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Beige Book Report: New York
April 14, 2021
Summary of Economic Activity
Economic activity in the Second District has accelerated sharply in the latest reporting period, growing at a strong pace, despite an upturn in reported COVID cases across the District. Moreover, business contacts have grown increasingly optimistic about the near-term outlook. The labor market has strengthened, with contacts reporting a pickup in hiring activity, hiring plans, and wages. Input price pressures have continued to intensify, and more businesses report that they are raising their selling prices. Consumer spending has strengthened, with retail sales exceeding expectations. Tourism has continued to strengthen, though it remains well below pre-pandemic levels. Housing markets have generally remained robust, while markets for office and retail space appear to have stabilized at weak levels. Finally, contacts in the broad finance sector reported modest improvement in conditions, while regional banks reported steady to higher loan demand and little change in delinquency rates.
Employment and Wages
The labor market strengthened moderately in March, with businesses in most major industry sectors reporting a pickup in employment. A major New York City employment agency noted that financial sector hiring, though still subdued, has improved to levels not seen since before the pandemic. An upstate employment agency reported that hiring activity has picked up across the board and that it remains difficult to fill lower-wage jobs.
Hiring plans for the months ahead increased markedly—particularly in the manufacturing, leisure & hospitality, and information sectors. Hiring and retaining tech workers has been cited as a particular challenge, due to competition from major tech firms as well as visa restrictions.
Wages have continued to grow moderately, at a similar rate as in the last report. Wage increases were particularly widespread in the retail, transportation, information, and construction sectors. Looking ahead, more businesses reported plans to raise wages than at any time during the pandemic, with the most widespread hikes expected in the leisure & hospitality, professional & business services, transportation, and retail trade sectors.
Firms' input prices have continued to accelerate, with exceptionally widespread increases reported from contacts in manufacturing, as well as sizable increases in construction, transportation, retail trade, and leisure & hospitality. Businesses in most sectors continue to expect widespread hikes in the prices they pay in the months ahead.
Selling prices have also continued to accelerate but more moderately. Still, contacts in the manufacturing and distribution sectors report widespread increases in their selling prices and also in their plans to hike prices in the months ahead.
Consumer spending has strengthened in recent weeks. Non-auto retailers reported that both business and foot traffic have picked up but were still short of normal levels. One retail chain noted that its sales across the District have exceeded plan, though sales at New York City stores continued to lag. Demand for home goods remained strong and luggage sales have reportedly picked up, whereas clothing sales have picked up somewhat but remain weak. Sales in some categories, notably furniture, have reportedly been constrained by inventory shortages due to supply chain delays. Retail contacts remained optimistic about the near-term outlook, but the uncertainty associated with the long lead time between ordering and receiving merchandise has been a concern.
New vehicle sales showed signs of picking up noticeably in March, despite low inventories—a constraint that is expected to persist for several months, due to various factors including a shortage of microchips used in new vehicles. Used auto sales have been somewhat constrained by low inventories. Dealers indicate that credit availability is not much of an issue.
Consumer confidence among New York State residents climbed in March to its highest level in a year, led by a surge in expectations.
Manufacturing and Distribution
Manufacturing activity picked up further in March, expanding at a robust pace. Contacts in wholesale trade and transportation & warehousing also reported that activity picked up briskly. Contacts in these sectors continued to report supply disruptions and delays—particularly in getting shipments from overseas.
Looking ahead, businesses in all these sectors expressed increasingly widespread optimism about future business prospects.
Service industry contacts also reported a strong pickup in growth in the latest reporting period. Contacts in information and professional & business services reported a brisk pickup in business, while education & health providers noted a moderate pickup. Contacts in the leisure & hospitality sector noted a significant upturn in activity for the first time since the onset of the pandemic. Looking to the months ahead, contacts in all these sectors expressed widespread optimism about business prospects.
Tourism has continued to trend up. Leisure air travel reportedly increased sharply in March, and flight bookings are being made longer in advance. In New York City, weekend hotel occupancy rates have risen steadily since the last report, recently surpassing 50 percent, though nightly room rates are still substantially below pre-pandemic levels. Future bookings have also expanded. Some hotels that had previously announced permanent closures have more recently announced plans to reopen. Museums and restaurants have also seen a steady uptrend in business. Most of the rebound in tourism has been from day-trippers and other domestic visitors, though tourism from Central and South America has reportedly increased.
Real Estate and Construction
Housing markets have strengthened further in the latest reporting period. Sales markets in upstate New York have been particularly robust, with brisk sales volume, lean inventories, and strong price appreciation, with many homes reportedly selling for well above asking price. Home sales activity in areas around New York City has strengthened as well, with prices holding steady but running 5-10 percent ahead of pre-pandemic levels. Inventory levels remain low but have been stable since the start of the year.
New York City's co-op and condo market has picked up further since the last report, with apartment sales volume so far this year surpassing comparable 2020 levels. However, price trends have been mixed, down nearly 10 percent in Manhattan but edging up to record highs in the outer boroughs. The inventory of unsold units has come down but remains somewhat above historical norms. New York City's rental market has stabilized, though rents are still down 15-20 percent from early-2020 levels in Manhattan and down 8-10 percent in Brooklyn and Queens. However, leasing activity has remained fairly brisk.
Commercial real estate markets have been mixed across the District. Office markets in New York City and northern New Jersey have continued to soften, but markets elsewhere across the District have steadied. The market for retail space has been fairly steady in recent weeks, though still quite slack, especially in New York City.
New office construction has remained sluggish, but residential construction has picked up outside New York City. Contacts in the District's construction industry remained somewhat negative about current conditions but have grown increasingly optimistic about the near-term outlook; the main concerns expressed pertain to costs of materials and shortages of materials and skilled workers.
Banking and Finance
Businesses in the broad finance sector reported modest improvement in business activity. Small to medium sized banks in the region reported rising demand for business loans, as well as commercial and residential mortgages, but steady demand for consumer loans. Bankers reported unchanged credit standards for all categories, steady loan spreads, and no change in average deposit rates. Contacts reported little change in delinquency rates, with bankers reporting some decrease in lenient policies for delinquent consumer loan and home mortgage accounts.
For more information about District economic conditions visit: www.newyorkfed.org/regional-economy