October 17, 2007
Federal Reserve Districts
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The Second District's economy has expanded at a moderate pace since the last report, while price pressures have remained steady. The labor market has generally been stable and tight. Manufacturers report ongoing expansion in activity in early October. Retailers indicate that sales were on or below plan in September, except in New York City, where sales have been relatively strong and tourism activity has held steady at high levels. Housing markets continue to be mixed: Manhattan's sales and rental markets remained relatively firm in the third quarter, while housing markets in New Jersey and other areas continue to be soft. Office markets in the New York City area have been steady to stronger, with continued steep increases reported in Manhattan asking rents. Bankers report weakening loan demand, particularly for consumer loans and home mortgages; they also report tightened credit standards in all categories except consumer loans, and rising delinquency rates on commercial loans and mortgages.
Tourism activity in New York City has been steady at a high level. Hotels remained at close to full capacity in August, with room rates accelerating to a 15 percent year-over-year growth rate, and total revenues up nearly 20 percent from a year earlier. A contact at a leading industry organization characterizes September as another strong month, though not quite as robust as August. Broadway theaters report that activity tapered off a bit in September, but remained at a strong level; both attendance and total revenues were little changed from a year ago, after running 8-12 percent ahead in August.
Construction and Real Estate
Housing markets continue to be mixed, as in the last report. New Jersey homebuilders report that they have reduced new construction activity and have all but ceased seeking approvals for new development. Both builders and sellers of existing homes are reported to have become more negotiable on selling prices, and this has boosted sales activity somewhat. Selling prices for new homes in northern New Jersey are estimated to be down roughly 10 to 15 percent from a year earlier, on average. Based on monthly reports from New York State Realtors, sales of existing single-family homes were down 7 percent from a year earlier in August, while selling prices were down roughly 2 percent, on average--not much different than in prior months.
Manhattan's apartment sales and rental markets were steady and relatively strong in the third quarter. Sales activity for co-ops and condos rebounded more than 60 percent from the depressed levels recorded a year earlier, and the number of listings (inventory) was down by roughly a third, to levels that are characterized as more normal. Overall, selling prices of Manhattan apartments were up slightly from a year earlier, on average, though the high end of the market registered double-digit price appreciation. Similarly, rents on high-end (large) apartments are reported to have risen by more than 15 percent from a year ago, reflecting a severe dearth of available units; rents on studio and one-bedroom units are estimated to be up roughly 7 percent, on average, over the past 12 months.
Other Business Activity
A major New York City based employment agency, specializing in office jobs, reports that large financial services firms have pulled back on hiring activity somewhat, but that labor demand remains strong in other industries, particularly legal services. Available office workers reportedly remain in short supply. Starting salaries are estimated to be up roughly 5 percent from a year ago, on average.