Donald Trump and the other forces poised to shape the city’s economy in 2017. Some industries will fare better than others
In 2014 and 2015, New York City added a quarter million jobs, something that had never been done. The news isn’t as good for this year, and won’t be for 2017, but make no mistake: The city’s economy continues to prosper as sectors from tech to tourism to accounting to advertising—and especially health, education and the city government—continue to expand.
The great unknown is what President Donald Trump will mean for New York. His plan to cut taxes and add to infrastructure spending could provide a fiscal stimulus. His determination to roll back regulations on Wall Street could help this crucial industry that has been, at best, treading water. But he could also slash aid to the city and state over immigration reforms or set off a disruptive trade war that would upend all the assumptions.
Economists who specialize in the local economy agree that the city will end 2016 with an increase of about 80,000 jobs, a good performance by historical, if not recent, standards. Their forecasts for next year suggest a similar uptick.
The metro area’s $1.6 trillion gross domestic product, the largest in the country ahead of Los Angeles, and a 20% increase since 2013, according to the federal Bureau of Economic Analysis. The best news is that wages are rising faster here than they are in the rest of the country. Median household income in New York jumped 5.1% to $55,752 in 2015 and is now back to prerecession levels. Another jump is likely for this year and next, in part because of the big minimum-wage hike coming at the end of 2016.
But despite the recent Wall Street rally, a Trump presidency may not have much of an impact on the city’s fortunes, at least for the first half of the year.
Mark Zandi, the chief economist of Moody’s Inc.—and a solid Democrat—said the national economy is doing so well, and the Trump team is so unprepared, that it will be months before policies that affect economic growth will start to take shape. But as next year progresses, Trump’s priorities will start to matter, especially for the securities industry. The recent news on Wall Street has been pretty bad: The sector has not regained the jobs lost in the recession, profits have fallen for two consecutive years and the state comptroller has predicted bonuses will drop again next year. While it may not be as important as it was from 1980 to 2008, the financial market is still the city’s most important sector because of the outsize pay. Less than 5% of city jobs come from Wall Street, but the industry accounts for more than 20% of all income in the city and more than 20% of all state tax revenue. With financial stocks fueling the Trump rally, investors are betting that the next president will unshackle the industry from regulation, resulting in soaring profits and a boost in bonuses, furthering accelerating local gains.
But not all sectors will be winners in 2017. While the city expects to set another tourism record of 60 million visitors this year, the increase is relatively small. Without substantially more visitors, room rates will come down because so many new hotel rooms are coming on line. International visitors are also shopping less and retail employment in Manhattan is falling as a result.
Vacancy rates are increasing for the most expensive apartments as well as for retail and office space. There is clearly a glut of superluxury units, and retailers simply can’t pay what landlords are asking for, given the erosion of their businesses to online shopping. The strength of residential construction may depend on the resolution of the 421-a tax break controversy, and office rents will remain weak thanks to what looks to be a temporary glut of space. Taken together, the overall economy is likely to be a big plus for Mayor Bill de Blasio as he seeks reelection. If it falters, he can always blame President Trump.