The Federal Reserve Bank of New York today released Employment in the New York-New Jersey Region: 2008 Review and Outlook, the latest article in the series Second District Highlights.
Authors Jason Bram, James Orr and Rae Rosen track the slowdown in the New York-New Jersey economy that began in mid-2007 and had continued through August 2008—the last month of data they analyze. The study considers the risks to job growth in the region associated with the slowing U.S. economy and the market turmoil affecting New York City’s finance sector.
According to the authors, the Federal Reserve Bank of New York’s composite measures of economic activity, known as the indexes of coincident economic indicators (CEI), show that:
- In New York State, the CEI expanded 3.2 percent in 2007, up from 2.7 percent in 2006. Readings through the first eight months of 2008, though, reveal the beginning of a decline in March, and by August activity was at its year-ago level.
- In New York City, this measure of activity expanded at a relatively healthy pace through early 2008. By August, however, growth slowed considerably, although the index was still up 2.5 percent on a year-over-year basis.
- In New Jersey, the modest downturn in activity in the second half of 2007 continued into 2008. Outright declines occurred from July to October 2007 and from March to August 2008, at which point the CEI was down 0.6 percent from a year ago.
Bram, Orr and Rosen also explain that job growth in the region slowed in 2007, and the deceleration continued through August 2008. Job counts in New York State and New York City leveled off in early 2008 and remained little changed through August. New Jersey saw relatively flat employment through most of 2007 and a modest decline in the first eight months of 2008.
Although the authors present no specific point estimates for job growth in 2008, their outlook for the region suggests substantially smaller gains than the 35,000 net new jobs recorded in 2007. They suggest, if U.S. economic growth falls short of earlier expectations, employment in a number of the region’s sectors would decline significantly.
The key risk to New York City, report the authors, is that the sharp deterioration in financial market conditions will not be reversed in the near term and that financial sector activity, particularly in the securities industry, will continue to weaken. Given the finance sector’s importance to the city and the broader region, negative effects on employment and income in the area could therefore be expected. Continued, or intensified, contraction in finance could potentially lead to substantial fallout in other sectors of the region.
Jason Bram is an economist and James Orr an assistant vice president in the Microeconomic and Regional Studies Function of the Research and Statistics Group; Rae Rosen is a senior economist and assistant vice president in the Bank’s Regional Affairs Office.