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By NYC Comptroller Brad Lander
Krista Olson, Deputy Comptroller for Budget
Steven Giachetti, Chief Economist
Andrew McWilliam, Director of Economic Research
No. 67 – July 11th, 2022
Table of Contents
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Please address any suggestions or feedback to us at: NYbytheNumbers@comptroller.nyc.gov
Dear New Yorkers,
If you’re a regular reader, some of the economic data for New York City this month will look familiar: modest but steady growth in jobs (now at about 95% of pre-pandemic levels), in subway and bus ridership (a bit under 60%), and even in office occupancy (though still lower, surpassing 40% of pre-pandemic levels for the first time).
So perhaps we can start to discern some of the patterns that New Yorkers are settling into: spending less time on average in office buildings, transit stations, and retail establishments, and more time near their homes, on bikes, and in parks.
Our spotlight this month looks at new data from the U.S. Bureau of Labor Statistics to focus on some of the patterns in changes to private establishments — across the five boroughs and by industry sector — during the last two calendar years.
It won’t surprise you to learn that the largest net loss in the number of business establishments was in Manhattan, taking the borough below 50% of the city’s businesses for the first time. Or that Brooklyn saw the largest increase in new private businesses, buoyed by growth in the tech and administrative services sectors. Though accelerated by the pandemic, these are longstanding trends.
Outer borough growth has not been evenly shared, however. The Bronx is the only other borough besides Manhattan with a reduced percentage of New York City’s overall private establishments since 1990. As we explore new uses for Midtown commercial spaces (an important concern, as we highlighted last month), we’ll also need to focus more on what’s happening in working-class and low-income neighborhoods if we want a balanced and equitable recovery.
One statistic especially jumped out at me this month: Largely as a result of inflation, real hourly wage growth has plummeted during the pandemic. That has eroded the purchasing power of all workers, but of course it bites especially hard for the lowest wage earners – so much so that gains achieved through the pre-pandemic expansion, and supported by increasing the minimum wage in NYC to $15 per hour as of 2019, have been significantly diminished.
One small but important group of low-wage workers did get a boost last week. Mayor Adams and DC37 reached a deal to raise lifeguard pay to $19.46 per hour (with a $1,000 retention boost if they work all summer). Hopefully the laws of supply and demand will work to shorten the lines at the City’s pools (and keep New Yorkers safe and cool) in the hot weeks ahead.
Bring sunscreen, and we’ll keep watching the numbers.
According to monthly reports from the Port Authority of New York and New Jersey, domestic passenger volume at local New York City airports reached 7.7 million in April 2022, exceeding domestic volume of 7.6 million in April 2019. However, international volume was still down 28% (though improving from last month at 35%).
Personal income tax (PIT) data for June provided the first indication that the decline in the stock market is starting to have a toll on City tax collections.
The COVID-19 pandemic is the largest shock to the New York City’s private establishment ecosystem in decades, pushing many businesses into closure and reshaping their distribution across the city. This spotlight takes a deep dive into Quarterly Census of Employment and Wages (QCEW) data published by the U.S. Bureau of Labor Statistics (BLS) on June 8, 2022, to assess the changes in private establishments across boroughs and industry sectors between the fourth quarter of 2019 and the fourth quarter of 2021. While the net number of businesses in New York City as a whole declined during the two years, losses were disproportionally concentrated in Manhattan while the other boroughs saw growth or small declines.
New York City lost more than 4,000 private establishments from 2019 to 2021, a 1.5% decline from its base of approximately 275,000 prior to the pandemic. An “establishment” here is defined by the BLS as a single store or location, so a single employer may have multiple establishments (e.g. chain stores, retail banking, etc.). Over the same time period, jobs in New York City fell by approximately 295,000, or 7 percent of its base of approximately 4 million at the end of 2019. Establishment counts may not directly track jobs; for example, both retail establishments and employment fell over the two-year period, and both information establishments and employment grew. But the number of health care & social assistance establishments fell, even as their total jobs grew.
As Chart S.1 illustrates, Brooklyn gained substantially more total private establishments than any other borough between 2019 and 2021 while the Bronx and Staten Island also showed small increases. Queens experienced a slight net decrease in total private establishments, but the great majority of New York City’s losses were concentrated in Manhattan.[1]
When looking at a longer timeframe, New York City’s contraction of private establishments represents the largest fourth quarter to fourth quarter decline on both a one-year and two-year basis since the QCEW program was modernized in 1990.[2] In the 30 years of available data, the count of private establishments in New York City has increased consistently, except during economic shocks such as the early 90’s recession, the 9/11 recession, and the COVID-19 pandemic.
One distinctive characteristic of the pandemic decline is the outsized impact of private household employers within the total reduction of private establishments. These employers are defined as “private households that engage in employing workers on or about the premises in activities primarily concerned with the operation of the household” and they averaged 5% of total private establishments in New York City since 1990. The private household subsector accounted for a two-year loss of nearly 2,500 establishments or 61% of the overall net decline. Pandemic-driven reductions to private household establishments may be a consequence of changing patterns of work and schooling (e.g., more household members at home resulting in a reduced need for child care) as well as a desire to reduce the presence of non-household members in the home during the pandemic.
In Chart S.2 below, we illustrate the change in total private establishments on a yearly basis, disaggregating private households from the other sectors. For the one-year period ending in 2020, there was growth in private establishments when private household employers are removed. The losses for household employers may be explained by their ineligibility for Paycheck Protection Program loans which were initially included in the Coronavirus Aid, Relief, and Economic Stability (CARES) Act and expanded by the Economic Aid Act and the American Rescue Plan Act (ARPA).[3] However, as the same figure illustrates, in 2021 the city’s private establishment losses expanded far beyond the private household subsector. The decline in other private establishments in 2021 may be due to the expiration of the timeline for PPP loan forgiveness, which extended for up to 24 weeks after receipt of the loans.[4]
Notably, the major citywide decline in private establishments during the pandemic period has also accelerated a trend where an increasing share of establishments are found away from Manhattan, especially toward Brooklyn. As the overall size of New York City’s pie has grown over time, the size of each borough’s share has also shifted.
The share of New York City’s Manhattan-based private establishments, which once stood at 54.6% in the fourth quarter of 1990, has eroded to just 45.5% as of the fourth quarter of 2021. During this same time period, Brooklyn’s share of citywide private establishments has grown from 17.8% to 24.4%, while Queens and Staten Island showed more moderate gains of 2.5 and 0.4 percentage points respectively. The Bronx is the only other borough besides Manhattan with a reduced percentage of New York City’s overall private establishments since 1990. Chart S.3 below illustrates the changes in the distribution of private establishments in New York City between the fourth quarters of 1990 and 2021 respectively.
In Chart S.4, we illustrate the year over year change in private establishment share at the final quarter of each year in Brooklyn and Manhattan. As the chart shows, Manhattan’s share of establishments declined every year since 1997 and recorded the largest loss in share in 2021. Brooklyn, on the other hand, exhibited growth in its share in every year since 1997, including during the 9/11 recession, the Great Recession, and the COVID-19 recession.
For the remainder of this analysis, we frame our data within the two-year window from the final quarter of 2019 to the same quarter of 2021 to understand the pandemic’s impact on private establishments in New York City. Below we review changes in industry sectors during that time period.
Changes in the city’s industry composition materialized in different ways over the two-year period. First, we discuss industries where changes to private establishment counts were observed across all five boroughs. Afterwards, our discussion turns to shifts in the private establishment landscape that impacted some boroughs differently than others. We conclude this section with an interactive map that is embedded with detailed breakdowns of industry subsectors for each borough.
At the citywide level, four sectors showed net private establishment declines in each borough between the fourth quarters of 2019 and 2021. They were: Retail Trade (-2,023 establishments), Wholesale Trade (-1,084 establishments), Real Estate (-639 establishments), and Other Services (-3,563 establishments). Other Services includes private household employers, which, as previously noted, lost the greatest number of private establishments (-2,482 establishments), as well as Personal & Laundry services (-794 establishments), Repair & Maintenance (-166 establishments), and Membership Associations & Organizations (-121 establishments). These service declines, as well as the reduction in retail and wholesale services across the boroughs perhaps reflect changes in consumer behavior.
Losses in these sectors were partially offset by two industry sectors with five borough growth – Information (+1,049 establishments) and Administrative Services (+834 establishments). The Management sector saw citywide growth as well, with a net increase of 81 establishments.
Drilling more specifically into the large net reduction of 5,266 private establishments in Manhattan shows that some of its deepest industry declines were common across all boroughs, and included Other Services, Wholesale Trade, Retail Trade, and Real Estate. However, only Manhattan lost establishments in Accommodation and Food Services; Finance and Insurance; Arts, Entertainment and Recreation; and Professional and Technical Services.
Manhattan’s private establishment losses likely reflect changes in where and how people now spend their time. It is well documented in this newsletter and other sources that there have been fewer New Yorkers, out-of-town commuters and tourists working, living and congregating in Manhattan business districts, cultural venues and other heavily trafficked destinations during the pandemic period. This diminished population and customer base in Manhattan negatively impacted several industries, which have endured net losses in private establishments since the onset of the pandemic.
Changes in some of these sectors likely also illustrate a shift in the placement of certain private establishments citywide. For example, private establishments in the Professional and Technical Services sector sustained a net loss of 315 Manhattan-based establishments while tallying net increases of 599 private employers in Brooklyn, 91 in Queens and 46 in the Bronx. There was a similar shift in the Arts, Entertainment and Recreation sector, with a net decline of 244 Manhattan-based establishments but net increases of 57 private establishments in Brooklyn, 28 in Queens and 9 in the Bronx. The Construction sector provides another example of this trend. During our study period, Manhattan sustained a small loss of private construction establishments while each of the other boroughs saw net increases, with nearly half of the outer borough growth occurring in Queens.
Finally, it is notable that New York City overall recorded a net gain of 2,285 private establishments in the unclassified sector during our study period, with gains in all five boroughs. These businesses were a substantial factor in the overall change in private establishments during our study period. Unclassified industries are typically novel and new industries that may not fit within the existing classifications set by the U.S. Bureau of Labor Statistics (BLS). Surveys and other methods are used by BLS to eventually classify these businesses within their framework. Hopefully this reflects the birth of new and innovative businesses that will grow into thriving sectors across New York City. The 2021 business application data (generally, applications for an Employer Identification Number or EIN) released by the Census Bureau supports this hope and underlines the incredible amount of churn driven by the pandemic recession and recovery. Business applications in the five boroughs stood at 129,600 in 2019, they increased to 145,300 in 2020, and they reached 168,900 in 2021. Applications in 2020 and 2021 set new records in available data starting in 2005.[5]
The interactive map below provides a breakdown of total private establishments for each borough at the close of the last three consecutive fourth quarters, starting with the fourth quarter of 2019, which immediately preceded the pandemic. Also embedded in the interactive map are tables with the top private establishment gains and losses in each borough by subsector, the changes in employment from Q4-2019 to Q4-2021 and the average weekly wage, which we include as proxies for a subsector’s size and typical renumeration. This additional granularity is furnished to provide even deeper context to the discussion above.
Spotlight Prepared by: Stephen Corson, Senior Research Analyst
[1] The data in this analysis is primarily sourced from the Quarterly Census of Employment and Wages (QCEW), a product that is published four times each year by the U.S. Bureau of Labor and Statistics. An “establishment” is defined in the QCEW as “a single economic unit, such as a farm, a mine, a factory or a store that produces goods or services.” The QCEW elaborates that “establishments are typically at one physical location and engaged in one, or predominantly one, type of economic activity for which a single industrial classification may be applied.” Whereas an employer is defined as a firm or company that “may consist of one or more establishments, where each establishment may participate in different predominant economic activity.” In instances where there are employers with multiple worksites, an establishment may only represent some, but not all, of that firms business activities, which indicates that the overall number of establishments identified in the QCEW for a specific geography will exceed the number of employers in that same geography. Furthermore, there may be some statistical noise in the data, caused by factors such as opening and closings, major establishment expansions or contractions, changes in the dominant economic activity of a particular establishment or the relocation of an establishment from one location to another.
[2] Data classified using the North American Industry Classification System (NAICS) are available from 1990 forward, and only on a limited basis from 1975 to 1989
[3] See https://home.treasury.gov/system/files/136/PPP–IFRN%20FINAL.pdf, https://www.sba.gov/sites/default/files/2021-01/PPP%20–%20IFR%20–%20Paycheck%20Protection%20Program%20as%20Amended%20by%20Economic%20Aid%20Act%20%281.6.2021%29.pdf, and https://www.govinfo.gov/content/pkg/FR-2021-03-22/pdf/2021-05930.pdf.
[4] See https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program/ppp-loan-forgiveness#section-header-0
[5] Data are available here: https://www.census.gov/econ/bfs/index.html. 2021 data was released on June 23.
Sincerely,
Brad Lander
The Comptroller thanks the following members of the Bureau of Budget for their contributions to this newsletter: Eng-Kai Tan, Bureau Chief – Budget; Steven Giachetti, Director of Revenues; Irina Livshits, Chief, Fiscal Analysis Division; Tammy Gamerman, Director of Budget Research; Manny Kwan, Assistant Budget Chief; Steve Corson, Senior Research Analyst; Selçuk Eren, Senior Economist; Marcia Murphy, Senior Economist; Orlando Vasquez, Economist.
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