SILVER LINING: LEADING INDICATORS SHOW RATE OF DECLINE SLOWED IN LAST TWO QUARTERS

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New York City remained in recession during the second quarter of 2003, according to the latest issue of Economic Notes, a publication issued by the office of New York City Comptroller William C. Thompson, Jr.

"Although the National Bureau of Economic Research officially declared that the U.S. recession ended in November 2001, the City remains in the grip of a stubborn recession, as illustrated by the tenth consecutive quarter of negative real growth," Thompson said. "In the second quarter, seasonally adjusted payroll jobs fell by 10,600, of which 7,200 were in the private sector."

"In addition, although the unemployment rate decreased slightly from 8.6 percent in the first quarter to 8.2 percent in the second quarter, it is still too high, particularly when compared with the national rate of 6.2 percent," Thompson noted. "While we are aware of some hopeful signs in the economy, we must not overlook the fact the City still faces serious economic challenges that must be addressed."

The gross city product, a measure of economic activity in New York City estimated by the Comptroller's Office, decreased by 0.8 percent in the second quarter, reflecting declines in payroll jobs and real incomes. In comparison, the national economy increased 3.1percent for the same period. However, five key economic indicators show that the rate of decline diminished for New York City during this quarter, as compared to previous quarters (See attached Table).

The latest issue of Economic Notes also reports the following New York City data:

• Real Gross City Product (GCP), based on preliminary data, decreased at an estimated annual rate of 0.8 percent in 2Q03, compared with a decrease of 2.6 percent in 1Q03. U.S. GDP in 2Q03 (preliminary) increased 3.1 percent, compared with an increase of 1.4 percent in 1Q03. See the Summary Table on the next page.
  
  
• Payroll Jobs in 2Q03, seasonally adjusted, fell by 10,600. Private jobs fell by 7,200. Compared with 2Q02 (not adjusted for seasonal fluctuations), jobs fell 1.6 percent, the third-weakest performance of the 20 largest metro areas, after San Francisco and Boston.
  
  
• Personal Income Tax (PIT) revenues, a proxy for personal incomes, rose 0.6 percent in 1Q03 over 1Q02. Estimated taxes decreased 31.4 percent, reflecting lower dividends and capital gains. Withholding taxes increased 1.6 percent. U.S. PIT revenues rose 0.9 percent in 1Q03.
  
  
• Personal Income Tax (PIT) revenues, a proxy for personal incomes, decreased 0.4 percent in 2Q03 compared with 2Q02. Estimated taxes decreased 11.6 percent, reflecting lower dividends and capital gains. Withholding taxes increased 3.9 percent. U.S. PIT revenues decreased 4.7 percent in 1Q03.
  
  
• The Inflation Rate in the NYC metropolitan area was 2.7 percent in 2Q03, down from 3.2 percent in 1Q03. This 2Q03 inflation rate is the third-highest rate among the 14 largest metropolitan areas.
  
  
• The Unemployment Rate in NYC, seasonally adjusted, decreased to 8.2 percent in 2Q03 from 8.6 percent in 1Q03. The U.S. unemployment rate, also seasonally adjusted, increased to 6.2 percent in 2Q03, from 5.8 percent in 1Q03.
  
  
• Real Estate Commercial Vacancies Rose and Rents Fell. The Manhattan commercial vacancy rate in 2Q03 increased to 12.5 percent, up from 11.3 percent in 2Q02. Average Manhattan commercial rents decreased to $41.12 per square foot in 2Q03, down from $44.46 in 2Q02.
  
  
• Leading Indicators for the City were mixed. The City's help-wanted advertising index fell, but the number of building permits authorized rose in 2Q03 from 2Q02. The NYC business conditions index fell for the eighth consecutive month in July, a sign that job losses could continue in the near future.
  
  Summary Table. Five Key Economic Indicators, NYC and U.S., 2Q03
  

• Update of 9/11 Loss Estimates. A computation of the 2002 impact of 9/11 on GCP that is based on a comparison of GCP with GDP shows a slightly higher impact on 2002 GCP than estimated in September 2002, and - so far in 2003 - a significantly more serious impact on 2003 GCP than previously estimated. The failure of the City's economy to recover after 30 months of recession, even though the national recession officially lasted only nine months, can at least in part be attributed to the lingering effects of 9/11. The higher rate of City job loss than U.S. job loss in 2003 (when the Comptroller's Office expected to see job gains for the year) is a sign of the severity of the impact.