Even The Fed Is Keeping NY/NJ Expectations Low

Is the Worst Over? Economic Indexes and the Course of the Recession in New York and New Jersey

September 28, 2009
Note To Editors

The Federal Reserve Bank of New York today released Is the Worst Over? Economic Indexes and the Course of the Recession in New York and New Jersey, the latest article in its series Second District Highlights.

Using coincident indexes – composite measures that gauge the level of current economic activity – for New York State, New York City and New Jersey, authors Jason Bram, James Orr, Robert Rich, Rae Rosen and Joseph Song analyze the area’s most recent recession and provide an update on the regional economy as of July 2009.

The indexes show that the New York-New Jersey region began to experience a severe economic downturn in 2008, several months after the onset of a national recession in December 2007. The authors note that this sequence of events differs from the 1990-91 and 2001 U.S. recessions, when regional downturns preceded the corresponding national trends. This delayed start suggests that the regional economy had more momentum and showed more resilience than the U.S. economy during the early stages of the national recession.

Job losses and rising unemployment were largely responsible for the steep declines in the regional indexes. Employment losses have been particularly marked in the region’s finance industry—a high-income sector that is a key driver of the region’s economy. During the downturn, weakness in this sector spilled over to supporting sectors such as business and professional services, resulting in additional job losses.

The pace of decline in the region moderated considerably in the spring of 2009 and leveled off in July 2009. However, the authors note that a period of ongoing job losses and rising unemployment may continue in the region even as the U.S. economy begins to recover, owing to the region’s historical tendency to lag the national recovery, the restructuring in the finance sector, and fiscal pressures arising from decreases in tax revenue.

Jason Bram is a senior economist, James Orr an assistant vice president and Joseph Song an assistant economist in the Microeconomic and Regional Studies Function of the Bank’s Research and Statistics Group; Robert Rich is an assistant vice president in the Macroeconomic and Monetary Studies Function of the Research and Statistics Group; Rae Rosen is an assistant vice president in the Regional Affairs Function of the Communications Group.

Here is the full report:

http://www.newyorkfed.org/research/current_issues/ci15-5.pdf

In the larger picture...

Where will all the home buyers come from?

NY Times: Metro NYC Woes Not Slowing

September 18, 2009

Unemployment Hits 10.3% in New York City

By PATRICK McGEEHAN

Continuing layoffs on Wall Street drove New York City’s unemployment rate to 10.3 percent in August, a 16-year high that underscores the need to retrain former financial services workers for other jobs, state officials said Thursday.

In the year since the Lehman Brothers investment bank collapsed and others had to be rescued from failing, the number of unemployed city residents has risen to more than 415,000, the highest total on record. The still-shrinking financial sector, which had been the main engine of employment growth in the city before the downturn, has essentially been declared to be in a state of emergency.

The State Department of Labor has begun using a “national emergency grant” of $11 million in federal funds to help those laid off on Wall Street shift into other fields, like health care and education. Emphasizing the need for such a shift, M. Patricia Smith, the state labor commissioner, said, “Our economists don’t see the financial-services sector ever coming back as strong as it was.”

Ms. Smith joined Gov. David A. Paterson and Assembly Speaker Sheldon Silver at a news conference in Lower Manhattan to discuss the latest jobs data and promote the retraining program. Mr. Paterson said the latest increases in the state and city unemployment rates showed that the recession was continuing in New York.

Referring to the recent pronouncement from Ben S. Bernanke, the chairman of the Federal Reserve, that the national recession is probably over, Mr. Paterson said, “What he’s saying about the national recession doesn’t apply to us.” He said New York faced at least another year of “tough sledding.”

The city’s unemployment rate, which rose from 9.5 percent in July, is now well above the national rate of 9.7 percent. Until July, unemployment had been the same or lower in the city than it was in the country for more than 18 months. Last month, the state’s unemployment rate rose to 9 percent, from 8.6 percent in July. Excluding the city, unemployment in New York State was 8 percent.

Still, Mayor Michael R. Bloomberg found a bright spot in the report. “While the job market is tight,” he said, “the city is losing jobs at less than half the rate of the rest of the country. This is an important sign that despite the challenges, people continue to be optimistic about the city’s future.”

Ms. Smith said the divergence between the city and the rest of the state was largely attributable to continued cutbacks on Wall Street and the ripple effect of the loss of those high-paying jobs. She emphasized that most of the Wall Street layoffs have involved mid- and lower-level workers who did not earn millions of dollars a year.

Under the retraining program that began in July, more than 450 people have begun classes to prepare for a career shift, and state officials say they have enough money to help at least 1,000 more.

One person in the program, Marisha Clinton, 39, of Prospect Heights, Brooklyn, said she lost her job analyzing technology stocks for Bear Stearns after it collapsed early last year. A year later, she was laid off by another securities firm.

Now, Ms. Clinton is using the $12,500 subsidy offered by the Labor Department to take courses at the New York Institute of Finance that might help her find other work.

“I’m keeping my options open,” Ms. Clinton said. “I’ve been working since I was 14 years old. I’d rather be working than not.”

The emergency federal grant went to New York. New Jersey and Connecticut, which received a combined $22 million to retrain people who have lost jobs since June 2008 at any of 31 companies — mostly large financial firms like Citigroup and Lehman Brothers.

Lana Umali, who worked for JPMorgan Chase for 20 years before losing her job in Manhattan last year, has already put Wall Street behind her. Ms. Umali, who lives in Middletown, N.J., used the state subsidy to help pay for courses to prepare her to work with elderly people. She is hoping to find work at a company that operates assisted-living facilities.

Immediately after she was laid off in June 2008, she said, “I was determined to go back into financial services. I never really thought about anything else.” But after a fruitless search, Ms. Umali said, “I got in touch with a whole other side of me.”

WSJ BLOG/Developments: Toll CEO Sells More Company Stock

WSJ BLOG/Developments: Toll CEO Sells More Company Stock

By James R. Hagerty Why is Robert Toll unloading large amounts of stock in Toll Brothers Inc.? The chief executive of the luxury home builder isn't talking. The company's chief financial officer, Joel Rassman, has said the 68-year-old Mr. Toll wants to diversify his personal investments. Whatever the case, says Ivy Zelman, chief executive of Zelman & Associates, a housing research firm, "I think he's smart." Ms. Zelman says the share prices of home builders have run up too fast on hopes of a recovery in the housing market. She thinks new waves of foreclosure spell trouble ahead as builders will face tough competition with bank-owned properties. "I believe that homebuilding equities are ahead of the fundamentals and that selling (their stock) into strength is prudent," Ms. Zelman says. Mr. Toll, who helped found the company in 1967, sold 1.58 million shares of the stock Wednesday, according to a securities filing by Toll Brothers Thursday. That included 452,182 shares acquired through stock options due to expire in December. The latest sales reaped pretax proceeds, net of the cost of exercising the options, of about $33 million. So far this year, Mr. Toll has sold about 4.4 million shares for total pretax proceeds of $83 million, according to filings by the company. After the latest sales, Mr. Toll's direct and indirect holdings in the company total 14.7 million shares, or about 9% of the stock outstanding, down from 11% in early January. Toll Brothers last month reported a loss of $472.3 million for the fiscal third quarter ended July 31, largely reflecting write downs of asset values. At that time, Mr. Toll said told analysts in a conference call that stronger housing demand in recent months "makes us feel a whole lot better." During the call, Ms. Zelman prodded Mr. Toll about whether he and others in the building industry might be getting carried away in their hopes for a recovery in housing. "I sense a little optimism," she said. "I don't want to call it Kool-Aid." Given the outlook for further waves of mortgage defaults and foreclosures and other "headwinds" in the housing market, she said, "I'm just wondering if your views of stabilization might be a little bit premature." Mr. Toll replied: "I am concerned, (though) probably not as much as you are." He added that his company hadn't bought huge amounts of land recently. "So while we're optimistic," he said, "we're also unwilling to make bets on the future being much different than the current market."

Regional Job Picture Negative Despite National Optimism

Verizon Will Cut Additional Jobs to Combat Slowdown

By Amy Thomson

Sept. 10 (Bloomberg) -- Verizon Communications Inc., the second-largest U.S. phone company, will cut more jobs as it grapples with a shrinking home-phone business and a sluggish economy, Chief Financial Officer John Killian said.

The cuts, which will take place in the next few years, are in addition to 8,000 employee and contractor cuts the company had announced for the second half of 2009, Killian said today in an investor conference in Marina del Rey, California.

Verizon isn’t planning for an economic improvement this year, and sales and profit margins will remain under pressure, Killian said. Margins will hit a low point this quarter, he said. Declining sales to businesses contributed to a 21 percent drop in second-quarter profit as enterprises reduced workers and cut phone usage.

Verizon, based in New York, is also combating the slump by focusing on its wireless business and the FiOS Internet and TV service.

As FiOS expands, the company plans to add 1 million customers a year, Killian said. The wireless unit should keep adding 1 million mobile subscribers a quarter, he said. Verizon is also expanding into faster “fourth-generation” wireless broadband, which will be available nationwide by 2013.

Verizon rose 46 cents, or 1.5 percent, to $31.35 in New York Stock Exchange composite trading at 4 p.m. The stock has dropped 7.5 percent this year.

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

Last Updated: September 10, 2009 16:07 EDT