The latest edition of the Federal Reserve Bank of New York’s Current Issues in Economics and Finance, Taking the Pulse of the New York City Economy, is available.
Authors Jason Bram and James Orr contend that New York City’s economy has shown considerably more strength over the past five years—and over the longer term—than payroll employment figures measuring the number of wage and salary jobs located in the city would suggest. Noting that payroll employment has not yet returned to its 2001 peak level, the authors undertake a broader assessment of local economic conditions based on a number of alternative measures and conclude that the city is nonetheless experiencing a healthy expansion.
Nearly three years into the jobs recovery and despite brisk growth over the past year, Bram and Orr examine the reasons that payroll employment in the private sector still falls about 100,000 jobs short of its January 2001 high. They find that the employment effects of the September 11 attack had largely dissipated by late 2002, and thus discount the hypothesis that this job shortfall can be linked to the World Trade Center event.
Instead, the authors suggest that the city’s extraordinary economic boom of the late 1990s resulted in a level of employment in 2001 that was well beyond the historical trends in job growth. Thus, it is not surprising that the city’s recent job gains, though sizable, have not yet restored employment to its 2001 peak level.
Bram and Orr suggest that the payroll employment count has substantially understated economic growth primarily because it fails to capture rapid advances in productivity. The authors point to a range of alternative measures that indicate a stronger recovery than the payroll data suggest.
For example, wage and salary earnings—a measure of production—rebounded briskly in the past three years, after falling sharply from early 2001 to early 2003. In addition, the Federal Reserve Bank of New York’s index of coincident economic indicators—a composite measure of payroll data that combines information on earnings, unemployment and hours worked—climbed rapidly from its cyclical low in 2003 to reach a record-high level by early 2006.
Further, the authors cite two alternative employment measures—one issued by the Bureau of Economic Analysis and the other drawn from the Bureau of Labor Statistics’ household survey—that present a more favorable picture of job trends than payroll employment, and argue that these measures more accurately portray the job opportunities available to New Yorkers.
Jason Bram is an economist and James Orr a research officer in the Microeconomic and Regional Studies Function of the Bank’s Research and Statistics Group.