June 10, 2009
Federal Reserve Districts
|Skip to content
The Second District's economy has shown signs of stabilizing since the last report, though some sectors continued to weaken. The labor market remains exceptionally slack and has yet to show signs of leveling off. Manufacturing sector contacts indicate that activity has generally stabilized and express increasingly widespread optimism about the near-term outlook. Retailers indicate that sales improved somewhat in May and were roughly on plan but still down moderately from a year earlier. Consumer confidence rose noticeably in April and May, rebounding from a record low. However, tourism activity in New York City showed further signs of softening since the last report. Commercial real estate markets have been mixed since the last report, with Manhattan's market continuing to weaken, but most surrounding markets slack but stable. Housing markets appear to be stabilizing in much of the District but continued to weaken in New York City. Finally, bankers again report increased demand for home mortgages but steady to somewhat weaker demand in other loan categories; they also report further tightening in credit standards and continued moderate increases in delinquency rates across all segments.
The Conference Board reports that consumer confidence among residents of the Middle Atlantic states (NY, NJ, PA), which had fallen to a record low in March, rebounded briskly in April and registered a further moderate gain in May. In contrast, tourism activity in New York City has weakened since the last report. Manhattan hotels report that business had picked up modestly in April, but fell back in May, with revenues falling nearly 40 percent below a year earlier; this compares with drops of 30 percent in April and 35 percent in March. Similarly, Broadway theaters report that business picked up in April but weakened in May: attendance was up 1 percent from a year earlier in April but down 4 percent in May; revenues were up 4 percent in April but down 3 percent in May.
Construction and Real Estate
Housing markets remained soft throughout the District, with ongoing deterioration reported in New York City--both in the rental and sales markets--but signs of stabilization indicated in other parts of the District. An authority on New Jersey's housing industry maintains that the market for new homes continues to slacken but that the market for existing homes appears to have stabilized; sales volume has reportedly picked up as sellers have reduced prices, which are now running an estimated 12-15 percent below a year ago. One real estate agent in suburban New Jersey reports that the market for more moderately-priced homes (under $600K) has picked up somewhat in recent months--some sellers that have reduced their prices noticeably have received multiple offers. A contact in the Buffalo area reports that sales activity has picked up somewhat since March and that home values have remained stable. Contacts across much of the District indicate that new residential construction has virtually ground to a halt.
New York City's apartment sales and rental markets have continued to soften since the last report. A leading residential appraisal firm notes that market conditions continue to deteriorate--particularly for new buildings, many of which are less than half occupied. Sales activity is reported to be down 50 percent from a year ago in Manhattan, and down 25-30 percent in Brooklyn and Queens. Prices for Manhattan apartment resales are reported to have fallen by roughly another 5 percent since the first quarter and are running roughly 25 percent lower than a year ago, though price moves have been quite erratic due to thin volume. Manhattan's rental market has also continued to soften, partly reflecting increased supply, as many landlords are renting out units that are not selling. Asking rents are reported to be down 5-10 percent from a year earlier in May, but the decline in effective rents has been much steeper due to the widespread and growing practice of waiving of rental fees and offering one or more months of free rent.
Other Business Activity
Contacts in service-sector industries generally report that both business conditions and employment levels continued to weaken in May. A securities industry contact notes that firms are generally showing profits in the current quarter, reflecting low interest rates, an upturn in the equity markets, and a pickup in underwriting activity. There are scattered reports of hiring in the financial sector--mainly at smaller firms and accounting firms--but these are being swamped by ongoing layoffs at large financial firms, mainly related to mergers in the industry. A leading New York City employment agency notes that, despite some pickup in hiring activity, there has been no noticeable change in the large queue of job-seekers; there are very few opportunities for people now graduating from college, and a sizable proportion of 2008 graduates are still looking for work.