-- Tourism Industry a leader in job creation --

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New York City’s economy is showing signs of an economic slowdown, according to Economic Notes, a quarterly publication released today by Comptroller William C. Thompson, Jr. The report features an analysis of the tourism industry, which has become a leader in job creation in recent years.

Real Gross City Product (GCP), a measure of the overall City economy, grew 2.9 percent in the second quarter of 2006, down from the 4.3 percent rate of the first quarter but above the 2.6 percent U.S. rate. Of five key economic indicators – GCP, payroll jobs, growth in withheld personal income taxes, inflation rate and the unemployment rate – only two improved in the both the City and the nation.

“Though signs of an economic slowdown are emerging, a recession is still considered unlikely,” Thompson said. “The Federal Reserve’s decision to hold short-term interest rates at their present level coupled with an easing of oil prices may help achieve a soft landing.”

Personal income tax withholdings increased by a respectable 6.2 percent compared to the prior year, indicating that the earnings of New York’s workers are holding up well, the report notes. General sales tax collections were up by 10.1 percent, also a positive sign.

Portents of a slower rate of growth in the City’s economy are coming mostly from the real estate sector. City collections of real property transfer taxes and mortgage recording taxes were down modestly during the quarter, and the number of new housing units authorized fell 18.7 percent compared to the prior year. Thus far, the slowdown in real estate transactions has not translated into lower prices for condos and houses, according to the Comptroller’s report.  

The report shows that tourism is largely responsible for the growth in the leisure and hospitality sector, which includes the arts, entertainment, food service, and accommodations. While other industry sectors, like finance, business services, and information have remained well below peak levels reached in December 2000, the City’s leisure and hospitality sector has increased its employment rolls by 30,000 workers during 2000 to 2006.

“In the uncertain months after 9/11, it was widely predicted that the City’s tourism business would be seriously harmed, perhaps permanently,” Thompson said in his report. “The unexpectedly rapid recovery of the tourism business has allowed the leisure and hospitality sector to be a leader in job creation during an otherwise slow recovery from the 2001 recession.”

The Comptroller’s office estimates that in 2005, tourist spending in New York City totaled $5.3 billion in accommodations, $2.5 billion in food service, $2.3 billion in entertainment, and $4.5 billion in fashion and other retail items. The $14.6 billion total tourist spending equals 31 percent of all spending in those categories.

The City’s tourism industry directly provides about 135,000 jobs in the five boroughs for workers in hotels, food service, entertainment and cultural institutions, retail stores and transportation. The largest portion of those jobs are within the hospitality industry, which directly employs 41,500 workers, followed by food service with 25,000 workers, retail with 20,000 workers, performing arts industries with 33,000 workers, and museum and cultural institutions with 11,000 workers.

Annual wages for these workers range from an average of $29,000 for maids and housekeepers to over $41,000 for top waiters and waitresses. Among waiters and waitresses, higher education translates into larger earnings. Wait staff with a college degree earn about one-third more in wages, on average, than waiters and waitresses holding a high-school diploma.

The report also points out that tourism provides important opportunities for immigrants who are acclimating to the metropolitan labor force and other labor force entrants, such as high school and college students, who can find flexible and part-time work within the industry. For example, among hotel maids and housekeepers nearly 80 percent are immigrants.

The tourism industry has been a great boon for the City and is projected to continue to expand. New York City & Company, the City’s official tourism agency, has established a target of 50 million visitors annually by 2016, which would translate into another 25,000 direct jobs in the tourism sector.

“New York City is one of the greatest tourist destinations in the world,” Thompson said. “When domestic and international visitors come to our great City they not only experience a unique destination, they also contribute to our economy in a very profound way.”

Economic Notes also includes the following New York City data:

• New York City payroll jobs grew at a seasonally adjusted annualized rate of 1.6 percent or by 12,800 jobs in 2Q06. The City’s pace of job growth was more than the nation’s payroll employment growth of 1.2 percent. In New York City, the private sector added 12,400 jobs while the public-sector added 400 jobs. As of 2Q06, the City’s total job count was still more than 100,000 below the peak reached in 4Q00.

• Personal income taxes withheld from paychecks rose 6.2 percent in 2Q06, on a year-over-year basis.  Estimated tax payments on interest income, rental income, and capital gains rose 25.9 percent, a rate of increase below the previous quarter.  A reason for the slower rise in estimated tax payments may be due to a decline in housing sales and realized capital gains.  

• New York City’s unemployment rate fell to 5.2 percent in 2Q06, the lowest since 2Q88. The U.S. unemployment rate fell to 4.6 percent, the lowest in nearly five years. The City’s total of employed residents, labor-force-participation rate, and employment-to-population ratio were all at a record high in 2Q06.

• The overall Manhattan commercial vacancy rate fell to 7.8 percent, from 8.4 percent in 1Q06. The average commercial asking rent in Manhattan rose to $43.46 per square foot.

• New York City’s inflation rate hit a 15-year high of 4.7 percent in 2Q06. Core inflation, which excludes food and energy prices, rose to a four-year high of 3.8 percent in 2Q06. The City’s inflation rate surpassed the nation’s in every category except energy. Energy prices rose 21 percent in the New York City metro area compared with 21.6 percent in the nation.

Summary Table. Five Key Economic Indicators, NYC and U.S., 2Q06 vs. 1Q06
NSA means Not Seasonally Adjusted. SA means Seasonally Adjusted. SAAR means SA Annualized Rate. PIT means Personal Income Tax. Comparisons for “Better”

A copy of the report can be found at the Comptroller’s web site: www.comptroller.nyc.gov

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