and lodging industries — that has seen 250,000 jobs disappear, a little more than half of those that existed at the beginning of 2020.

By total jobs lost, the other hard-hit areas include professional and business services (89,000), education and health services (69,800) and retail (67,100).

In percentage terms, leisure and hospitality is followed by manufacturing, transportation and retail.

The bottom line remains sobering: New York City jobs losses have been so great that an analysis by Moody’s Analytics found it suffered the worst employment losses of the 82 metro areas it tracks. Suburban areas didn’t do much better with Northern New Jersey ranked 74th, Westchester 73rd and Long Island 68th.

Many Jobs ‘Gone for Good’

Some experts are worried about the city’s near-term prospects, even as it appears that upcoming budgets out of City Hall and Albany will be balanced despite Gov. Andrew Cuomo’s travails.

“The American Rescue Plan is certainly laudable in providing triage for a pandemic-battered economy that should get us past the lockdown phase,” said James Parrott, a New School economist closely tracking local data. “The latest extension of unemployment benefits will run out in September but hundreds of thousands of jobs won’t have come back by then and some portion will be gone for good. New York City’s economy will still face a monumental task of repairing a labor market.”

A March 1 update from the Independent Budget Office was headlined “A slow and fragile recovery” and projected that the city would not regain all the jobs lost by the end of 2025.

“Where will we be when the aid runs out, how long will it take to get arts and entertainment back and how fast will the leisure and hospitality sector rebound?” IBO Executive Director Ronnie Lowenstein asked in an interview with THE CITY earlier this month.

Another hurdle came into the spotlight again Thursday when the Partnership for New York City released its latest survey, which showed only 10% of workers have gone back to their offices. The percentage expected to return by September declined slightly to 45%.

Remote Chances for Return

Employers expect more than half of their workforce will continue to work remotely at least part of the time. If that happens, the ripple effect will make the recovery a long-term proposition.

“The labor market is characterized by permanent job loss, severe long-term unemployment and the need to retrain tens of thousands of workers for different occupations and industries,” Parrott added.

However, the passage of the Biden aid package and the vaccine rollout has other economists turning much more optimistic about the national economy — a trend that could help New York.

Economists surveyed by The Wall Street Journal in the past week boosted their average forecast for this year’s increase in Gross Domestic Product to 5.95% from 4.87% last month. Analysts with Goldman Sachs say the economy could grow 7.7%. Either would be the U.S. economy’s best gain since 7.9% in 1983.

Broad economic trends have bolstered two crucial sectors in the city and could do so for more areas this year.

Wall Street last year is believed to have produced profits of $45.8 billion, the second highest ever and nearly double the previous year. A strong stock market, a wave of highly lucrative initial public offerings and low interest rates, which reduce borrowing costs, all have contributed to the good times for the industry.

While the city’s economy is no longer as dependent on Wall Street as it once was, the sector still accounts for 20% of all private sector wages and 18% of all state tax collections, mostly because its average wage of $407,000 is by far the highest in the city. Wall Street’s success is the primary reason state and city tax collections have proved far higher than expected.

Holiday Hopes Bloom

Meanwhile, the pandemic inspired shift to online has also bolstered the city’s growing fast-growing tech sector, which too has thrived in the pandemic. Venture capital invested in New York companies last year almost matched the record of 2019.

“The pandemic has been a tailwind for tech if anything,” said Ben Sun, a founder of Primary Venture Partners, which just raised $150 million to invest in New York startups. “We see so many great companies in New York where founders coming out that say this is a great time to start a company.”

Some in the tourism industry even see reason to hope for a strong holiday season in New York. Matt Hurlburt, general manager of the Kimpton Muse in Times Square plans to reopen the hotel on March 24.

“I feel good about the end of the year being our best time period in 2021,” he said. “I base that on expectations of the vaccine rollout, that case counts will be lower, that people have pent up savings and that people want to get out and start to get on the road again.”

This story was originally published by THE CITY, an independent, nonprofit news organization dedicated to hard-hitting reporting that serves the people of New York.

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  1. The Rev Kev

    That is a massive amount of jobs lost just for one city. For context, if those 631,000 jobs were people, that would be almost the population of Las Vegas in Nevada or Memphis in Tennessee.

    1. Big River Bandido

      It *is* a massive amount, although one must consider that on the average pre-pandemic weekday, NYC’s population swelled from 8 million to 40 million during business hours.

  2. jsn

    “New York City’s economy will still face a monumental task of repairing a labor market.”

    The cart is well out in front of the horse here.

    The New York City economy will face the monumental task of revaluing real estate. Without continued Federal support for wage earners income, nothing is viable as before in the metro area.

  3. cocomaan

    Yves, you’re looking incredibly prescient by leaving NY. The city was hollowed out when you decided to leave and now it looks even more so.

    I don’t really understand how anyone can think that the Rescue Act is going to “supercharge” the recovery in NY. Maybe I’m wrong. But this kind of smells like De Blasio just kissing White House butt.

    How is an enhanced unemployment benefit going to deal with the fact that much of Manhattan’s overheated real estate is foreign owned by absentee landlords who probably couldn’t travel to the USA if they even wanted to?

    What about the fact that people just don’t feel safe in Manhattan anymore? If I was thinking of moving back there to spend money, I’d be wondering if 2021 will be like 2020 with unpredictable mobbing going on.

    Was looking for some stats on the 2020 crime wave and found that wikipedia doesn’t even list crimes that happened in 2020, haha, what a psy op

    1. tegnost

      “Economists surveyed by The Wall Street Journal in the past week boosted their average forecast for this year’s increase in Gross Domestic Product to 5.95% from 4.87% last month. Analysts with Goldman Sachs say the economy could grow 7.7%. Either would be the U.S. economy’s best gain since 7.9% in 1983.”

      They really think this is going to be the best of times

    2. Yves Smith Post author

      I love the city and really miss it. It’s now not so unaffordable except for its General Corporation Tax, which is a real drag on anyone doing business there (and I would have to be paying it again were I to return).

  4. Big River Bandido

    I was glad to see that the economic sector I work in (arts/entertainment) at least got one mention. The big drag on that sector is that artists who cannot work cannot pay those out-of-whack rents.

    As to “how long it will take to come back?” — it won’t even *start* coming back until live performances resume. And even then, it will require months if not years to rebuild, plus a complete recalibration of the pay scales for performers. The “gig economy” that supported New York musicians in the 70s and 80s was made possible by cheap Manhattan rents in then-undesirable neighborhoods. (Getting paid $15 for a 5-hour gig in a small club or restaurant was fine when you could play 2-3 gigs a night and your rent was only $100/month in that old rundown loft.) The big problem for musicians in NYC since 1990 has been that rents rose astronomically while the gigs still pay the same $15.

    Far from helping to solve the housing crunch for artists, mega development projects like Hudson Yards have only made that problem worse by demolishing things like the small “art” theaters that were never about profit in the first place. They push out people who may not have driven the housing market, but they sure did drive the industry that provided the city with its special glitz. I don’t see how New York will prosper without artists, and I don’t see that sector truly recovering, ever.

    1. elissa3

      Very astute comment. Born in NYC in 1950, I’ve seen the city undergo several cycles of despair/exhilaration since. I think that this time truly is different. The underlying problem–which started decades ago–is that NY is just too damn expensive for “normal” people to live and work there. Covid has brought into focus quality of life issues that could be rationalized away in good times. By that I mean mind-numbing commutes, trashy living space, the daily noise and aggression. If one is not able to insulate oneself from all these daily stresses–primarily by having gobs of money–why bother? My view is very Manhattan-centric, and perhaps a strengthening of other borough neighborhood life will lead to some revival. But I’m skeptical.

  5. Louis Fyne

    FWIW, a family member is a jr. partner at a mid-sized money management firm….they are never going back to pre-Covid office layouts.

    The older/more powerful partners love working from home/second house/golf course. Far-flung clients don’t mind Zoom meetings and cutting back on 50%+ of office space is a no-brainer. The only downside is for those under-30 starting their careers….given the loss of spontaneous/informal mentoring and networking, etc.

    Covid has squeezed 10 years of commercial office change into 1 year. Tourism will rebound but IMO, in the US, we hit peak high-end office space/rents in 2019.

    Remember how in many US cities, no major office tower was built for 5-10+ years after the late 80’s/early 90’s bust? That will be the next 10-20 years.

    Check back in 3 years to see how this prediction ages, lol.

    1. Bankster

      I tend to agree with your CRE prediction. And yet major office projects keep getting announced. Vornado’s Empire Station development. That colossal new tower to replace the Grand Hyatt. One Vanderbilt claims it’s 75% leased and some of the office towers at/near Hudson Yards claim similar. Even before the pandemic, I wondered how much of this was just stealing from existing buildings. That disconnect has only gotten much bigger now.

  6. Jeremy Grimm

    “…economists turning much more optimistic about the national economy — a trend that could help New York.”
    What’s good for Wall Street and good for the Gross Domestic Product(GDP) is good for the City? I believe Michael Hudson has defined a different measure for GDP — a GDP that counts economic growth, not things like imputed rent and bank services like late payment penalties and interest increases. I do not think Michael Hudson’s GDP will see a growth of 5% or 6% for 2021.

    I visited the City occasionally. I miss those visits. I am afraid the City will not be anything like it was, and that the new City will lack some of the magic it once held for me. I am not sure what might happen when the rent moratoriums end. My daughter still lives and works in Brooklyn and seems to have fallen in love with the City. I hope the City can continue to return her love. If rents for housing and small business go down enough and after some time — how much time I do not know — post Corona, perhaps the City could be better than before. I may be too old to enjoy by then.

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