by Chris Jones, Vice President for Research, RPA
Next to the presidential election contest, the biggest drama unfolding in 2008 is the rapid weakening of the economy. Seemingly every new statistic or quarterly earnings report adds credence to a growing chorus of economists and business leaders who think that we are already in a recession, and no one knows when or where the expanding credit crisis that began with subprime mortgages will stop.
Yet if there is palpable fear on Wall Street and growing anxiety throughout the country, there doesn't appear to be a sense of panic over the future of the tri-state region's economy. Granted, it is still early and there are sectors beyond finance and real estate that are beginning to stare into the abyss. But compared to previous downturns, if in fact that's what we're in, this one seems to have a different psychology.
The recessions of the early 1970s, early 1990s and post-2000 were all accompanied by a crisis in confidence over New York's place in the global economy. The region's long decline from 1969 to 1976 brought home the urban crisis that had been brewing for a decade or more. The 1989-1992 downturn unearthed fears that a combination of new communication technologies, increasing global competition and an epidemic of crime and crack at home would lead to a long period of decline. In the most recent recession, the September 11 attacks brought the uncertainty of new global political reality to the abrupt bursting of the technology and stock market bubbles.
For the moment, there appears to be a more sanguine attitude that we're just looking at a normal dip in the business cycle. Perhaps this is because we have seen all this before and adopted a survivor's mentality. Another Wall Street bust? Ho-hum. The housing bubble has finally burst? Thank God - I may actually be able to afford something. Or it may be because we're surprised that the boom went on as long it did, particularly in housing prices, and that things are actually returning to normal.
More fundamentally, however, there is greater confidence that people will still want to live here. New York is at the forefront of a national urban revival that has seen neighborhoods repopulated, crime reduced and cities rediscovered by young families and aging baby boomers alike. Other regional centers like Stamford, White Plains, New Rochelle, Newark and New Brunswick have also regained their footing. A loss of jobs and income would clearly slow down that rebirth, but it would take a very long and deep local recession to reverse it.
None of this should underestimate the inevitable pain that comes with any recession, or the larger risks of a prolonged financial crisis. Even a brief downturn would hit some people very hard and stress vulnerable sectors, not the least of which are state and local governments with long-term fiscal imbalances. There is also a danger that this could blow up into a long, deep recession. In addition to not knowing how long it will take to restore faith in the credit markets, there is always the potential for a global or local event to exacerbate economic weakness. Every recession has its own unique pattern, and to understand how a new one would unfold, it's helpful to look at likely similarities and differences with previous ones.
Because of its length and the near default of New York City, the 1969-1976 downturn is generally remembered as the region's darkest period. The metropolitan area lost 6 percent of its jobs, 400,000 in total, as New York City was hit by a perfect storm of deindustrialization, stock market decline and fiscal mismanagement. But this long slide was concentrated in New York City as both jobs and people fled to the suburbs. The 1989-1992 recession, by contrast, saw job losses of nearly equal magnitude in all parts of the region. This time, a Wall Street downturn was accompanied by white-collar corporate downsizing and post-Cold War declines in defense industries in Connecticut, Long Island and other areas. On the whole, the region lost 8 percent of its job base, or nearly 800,000 jobs.
The most recent recession was the mildest, with jobs losses of 340,000 jobs, or about 3.5 percent, between late 2000 and late 2003. New York City declined more sharply than other parts of the region, with the effects of September 11 at least partly to blame. Both office and industrial sectors tumbled. Interestingly, men appeared to be more affected than women, particularly at the bottom of the income scale. Low-income women actually fared relatively well as employment continued to grow in sectors like health care, education and child care. However, male-dominated industries such as manufacturing and transportation took a sharp dive, along with male unemployment rates.
A 2008 recession would probably have a lot of similarities to the previous one. Because of its disproportionate reliance on Wall Street, New York City and other finance centers, such as Stamford, would be likely to see sharper declines initially than other parts of the region. Male-dominated industries like construction would also take a sharper dive, while health care and education are likely to keep growing.
One distinct difference between this and previous recessions is that it is first hitting vulnerable populations through the housing market rather than the job market. Mortgage delinquencies, concentrated in low-income neighborhoods, are causing many people to lose homes and savings even before layoffs and wage declines hit. If this is exacerbated by employment losses, the repercussions could be even more difficult to unravel.
One trend that a recession would be unlikely to affect is the recent recentralization of people and jobs. Although New York City took the largest jobs losses in the last recession, it also bounced back stronger, growing by 5% since 2003 compared to about 3% elsewhere in the region. About 36% of new housing starts occurred in New York City since 2000, more than doubling its average of 1980-2000. Outside of the city, a much higher share of residential development was in multi-family housing, which tends to be clustered in downtown centers.
With growing land and transportation constraints in the suburbs, and distinct anti-growth sentiments in many towns and villages, urban communities are likely to continue to capture a larger share of both population and jobs than they did in most of the post-war period.
Next to the presidential election contest, the biggest drama unfolding in 2008 is the rapid weakening of the economy. Seemingly every new statistic or quarterly earnings report adds credence to a growing chorus of economists and business leaders who think that we are already in a recession, and no one knows when or where the expanding credit crisis that began with subprime mortgages will stop.
Yet if there is palpable fear on Wall Street and growing anxiety throughout the country, there doesn't appear to be a sense of panic over the future of the tri-state region's economy. Granted, it is still early and there are sectors beyond finance and real estate that are beginning to stare into the abyss. But compared to previous downturns, if in fact that's what we're in, this one seems to have a different psychology.
The recessions of the early 1970s, early 1990s and post-2000 were all accompanied by a crisis in confidence over New York's place in the global economy. The region's long decline from 1969 to 1976 brought home the urban crisis that had been brewing for a decade or more. The 1989-1992 downturn unearthed fears that a combination of new communication technologies, increasing global competition and an epidemic of crime and crack at home would lead to a long period of decline. In the most recent recession, the September 11 attacks brought the uncertainty of new global political reality to the abrupt bursting of the technology and stock market bubbles.
For the moment, there appears to be a more sanguine attitude that we're just looking at a normal dip in the business cycle. Perhaps this is because we have seen all this before and adopted a survivor's mentality. Another Wall Street bust? Ho-hum. The housing bubble has finally burst? Thank God - I may actually be able to afford something. Or it may be because we're surprised that the boom went on as long it did, particularly in housing prices, and that things are actually returning to normal.
More fundamentally, however, there is greater confidence that people will still want to live here. New York is at the forefront of a national urban revival that has seen neighborhoods repopulated, crime reduced and cities rediscovered by young families and aging baby boomers alike. Other regional centers like Stamford, White Plains, New Rochelle, Newark and New Brunswick have also regained their footing. A loss of jobs and income would clearly slow down that rebirth, but it would take a very long and deep local recession to reverse it.
None of this should underestimate the inevitable pain that comes with any recession, or the larger risks of a prolonged financial crisis. Even a brief downturn would hit some people very hard and stress vulnerable sectors, not the least of which are state and local governments with long-term fiscal imbalances. There is also a danger that this could blow up into a long, deep recession. In addition to not knowing how long it will take to restore faith in the credit markets, there is always the potential for a global or local event to exacerbate economic weakness. Every recession has its own unique pattern, and to understand how a new one would unfold, it's helpful to look at likely similarities and differences with previous ones.
Because of its length and the near default of New York City, the 1969-1976 downturn is generally remembered as the region's darkest period. The metropolitan area lost 6 percent of its jobs, 400,000 in total, as New York City was hit by a perfect storm of deindustrialization, stock market decline and fiscal mismanagement. But this long slide was concentrated in New York City as both jobs and people fled to the suburbs. The 1989-1992 recession, by contrast, saw job losses of nearly equal magnitude in all parts of the region. This time, a Wall Street downturn was accompanied by white-collar corporate downsizing and post-Cold War declines in defense industries in Connecticut, Long Island and other areas. On the whole, the region lost 8 percent of its job base, or nearly 800,000 jobs.
The most recent recession was the mildest, with jobs losses of 340,000 jobs, or about 3.5 percent, between late 2000 and late 2003. New York City declined more sharply than other parts of the region, with the effects of September 11 at least partly to blame. Both office and industrial sectors tumbled. Interestingly, men appeared to be more affected than women, particularly at the bottom of the income scale. Low-income women actually fared relatively well as employment continued to grow in sectors like health care, education and child care. However, male-dominated industries such as manufacturing and transportation took a sharp dive, along with male unemployment rates.
A 2008 recession would probably have a lot of similarities to the previous one. Because of its disproportionate reliance on Wall Street, New York City and other finance centers, such as Stamford, would be likely to see sharper declines initially than other parts of the region. Male-dominated industries like construction would also take a sharper dive, while health care and education are likely to keep growing.
One distinct difference between this and previous recessions is that it is first hitting vulnerable populations through the housing market rather than the job market. Mortgage delinquencies, concentrated in low-income neighborhoods, are causing many people to lose homes and savings even before layoffs and wage declines hit. If this is exacerbated by employment losses, the repercussions could be even more difficult to unravel.
One trend that a recession would be unlikely to affect is the recent recentralization of people and jobs. Although New York City took the largest jobs losses in the last recession, it also bounced back stronger, growing by 5% since 2003 compared to about 3% elsewhere in the region. About 36% of new housing starts occurred in New York City since 2000, more than doubling its average of 1980-2000. Outside of the city, a much higher share of residential development was in multi-family housing, which tends to be clustered in downtown centers.
With growing land and transportation constraints in the suburbs, and distinct anti-growth sentiments in many towns and villages, urban communities are likely to continue to capture a larger share of both population and jobs than they did in most of the post-war period.
@RegionalPlan
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