Economic Research & Analysis

February 2017 Economic Snapshot: Interest Rates Take a Hike!

Highlights

January 2017 saw a sharp rise in private sector employment.
The value of venture capital financings in New York City grew 18% in the final quarter of 2016.
Citywide construction continued to be slightly depressed, while the Bronx and Brooklyn exceeded historical averages.
Residential rents continued to fall through the end of 2016, despite rising home values.
While tourism ended 2016 on a high note, transit indicators were lower than usual.

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#82: Interest Rates Take a Hike!

What happens when the Fed raises interest rates? How do these interest hikes affect everyday New Yorkers? This month, our old friend and colleague Kim Grauer joins us to discuss everything you've ever wanted to know about how these interest rates affect the economy. Don't miss it!

Employment

Private sector employment rose by 39,000 in January 2017.1 Educational Services led job growth, adding 12,900 jobs between December and January, followed by Accommodation and Food Services and Professional Services. Administrative Services, Transportation and Warehousing, and Manufacturing all saw job losses last month. Between January 2016 and January 2017, the City added 81,900 private sector jobs, an increase of 2.2%. By comparison, national job growth was 1.7% over this period. The unemployment rate fell 0.4 percentage points to 4.5%, its lowest level in the four decades that the rate has been tracked at the City level. This is also the first time since 2011 that the City’s unemployment rate is below the national average. Average weekly earnings were $1,197 in January 2017, an inflation-adjusted increase of 0.6% from the year prior.

The unemployment rate fell 0.4 percentage points to 4.5%, its lowest level in the four decades that the rate has been tracked at the City level. This is also the first time since 2011 that the City’s unemployment rate is below the national average. Average weekly earnings were $1,197 in January 2017, an inflation-adjusted increase of 0.6% from the year prior.

Note: New York City Office of Management and Budget (OMB): Per usual, the January 2017 report incorporates the annual benchmark revision, which adjusts the past two years of monthly survey data to align with the more accurate—but less timely—Quarterly Census of Employment and Wages (QCEW). The annual average employment for 2016 was revised up by 30,000 private sector jobs. Estimated employment gains between December and January are often subject to substantial revisions and should be interpreted with caution. Monthly employment data are seasonally adjusted by OMB.
Sources: New York State Department of Labor; US Bureau of Labor Statistics

February 2017 Snapshot - Employment by IndustrySource: New York State Department of Labor

February 2017 Snapshot - Employment by Metro Region

Source: U.S. Bureau of Labor Statistics

Finance

NYCEDC monitors New York City’s gross city product, venture capital financing, and the New York Federal Reserve Bank’s Index of Coincident Economic Indicators. These indicators are reported in a quarterly rotation. This month, we are reporting on venture capital.

The value of venture capital financing in the New York City metropolitan area rose to $2 billion in the fourth quarter of 2016 – the highest level in the three quarters. At the same time, the number of financing deals fell to the lowest level in recent years, indicating generally larger financings for local venture capital-backed firms. By comparison, both of these indicators fell in the US as a whole. Two deals accounted for nearly one-quarter of total financing: WeWork, a commercial real estate company, raised $260 million in a Series F round; and Buzzfeed, a media company, raised $200 million in Series G funding. Deal activity and financing levels for the New York City metropolitan area were second only to Silicon Valley for the fourth quarter.

Source: CB Insights/PwC

Construction

In December 2016, 540 construction projects worth a collective $2.67 billion were started in New York City, up 21% and 15%, respectively, from last year. While these totals are slightly lower than monthly averages over 2016, the value of starts exceeded 12-month borough averages for the Bronx and Brooklyn. This aboveaverage performance was led by residential building projects in both boroughs, which pushed citywide housing unit starts to 2,665 – 12% higher than monthly averages over the preceding year.

Source: Dodge Data & Analytics

February 2017 Snapshot - Construction Starts

Real Estate

In January 2017, housing continued end-of-2016 trends. Median residential rents remained unchanged at about $2,300, 0.6% lower than January 2016. This follows last month’s modest year-over-year rent drop and continues a trend of decreasing annual rent growth, which has been continuous since July 2016. Median home values continued their upward climb, rising 11.0% from January 2016 to about $631,000. The office market remained relatively steady with rents and vacancy rates both rising slightly.

Sources: Zillow; Cushman & Wakefield

February 2017 Snapshot - Residential Rent-Home ValueFebruary 2017 Snapshot - Office Vacancy-Rent

Transit & Tourism

Tourism in New York City showed signs of growth in December 2016. International flights led rises in passenger arrivals and departures at regional airports. Hotel rates and occupancy in last two months of 2016 improved from the prior year for the first increase in per-room profitability since mid-2015. Local transit indicators for December 2016 were down from December 2015 levels, led by falling subway ridership. Total subway ridership in 2016 was 0.9% lower than in 2015, reflecting a clear recent downward trend. Ridership on both commuter rails and bridges and tunnels (which carry automotive traffic) grew in 2016 overall, making current trends slightly more ambiguous for these modes of transit.

Sources: Port Authority or New York and New Jersey; Metropolitan Transportation Authority; Broadway League; CBRE

Transit Change Compared to 2016

February 2017 Snapshot - Transit

Tourism Change Compared to 2016

February 2017 Snapshot - Tourism