-Report identifies New York City region contributing almost one-tenth of nation’s GDP –

-Calls on Washington to consider New York City region when enacting budget or economic policies-

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A study featured in Economic Notes, the quarterly publication released today by New York City Comptroller William C. Thompson, Jr., identifies the New York metropolitan area as the single largest contributor to US gross domestic product (GDP), accounting for more than $1.1 trillion, or nearly one-tenth of the nation’s economic output.

The report - available at www.comptroller.nyc.gov  - is based on an analysis of a new data series released by the U.S. Bureau of Economic Analysis (BEA) which allows, for the first time, a direct comparison of metropolitan area economies.

“With these new data, we can see more clearly how critical the New York metropolitan area is to our entire nation’s economic life. These findings should prompt the federal government to consider the New York City metropolitan region when formulating its budget or implementing economic policies,” said Thompson.  “People are accustomed to thinking of economic geography in terms of states, counties and cities. However, economists have long observed that metropolitan areas are the basic unit of economic geography.  This data backs up that argument.”

The BEA data covers 2001 to 2005 and includes GDP estimates and major industry contributions for 363 metropolitan areas.  Rankings of economic importance were previously based on population and employment data, but these new numbers take into account the value that each area adds to the national economy.  The study reveals that metro areas, characterized by high value services and industrial activities tend to rise in the rankings, while those that grow primarily through population influx tend to fall.

The analysis illuminates the importance of the New York City Metropolitan area (includes Bridgeport-Stamford-Norwalk metropolitan area and NYC-Long Island-Northern New Jersey area) to the nation’s economy. In 2005, the metropolitan economy centered around New York City contributed 9.1% or $1.129 trillion of the nation’s GDP, while only accounting for 6.6% of the country’s population.  In addition, when compared to the next largest competitor, Los Angeles, the New York region had 7% more people, but contributed 43% more to the nation’s economic output.

“We always knew that the New York City area was the economic engine that drives the country, and these numbers prove it.  By exceeding more than $1.1 trillion, the metropolitan area economy is approximately the size of Canada’s,” Thompson said.

The report noted that the period of the study encompassed one recession and only part of the recovery.  In addition, unique circumstances prevailed in a number of metropolitan areas including the dot-com bust in the San Francisco / San Jose area and the 9/11 terror attacks in the New York City region.

The report showed that the New York region ranked tenth among the 15 largest areas in terms of real regional growth rate. However, New York’s growth outpaced that of several important areas which compete with New York for talent, business and prestige.  Those included the Seattle, San Francisco, Chicago and Boston metropolitan areas.

The data include estimates of gross regional product by major economic sector, which permits an analysis of the components of our region’s economy in a manner that has never been possible before.

BEA estimates showed that the real estate sector accounted for $200 billion of the New York metropolitan area’s gross product in 2005.  This produced a location quotient - a measure of an industry’s degree of regional concentration - which was 30% higher than national average. Finance and insurance was New York’s highest quotient, at 70% above the average and accounting for 13.6% of our regional economy.

New York’s health care and social services were found to be relatively proportional to the national average and its retail trade, and accommodation and food service sectors were found to be significantly smaller than average.  New York’s educational services quotient was slightly above the national average.

“The New York region remains strong in areas like professional and technical services, finance, arts, entertainment and recreation, but it is troubling that we are only slightly above average in educational services,” Thompson said.  “This is of concern because many economists feel that education is a driver of long-term economic growth.”

Economic Notes also features a quarterly look at important indicators of the local economy and concluded that the national economic slowdown is spreading to New York City.  Citing a number of different factors, including slowed economic growth in the first quarter of 2008, the report suggests a period of economic stagnation in the City’s economy is likely.

In some areas, the City is still outperforming the nation.  However, it seems evident that the woes experienced across the country are now being felt here in New York City. The Comptroller’s report looked at a number of factors to gauge the economy including the following:
 

• Real Gross City Product grew 0.8% in 1Q08, after growing 1.4% in 4QO7. The US economy grew 1% (final estimate) in 1Q08 after growing only 0.6% 4Q07.  The City’s economy was found to benefit from strong job growth early in the year, a relatively strong real estate market, and tourism.  However, the Wall Street fall-off will have a negative impact on the City’s output this year.

• NYC Payroll jobs remained virtually unchanged in 2Q08 but US jobs fell 0.6% in the same period.   Sectors that added jobs in NYC in 2Q08 included information, professional and business services, construction and health and education.  However, the data for June showed a 4,300 job-loss in the securities industry.

• City unemployment rate jumped to 5.4% in June, and averaged 5.1% in the second quarter. The nation’s unemployment rate was 5.5% in June and averaged 5.3% for the quarter. The City’s unemployment rate fell to a low of 4.1% in February, but a slippage in employment and a surge in labor force entrants pushed it back above 5% in the second quarter.

• The City’s payroll tax withholdings increased 6.1% in the first half of 2008, compared to the same period in 2007.  An indicator of personal income growth, income tax withholdings were up 6.3% in the first quarter and 5.9% in the second quarter on a year-over-year basis.  Total income tax collections were up 19.3% in the first half of 2008 due to a surge in estimated tax payments.  These are usually associated with taxpayers’ estimates of interest earnings, rental income and capital gains realizations.

• City general sales tax collections rose. In a year-over-year comparison from January to May, the City experienced an increase of 6.5% in sales tax collections.  Approximately 60% of sales tax collections are from consumer purchases with the rest coming from business spending.  Collections were strong in March indicating that Wall Street bonuses and /or tax refunds played a role.

• Manhattan office vacancy rate rose to 7.1% in 2Q08, from 6.1% the previous quarter. Office vacancy rates reached a low of 5.3% in 2Q07, but have been increasing since.

• Manhattan apartment sales prices declined by 2% in 2Q08, from previous quarter.  However, as compared to the same quarter a year ago, the prices are still 10.9% higher. Although prices were down, the number of transactions rose by 35% and inventory listings increased 11%.

• Transit ridership continues to increase. For the first four months of 2008, on a year-over-year basis, total monthly passengers using the subway rose 5.8%; using the Long Island Railroad rose 5.6%; and using the Metro-North Railroad rose 4.1%.  The increases apparently reflect the high fuel costs, as traffic on bridges and tunnels fell 0.6% during the same period.

“New York City was able to stave off the effects felt nationwide for a while but it seems that we are not impervious to this economic downturn,” Thompson said.

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