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How Healthy Is New York City's Economy? - Looking to a National Recovery
New York Times
James Parrot

August 31, 2010
View the Original Article


Despite a few signs of improvement, New York City’s economic outlook is for continued high unemployment for many months to come. Unfortunately, this will be the defining characteristic for many average New Yorkers.

When you factor in discouraged workers and those working only part time who want full-time work, the city’s real unemployment rate is 16 percent. For blacks and Hispanics, real unemployment is 21 percent. Half of the unemployed have been without jobs for more than six months.

The number unemployed is still more than double (375,000) what it was before the recession, and 40 percent of the unemployed do not receive unemployment insurance. The maximum weekly New York unemployment benefit has not been raised in over 10 years and is now lower than in all of our neighboring states.

Sustained high unemployment partially accounts for the dramatic disparity since 2007 in weekly earnings between managerial/professional and non-managerial/non-professional workers. In a forthcoming study from the Fiscal Policy Institute, we found that median weekly earnings for managers increased by 11 percent, while non-managers saw their weekly pay fall by 10 percent. Unless they are unionized, non-managers, who account for half of the local workforce, see a lot of their wage bargaining power erode when unemployment stays high for so long.

New York’s economy has a lot going for it and is more diversified than often believed, despite the large impact the finance sector has here. For most major economic sectors, output per worker in the city is well above the national average. The city will do well once a sustained national economic recovery gets underway. For that to happen, policymakers need to focus on spurring aggregate demand, averting economy-shrinking cuts in state budgets, and investing in productivity-enhancing infrastructure, particularly mass transit.

Also critical are measures to ensure that the fruits of productivity growth are broadly shared — data showing income polarization at its greatest since the eve of the 1929 crash demonstrate we haven’t been doing that, and that has been to our collective economic and social detriment.

The Obama stimulus package created or saved more than 80,000 jobs in New York City, pumping $16 billion into the local economy and helping to explain why the payroll job decline we’ve suffered turned out to be a lot less than once feared. The stimulus sent tens of millions of dollars to New York City laboratories through National Institutes of Health and National Science Foundation grants, provided $360 million in Pell grants to help low-income New Yorkers pursue their college dreams, and made possible $200 back-to-school allowances given last August to families on public assistance. There was also $1.7 billion in tax credits for working families. The stimulus package wasn’t the New Deal, but it helped put the brakes on an economy that was in free fall after the September 2008 financial meltdown.

One big challenge facing the city is to make sure that the jobs created here pay decent wages and benefits. Too many families struggle with poverty-wage jobs, and too much of our recent and projected job growth falls into that category. New York’s big businesses — the main beneficiaries of our high productivity economy — should be leading the way in ensuring that all businesses pay their workers an adequate wage. Needless to say, City Hall should be doing the same when it provides tax breaks or land use benefits to business.