March 9, 2005
Federal Reserve Districts
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The Second District's economic expansion has been well maintained since the last report, while price pressures have been relatively subdued. Manufacturers report continued moderate growth in activity in February, and some moderation in price pressures. Retailers indicate that February sales were little changed from a year earlier but generally close to plan; however, tourism activity is reported to have been unusually strong in early 2005. Residential real-estate markets showed further signs of strength in January and February, while both office and industrial markets were stable. The securities industry reports brisk business activity, as well as a pickup in hiring and compensation. Finally, bankers report little net change in loan demand and steady to declining delinquency rates.
New York City tourism has been exceptionally strong in early 2005. In January, Manhattan's hotel occupancy rate was up about 3 percentage points from a year ago, and total revenues were up roughly 15 percent. More recently, an industry contact reports that most Midtown and Uptown hotels were completely booked for most of February, largely spurred by visitors to the Christo "Gates" in Central Park. In the third week of the month, hotel revenues were reported be up by roughly a third from comparable 2004 levels. Museum attendance was also said to be exceptionally high in the second half of February. Broadway theater attendance was sluggish in the first half of February but picked up moderately in the third week of the month. Finally, Buffalo-area hotels report that occupancy rates have been running roughly on par with a year earlier, as stronger underlying demand was said to be offset by the cancellation of National Hockey League games.
Construction and Real Estate
Commercial real estate markets in and around New York City were relatively stable in the first two months of 2005. Compared with year-end 2004, office vacancy rates edged down in Midtown Manhattan and northern New Jersey but edged up in Lower Manhattan and Long Island; asking rents were also little changed. For all of Manhattan, an industry contact reports that the volume of available sublease space fell to its lowest level since September 2001. Industrial vacancy rates held steady on Long Island, in January and February, but edged up in New York City and climbed to a nearly two year high in northern New Jersey, partly reflecting new supply of space.
Other Business Activity
A major New York City employment agency reports that hiring activity remained fairly brisk in February, but has not strengthened noticeably from late 2004. Our contact indicates that the quality of job candidates available to meet openings is lower than last year. Most of the hiring is still reported to be coming from the financial and legal sectors, but there has been a scattered pickup in other industries such as fashion, pharmaceuticals, and executive placement. The securities industry has continued to perform well in early 2005; despite some slowing in equity issuance, other business segments are reported to be strong. Moreover, employment continues to grow, despite scattered layoffs, and total wages and salaries the first quarter are estimated to be running 10 percent ahead of a year ago, led by a 15 percent increase in bonuses.