Federal Reserve Bank of New York

Summary of Economic Activity

After a period of sustained weakness, economic activity in the Second District flattened this reporting period. Labor market conditions remained solid as employment grew slightly and wage growth picked up to a moderate pace. The pace of selling price increases remained modest for most services but picked up for manufactured goods. Following a sharp contraction in January, manufacturing activity continued to edge slightly lower. Consumer spending declined modestly after a strong end to last year. Still, tourism activity in New York City was solid and continued to move towards pre-pandemic levels. Housing markets picked up as buyers who were waiting for a reprieve in mortgage rates started to return. Commercial real estate markets mostly held steady despite increasing financial strain among property owners. The finance sector remained sluggish, with ongoing declines in loan demand and rising delinquencies. The outlook improved somewhat.

Labor Markets

Labor market conditions remained solid in early 2024. Employment continued to grow slightly as gains in the personal services and leisure and hospitality sectors were partially offset by losses in the business services, information, retail, and finance sectors. Labor demand and labor supply continued to come into better balance, with a range of contacts reporting that while demand has remained solid, it has become less difficult to find qualified workers. Many businesses noted ongoing challenges getting workers to come into the office, though a New York City employment agency indicated that candidates were approaching the negotiating table with more reasonable expectations for in-person days. Though layoffs remained limited, announcements of forthcoming reductions in the region's banking and finance sectors reflected some signs of weakening on the horizon. Still, businesses in most sectors planned to increase headcounts in the coming months.

Wage growth picked up to a moderate pace. While most contacts reported steady wage growth in the new year, the recent increase in New York State's minimum wage has caused some businesses to raise pay more substantially for some employees. Wage growth is expected to moderate over the course of this year as conditions continue to normalize.


The pace of input price increases picked up to a moderate pace. Contacts noted outsized increases in the prices of raw materials such as cocoa, copper, plastic, and textiles, amid ongoing sharp increases in insurance and freight costs. Pricing pressures have eased for steel, paper, and grains—inputs that saw steep price increases in recent years. The pace of selling price increases remained modest for most services but picked up for manufactured goods. Construction firms continued to report modest selling price declines. Inflationary pressures are expected to moderate in the year ahead.

Consumer Spending

Consumer spending declined modestly for both goods and services in early 2024 after a strong end to last year. Retail contacts reported declining sales since the last report. While spending on travel remained strong, contacts noted some retraction in discretionary spending among less affluent customers. Auto dealers in upstate New York indicated sales of new cars slowed noticeably, partially due to unseasonably harsh winter weather, while used car sales remained steady. Inventory has continued to improve, and consumers have increasingly been able to find the vehicles that they want.

Manufacturing and Distribution

Following a sharp contraction in January, manufacturing activity edged slightly lower. Though shipments increased slightly, new orders remained weak and unfilled orders continued to decline. Transportation and distribution firms also reported modestly declining activity. While supply availability continued to improve and delivery times shortened, some contacts reported ongoing difficulty obtaining raw materials. Manufacturers expect economic conditions to improve though optimism remained subdued.


On balance, service sector activity was little changed. While activity increased noticeably in the information sector and edged up in the education and health and leisure and hospitality sectors, activity in the business services sector declined. Service firms have become more optimistic about the outlook.

A New York City tourism contact reported that activity has been fairly level since the holiday season, with hotel occupancy at typical winter levels. Attendance at Broadway shows has begun to pick up as showtimes have been adjusted to account for shifting preferences, and the spring season has a promising slate of new shows. Business travel has picked up, and trade shows are drawing larger crowds with a renewed interest in conducting business in person. The selection of New York City as a host city for the 2026 FIFA World Cup has boosted optimism in the region's tourism industry.

Real Estate and Construction

Housing markets strengthened as the spring selling season got underway a bit earlier than normal. While inventory generally remained exceptionally low, inventory in New York City has begun to normalize. Many buyers who were waiting for a reprieve in mortgage rates have started to return with the intention of refinancing later. Though mortgage rate lock-in continues to limit new listings, particularly in the New York City suburbs, listings have increased in upstate New York as people have continued to leave the area for warmer climates. Still, with such limited inventory, home prices have continued to press higher. Bidding wars were prevalent in the New York City suburbs but have been more limited in upstate New York.

Residential rental markets firmed after softening in the fall. Though rents held steady during the latest reporting period, bidding wars on rentals have become more frequent, and new leasing activity was strong in New York City. In upstate New York, rents edged down but remained high.

Commercial real estate markets mostly held steady. New York City office vacancy rates were little changed near historic highs, and rents were flat. A commercial real estate contact noted that proximity to public transportation was a significant attraction to office tenants within Manhattan. Though generally businesses are looking to reduce their floor plans, legal firms have been active in seeking new space. Still, financial strain among property owners in New York City continued to build, with upcoming loan maturities foreshadowing further increases in defaults in the coming year. Office markets outside New York City, where supply is more limited, remained more resilient. Industrial markets edged down as some tenants looked to shed space, though rents remained elevated. Multifamily markets held steady even as operating expenses increased sharply with growing labor and insurance costs.

Construction contacts reported that overall activity declined noticeably. Office construction remained subdued. Industrial construction was strong in Northern New Jersey but declined in upstate New York.

Banking and Finance

Activity in the region's finance sector remained sluggish. Small- to medium-sized banks in the region reported ongoing declines in loan demand and weaker refinancing activity. Banking contacts also indicated that credit standards tightened, particularly for business loans and commercial mortgages. While deposit rates held steady, loan spreads narrowed, and delinquencies continued to rise.

Community Perspectives

Community leaders expressed concern about crime and public safety. Although violent crime rates have continued to decline over the past year, a rise in hate crimes and ongoing high rates of retail theft have reduced the sense of security in public spaces, such as on public transit and in stores. Retail theft has taken a particular toll on small business owners, who faced increased costs due to loss prevention measures. Legislators have worked to respond to this problem, with proposals including a tax rebate for shop owners to ease the costs of additional security and loss prevention measures.

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

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Last Update: March 06, 2024