By Ken McCarthy
Principal Economist, Applied Research Lead, Americas
One month does not a trend make – but May was pretty darn good. That was the overriding theme of my remarks at Cushman & Wakefield’s recent New York Tri-State Commercial Real Estate Overview & Outlook on July 20 at the Paley Center for Media in Manhattan.
Several of May’s economic indicators stand stood out to me. First, May was a strong month for job growth in New York City. New York City employs 4.4 million people, more people than 42 other states in the nation. The city added 24, 700 jobs in May, and combined with an additional 15,000 added in June brings total employment in 2017 to 33,200 above December 2016. Office-using industries account for nearly half of the jobs increase in 2017, now with 15,200 jobs more than end-of-year 2016. This is significant because office employment represents only 32% of the New York employment, yet accounts for nearly half of the 2017 job growth.
Of particular interest in the jobs numbers was the strength of the financial services sector. In New York City – a city whose economic output would place it as the 17th largest economy in the world were it a standalone nation – the financial services industry employs more than 470,000 workers. Yet during every year of this current economic expansion, beginning in 2010, the TAMI sector has outpaced financial services in job growth, often by significant numbers. And while this has allowed TAMI to make up significant ground on financial services, closing the employment gap between them by more than 33,000 jobs, financial services remains the dominant sector in New York office-using employment. That position has been further strengthened by a torrid start to 2017.
Highlighting the strength of this year’s job growth for financial services, over the first four months of the year the industry has created more jobs than in any four-month period in history, with data tracking going back to 1993. If 2017 trends hold up, this will represent the first time since 2010 that financial services outpaces TAMI in job growth, adding 6,500 jobs through the end of June, while TAMI has shed 6,900.
When it comes to information and technology jobs, however – the bookends of the TAMI equation – the devil may be in the details. While jobs created within the industry specifically, created by tech companies, have slumped so far this year, the tech and IT job market is likely stronger than those numbers suggest. The reason for this is the increasing number of tech jobs within non-tech sectors, as industries from financial services to healthcare to education become increasingly technologically advanced, often times drivers of technological innovation. While more data is required, following the trend of tech jobs in non-tech sectors will be interesting to watch moving forward, and its impact on commercial real estate could be significant.
One final point. Densification is an important trend that we’ve spoken about quite a bit, as companies shrink their footprint and take up less square footage per employee. As this trend continues, the growth of the job market is an important balancing factor, so that as densification makes more space available, an expanded employment base continues to fill that space back up.
The good news is that we can expect the job growth to increase as the economy’s growth velocity increases. The U.S. economy grew 2.6% in the second quarter, more than doubling Q1’s first quarter growth. We remain confident that New York City’s economy will remain healthy for the foreseeable future.
For more insights into the New York Tri-State Region, visit our research page here.
Ken has been with Cushman & Wakefield since August 2006. As Principal Economist, he works with the Chief Economist on Cushman & Wakefield’s U.S. economic position and presents it to the public. As Applied Research Lead, Ken is responsible for preparing cutting edge research about the outlook for commercial real estate in the Americas.