January 19, 2005
Federal Reserve Districts
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The Second District's economy has clearly gained further momentum since the last report, and the labor market has taken on a firmer tone. While cost pressures persist, prices of final goods and services generally remain stable. Manufacturers continue to report fairly widespread improvement in business conditions, as well as a pickup in hours worked. Reports from the retail sector, though mixed, are generally more favorable than in the last report, with holiday-season sales roughly in line with expectations.
Residential real-estate markets showed continued strength in the fourth quarter, while office markets were steady to stronger. Tourism is characterized as increasingly robust in both New York City and upstate New York. The securities industry reports an upsurge in business activity, as well as a pickup in hiring, in the fourth quarter. Finally, bankers report a normal seasonal pullback in household loan demand, unchanged credit standards, and lower delinquency rates on commercial loans.
Consumer confidence improved sharply in December, based on two separate surveys. Siena College's survey of New York State residents shows confidence jumping to a five-month high, led by a sharp gain in the New York City area. Similarly, The Conference Board's survey of Middle Atlantic state (NY, NJ, PA) residents shows confidence rebounding to a three-month high in December, led by a surge in the public's assessment of current conditions, which reached its highest level since September 2001.
Construction and Real Estate
Commercial real estate markets were steady to stronger at year-end. Manhattan's Class A office vacancy rate fell to a 2½-year low of 9.8 percent, down from 10.3 percent in November. Midtown's market showed particular strength, with available space (both direct and sublease) continuing to shrink, and asking rents 10 percent higher than a year earlier. Downtown's vacancy rate fell by more than a point in December, but asking rents have been little changed over the last year. An industry contact notes that the recent pickup in both the Midtown and Downtown markets mainly reflects brisk leasing activity from the financial sector and may signal a pickup in hiring in the securities industry. Suburban markets around New York City showed little change: vacancy rates edged down in northern and central New Jersey and Fairfield County but edged up in Westchester County.
Other Business Activity
The securities industry ended 2004 on a strong note, according to an industry contact. Investor sentiment improved and activity picked up in virtually all business segments starting in late-October and this trend gained momentum through December. The industry anticipates increased hiring in 2005 and stronger compensation growth than previously projected. More broadly, a major New York City employment agency, specializing in mid-level office jobs, reports that business was unusually brisk in both December and the first week of January, and that financial firms, in particular, have picked up their pace of hiring. Moreover, on the supply side, a growing share of job-seekers is reported to be looking to change jobs.
Tourism also ended 2004 on a strong note. Broadway theaters report a pickup in activity in December; though attendance and revenues for the month were slightly below the lofty levels of a year earlier, the last week of the year set a box-office record. Manhattan hotels report strong business in December: occupancy rates were up 2 percentage points from a year earlier, while room rates were up roughly 15 percent; also, bookings for January are said to be relatively strong. Hotel occupancy rates in the Buffalo and Rochester areas were also up noticeably from comparable 2003 levels, and Buffalo's airport notes robust growth in passenger traffic in November and December.