Why is NYC’s economy still struggling? Take a closer look at construction, entertainment and retail

In the summer of 2019, leisure and hospitality jobs fell to a record 474,000, with the city’s economy booming and the number of tourists visiting New York reaching a record 67 million by the end of the year.

In the summer of 2022, while the city is still struggling to recover from the pandemic recession, the number of jobs in restaurants, hotels, arts and cultural institutions is 404,000 – a decrease of about 15%.

That summer three years ago, cranes crowded the skyline and some 163,000 people worked to build new hotels, office buildings and residential buildings. This summer, 20,000 fewer people were employed in the construction industry, a number that hasn’t been hit in months.

The growth of online shopping started to hit retailers in mid-2019, but still 346,000 people worked in stores. Despite recovery from the pandemic, that number stands at just 306,000 today, with little chance of significant gains in the coming months.

Looking at the reasons for the slowdown in job numbers in those key sectors of entertainment and hospitality, manufacturing and retail is a place to start to understand why New York City’s economy is still struggling to recover its pre-pandemic mojo.

July represented a watershed, as the nation regained all the jobs lost to the pandemic. New York, however, received only 82%.

Experts are quick to point to areas of strength in the economy.

The tech sector is well ahead of its pre-pandemic job levels and gains in the city have outpaced the rest of the country. Finance, particularly Wall Street, remained strong throughout the recession, and the recent market rebound has eased fears of layoffs there. Health services are also expanding.

However, those areas are not enough. And the story behind the weaknesses in leisure and hospitality, retail and manufacturing adds up to the city’s new biggest problems: not enough big-spending international tourists and not enough office workers, period. And, of course, New York was hit first and hardest by both the coronavirus and the resulting business shutdowns.

“The pandemic hit the hospitality industry so hard in New York, especially compared to other cities with fewer restrictions and where businesses may have received more support,” said Andrew Riggi, executive director of the New York Hospitality Alliance.

The City Independent Budget Office compared the region’s rebound in New York to other major tourism destinations such as Orlando, Las Vegas, Washington, South Florida and San Francisco. All have regained a higher percentage of lost jobs than New York.

One reason is that nearly 19,000 hotel rooms remain closed, according to the Hotel Association of New York City. Many of them were concentrated on Lexington Avenue in Midtown, whose clientele was primarily businessmen visiting clients in Midtown.

Association president Vijay Dandpani said, ‘There is no business trip without an office.

While many international tourists have returned in surprising numbers, their ranks do not include the Chinese, who are still unable to travel due to that country’s strict coronavirus protocols. China was expected to be the No. 1 source of visitors to the city before the pandemic.

Due to the lack of staff in the office, restaurants are also in trouble. Last week, Riggi spoke with the owners of two Midtown eateries. The full-service restaurant is doing well. “But limited-service restaurants are having problems because office workers can’t go out to get a bagel in the morning or go out for lunch,” he said.

It’s not just hotels and restaurants, of course.

Broadway attendance is still only about 80% of pre-pandemic levels, and long-running shows including “Dear Evan Hansen” and “Come From Away” are closing this summer.

With transportation jobs still below 10,000 in the early 2020s, fewer tourists mean fewer businesses and less need for limos, while fewer office workers need fewer taxis and Ubers.

And retail districts, especially in midtown, don’t seem to have recovered their traffic. About half of the stores in Herald Square, a mecca for both tourists and office workers, are empty, according to data from Cushman & Wakefield.

The pandemic has cooled the environment for construction, which has stalled at 15% below its pre-pandemic level.

Almost all construction underway is on buildings that began before the pandemic, Louis Colletti, president of the Building Trades Employers Association, noted, with little new activity in residential, commercial and government-subsidized construction.

As the survey shows that office workers are unlikely to return in large numbers, the chances for the remaining four months of the year are slim.

“I think there’s reason to be concerned about growth for the rest of the year,” said Michael Jacobs, chief economist at the Independent Budget Office, “especially in terms of office employment.”

A city comptroller’s report earlier this month said the survey showed no significant increase for in-person office attendance this fall. A report from the Federal Reserve Bank of New York last week titled “Remote Work Is Sticking” suggested that current levels of work in and out of the office are likely to continue for years.

“For the past two months, New York has had 40% office occupancy, so it’s become harder and harder to break 40% and get to 50% or 60%,” said Rahul Jain, the state’s deputy comptroller.

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