New York City: Economic Refugee Camp

When the federal shutdown ends and monthly employment data is once again released, we will probably find that New York City’s unemployment rate is still high.  What is interesting, however, is why it is so high.  According to the survey of business establishments, the number of people working at payroll jobs in New York City (including those who commute in) is the highest it has ever been.  And according to data based on the survey of households, the number of city residents who were employed in June 2013 was only slightly below the pre-recession level of June 2007, while for the U.S. as a whole the number employed was 1.8 million lower.  New York City’s unemployment rate is high because the city’s labor force, including those looking for work but not employed, has soared.  In a country that is suffering a far greater economic decline than New York City, the city has become an economic refugee camp with young workers trying to find some economic hope.

But they aren’t earning so much, and don’t have it so good.  Before shutting down, the U.S. Census Bureau released American Community Survey data for 2012.  The data showed that New York City’s median household income fell 5.5% from 2008 to 2012 when adjusted for inflation.  The median work earnings per household fell 6.9%, and since full-time full-year workers showed some modest gains in earnings, the share of workers able to maintain that status must have fallen significantly.  Moreover, inflation adjusted mean household income, affected to a greater extent by earnings of the rich, fell 7.7% from 2008 to 2012, showing that even the one percent have not been spared.  This is the case nationally as well, according to data cited by this article.

http://www.economist.com/blogs/freeexchange/2013/09/incomes

Some spreadsheets and additional commentary may be found below.

First, let’s look at the household based employment data, as downloaded from the Bureau of Labor Statistics.

NYC and Metro Employment 2003 to 2013

Comparing June 2013 with June 2007, the present with the period before the recession, the number of employed residents of New York City was lower by just 22,100 (0.6%), a gap that will be wiped out soon at the current pace of gain.  But the city’s labor force was higher by 122,825 (3.3%), contributing far more to the higher unemployment rate.  The labor force is growing more slowly in the rest of the New York Metro Area, by 86,970 (1.6%) over the six years, and fewer residents of the suburbs are working, with a decrease of 75,160 (1.4%).  The likely reason?  The suburbs are aging, with fewer young and middle-aged workers and more empty nesters and retirees occupying housing units there.

What is surprising, based on the past 60 years of economic history, is that the labor force of the U.S. increased far more slowly than the labor force of New York City during the 2007 to 2013 period, by 1.0% in the U.S. (1.5 million) compared with 3.3% for NYC.

What makes this remarkable is that New York City’s potential for growth is highly constrained.  It is already fully developed at a high density, and expansion generally involves building up – tearing down valuable property and losing its income for a few years while a larger and more expensive building goes up in its place.  Imagine that most of Queens was open land, as it was in 1930.  New York City would probably add a hundreds of thousands of homes and millions of people in short order.  But the land is already full, and those people are already here.

In fact the New York metro area is fairly full, except for places far away from Manhattan, and urban redevelopment locations near rail transit where more density makes sense.  The U.S. as a whole, meanwhile, has no such constraints.  It isn’t growing due to a lack of demand, not a lack of supply.

The story becomes even more remarkable when trends are measured from June 2003 to June 2013, two post-recession years a decade apart.  New York City’s resident labor force soared by 8.5% (314,820) during the decade, compared with an increase of just 6.1% (8.97 million) for the U.S. and just 4.8% (257,260) for the rest of the NY Metro area.  The number of employed residents of the city jumped by 8.2% (277,500), compared with a gain of just 4.6% (6.4 million) for the whole U.S. and just 2.5% (126,220) for the suburbs.  So this isn’t just a Great Recession Trend.

With so many people flooding into a geographically constrained city, a city where a majority of the housing units are held by those who have their housing costs locked in (owner-occupied, rent regulated, public housing) and all the excess demand falls upon whatever is left, no wonder the cost of housing is soaring.  And income is not.

The American Community Survey for 2008 to 2012 for New York City is located here.

ACS_12_1YR_NYCetc

The Census Bureau shut down before I was able to obtain national data in the same form, but I did download a PDF report with some of that data.  And I can tell you that the median household income in the U.S. was $51,107 in 2012, higher than the $50,895 in New York City.  The city’s median household income, adjusted for inflation, fell 5.5% from 2008 to 2012, a larger decrease than the 4.9% for the nation.  But including 2007, the U.S. decrease to 2012 was 8.3%, compared with just a 5.8% decrease of New York City.  Moreover, while the poverty rate remains in the vicinity of 20.0% in New York City, it has risen from 12.5% in 2007 to 15.0% in 2012 in the U.S. as a whole.  So things are tough here, but getting worse there.

The idea that people from disadvantaged places would flock to New York City expecting the streets to be paved with gold, and end up having a tough time compared with those who were there earlier and grabbed advantages for themselves, is not new.  That was the story of immigrants from Europe in the 1800s through 1920, Black in-migrants from the south and migrants from Puerto Rico from the 1930s through the 1960s, and immigrants from the whole rest of the world from the 1970s through the 1990s.

Now people are once again moving here from the rest of the United States, and even from the rest of the metro area.  How long they will continue to do so, given falling wages, rising rents, higher taxes, diminished public services, and rising debts run up to benefit those cashing in and moving out remains to be seen.  As in the 1970s this city may reach the point where it makes sense for people and businesses to leave.  Unlike in the 1970s, there may not be as many places within the U.S. worth leaving for.

Meanwhile, the falling inflation-adjusted income for city residents as a whole puts the wage income demands of the city’s public employees in perspective.  Those public employees have already become much richer compared with most city residents, in total compensation, due to the cost of all the retroactive pension increases over the past 20 years.  Now they want to become richer relative to most city residents in cash as well.

The 6.9% decrease in real median work earnings for household from 2008 to 2013 is accounted for by inflation at 6.6% and a 0.3% decrease in earnings.  The 7.7% decrease in mean household income thus implies a nominal cut of 1.1% in addition to the 6.6% inflation.  But city unions have stoked the resentment of a labor force that demands wage increases in excess of inflation going back to 2008, and demand that other city residents become worse off as they become better off by $8 billion more.   After all, the real estate industry is cashing in at the expense of the serfs.

And they don’t want to pay for it.  Public employee pension income is already exempt from New York’s state and local income taxes.  And legislation is introduced every year to in effect exempt most public employee pensioners from property taxes as well (by excluding pension income from the calculation of who is “poor” for purposes of the enhanced STAR program), a deal that is just waiting for the right 3 am to pass.  All the city’s public unions have already secured that most valuable right – the right not to have to live in New York City.  Perhaps the economic refugees and others will get the hint about what their future in NYC holds.  One thing is for certain.  They should accept no excuses from the next city administration.

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One thought on “New York City: Economic Refugee Camp

  1. larrylittlefield Post author

    Here’s something interesting. Krugman admits we’re screwed.

    http://krugman.blogs.nytimes.com/2013/09/25/bubbles-regulation-and-secular-stagnation/?_r=0

    Though he is not quite ready to admit that his generation did the screwing and younger generations, who didn’t get the benefits, will be stuck with the cost.

    For 30 years I blamed the Republicans, primarily, for the debts don’t matter because we won’t be the ones paying it attitude. More recently, Krugman has made it more bi-partisan.

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