Federal Reserve Bank of New York

Summary of Economic Activity

Economic activity in the Second District declined slightly during the latest reporting period, continuing a period of sustained weakness. Labor market conditions continued to cool but remained solid. Employment growth slowed to a slight pace, as demand for labor softened with economic uncertainty inhibiting hiring plans. Inflationary pressures were little changed, with prices rising modestly. Consumer spending increased moderately, with strong holiday spending on apparel, toys, and sporting goods. Manufacturing activity fell sharply, with notable declines in orders and shipments. Tourism activity in New York City approached normal pre-pandemic holiday levels. Housing markets were mostly unchanged since the last report, with low inventory continuing to restrain sales activity in most of the District, but residential rental markets softened. Commercial real estate markets mostly held steady. Activity in the broad finance sector declined modestly, with ongoing weakening loan demand and rising delinquencies. Businesses and households across the District expressed concern about the high cost and reduced availability of credit. The outlook improved but remained subdued.

Labor Markets

Labor market conditions continued to cool since the last report but remained solid. Employment growth slowed to a slight pace, though businesses in information services, manufacturing, transportation, and construction reported declines in employment in recent weeks. Though the availability of workers has improved, contacts noted that demand for workers softened as economic uncertainty inhibited hiring plans. Indeed, many mid-sized companies have stopped hiring, while smaller companies have become more selective in who they hire. Contacts across a variety of sectors noted that attrition remains exceptionally low.

Wages grew modestly. As conditions have continued to normalize, contacts reported that labor demand and supply have come into better balance, reducing the need for outsized wage adjustments seen through the pandemic. Still, a major payroll and human resources firm reported that bonuses were up in 2023, with more employees receiving bonuses and solid increases in average bonus percentages. Looking ahead, more firms plan on increasing headcounts in the coming months than in the previous period.


Inflationary pressures were little changed, with prices rising modestly. On balance, the pace of input price increases continued to moderate. Contacts reported that prices for some goods, such as paper, ink, and construction materials have stabilized, while the cost of freight and insurance continued to rise. The pace of selling price increases rose slightly in the service sector but continued to moderate slightly for manufactured goods. However, construction firm contacts pointed to declining selling prices. Contacts do not anticipate significant shifts in the pace of selling price increases in the coming months.

Consumer Spending

Led by strong holiday sales, consumer spending was up moderately during the reporting period. Spending on apparel, toys, and sporting goods was particularly strong, while spending at restaurants and bars declined somewhat. Despite the higher cost of credit, auto dealers in upstate New York reported solid sales activity for both new and used cars at the end of 2023. With inventory continuing to improve, more buyers are able to find their vehicles of choice and ongoing declines in used car prices continued to boost sales in that segment of the market.

Manufacturing and Distribution

Manufacturing activity fell sharply, with orders and shipments declining. Transportation and distribution firms also reported declining activity. Supply availability continued to improve, with several contacts reporting that supply chains have returned to pre-pandemic norms. Moreover, an upstate auto industry contact reported that the shortage of microprocessors that stalled auto production for much of the pandemic period has largely been resolved. Still, slow delivery times remained a challenge for some industries. One local business contact reported a four-year lead time for specialty equipment delivery. Inventories increased slightly, while unfilled orders declined. Looking ahead, while manufacturers expect business conditions to improve modestly, optimism remained subdued.


On balance, service sector activity declined slightly in the latest reporting period. While businesses providing education and health services reported a modest increase in activity, business services firms indicated activity declined somewhat, and personal services businesses pointed to a sharp contraction. Service firms generally expect conditions to improve somewhat in the months ahead.

A New York City tourism contact reported that the city was bustling over the holiday season, with visitor levels at normal pre-pandemic levels, busy pedestrian corridors, and long queues for entry at museums. Hotel bookings were significantly higher this year compared to the same time last year, with hotel occupancy rates notably higher than other top U.S. tourism markets. However, some inventory of hotel rooms has been set aside for emergency housing for asylum seekers, reducing the stock of available rooms. Despite economic and geopolitical concerns, contacts are optimistic about a return to normal tourism levels in 2024.

Real Estate and Construction

Housing markets were mostly unchanged since the last report, with low inventory continuing to restrain sales activity in much of the District. Demand remained solid, with buyers who have been waiting on the sidelines for a drop in mortgage rates returning to the market. Inventory remained exceptionally low in the New York City suburbs, while inventory increased slightly in upstate New York. In general, contacts reported that home prices have continued to trend up. New York City was the exception, where prices have leveled off as supply has normalized.

Notably, residential rental markets softened after a sustained period of strength. Rents fell across the District, but particularly in New York City, where new lease activity continued to decline and rents dropped below last year's level. A contact in upstate New York noted that some investors who purchased and converted homes for rental income have started to sell their properties, reducing options for renters but increasing the supply of homes for sale.

Commercial real estate markets were unchanged for most markets. New York City office vacancy rates were steady near historic highs and rents declined slightly. Upstate New York office markets saw continued increases in vacancy rates, but rents were unchanged. In the industrial market, small improvements were seen in downstate New York while conditions in upstate New York deteriorated.

Construction contacts reported that activity declined modestly since the last report. Office construction dropped, but industrial construction grew with high volumes under construction and significant deliveries set for 2024 in downstate New York and northern New Jersey.

Banking and Finance

Activity in the broad finance sector declined modestly during the latest reporting period. Contacts from a variety of sectors expressed concerns about the high cost and reduced availability of credit. Small to medium-sized banks in the region reported declining loan demand across all loan segments, including refinancing. While banking contacts reported that credit standards were unchanged for consumer loans and residential mortgages, standards continued to tighten for business loans and commercial mortgages. On balance, deposit rates were higher, loan spreads narrowed, and delinquency rates continued to rise.

Community Perspectives

Households in the District have experienced greater difficulty meeting financial obligations. Though credit has become harder to get, many families have accumulated high debt burdens. To help ease these burdens and protect households, state and city governments have responded with new policies. Notably, New York State has enacted legislation prohibiting medical providers from reporting medical debt to credit bureaus, preventing the cascading effects of adverse credit reporting on household finances. Other policies have distributed funds directly to individuals, including one providing funds to cover back rent to residents of public housing managed by the New York City Housing Authority.

For more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy.

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Last Update: January 17, 2024