Beige Book Report: New York
July 14, 2021
Summary of Economic Activity
Economic growth in the Second District remained strong in the latest reporting period, as low levels of COVID and widespread vaccinations have enabled most businesses to re-open. Contacts continued to express broad-based optimism about the business outlook. The job market has strengthened further, as more businesses have added workers and raised wages, with many reporting labor shortages. Input price pressures have continued to broaden, and a growing proportion of businesses report that they are hiking their selling prices. Consumer spending has continued to grow, albeit at a more moderate pace, led by sales of used vehicles and tourism, while consumer confidence in the region climbed to near record highs. Home sales and rental markets have strengthened, while commercial real estate markets were mixed. Finally, contacts in the broad finance sector reported a pickup in activity, and regional banks reported rising loan demand and declining delinquency rates.
Employment and Wages
The job market strengthened further in recent weeks, with businesses indicating more hiring and growing labor shortages. A major New York City employment agency noted increased hiring activity and expects a rebound to pre-pandemic levels once most offices fully re-open. An upstate employment agency reported a continued increase in job postings, noting that many remain unfilled—in part reflecting increased turnover and churn, as more workers have changed jobs.
Businesses in a number of sectors have reported increases in their employment levels—particularly in the leisure & hospitality, wholesale trade, transportation and information sectors. Overall, business contacts report a gap between actual and desired staffing levels—especially in the leisure & hospitality, professional & business services, and retail sectors; moreover, some restaurants and hotels have reportedly been unable to find enough staff to meet the surge in pent-up demand.
Businesses across all major sectors plan to add staff in the coming months. Many employers that had shifted to all or mostly remote work have begun to bring workers back to the workplace, and this is expected to be most pronounced in September.
Wage growth has picked up somewhat, most notably for jobs in leisure & hospitality, education & health, construction, and transportation & warehousing. Looking ahead, businesses across all major sectors plan to raise wages. A leading New York City employment agency noted a wide gap between desired and offered salaries.
Prices
Firms' input prices have generally continued to accelerate. As has been the case for several months, those in construction and manufacturing noted the most widespread increases, but in the latest reporting period, there has been a substantial increase among those in leisure & hospitality, transportation & warehousing, and retail & wholesale trade. Contacts in all sectors foresee widespread hikes in prices paid during the rest of 2021.
Selling prices accelerated modestly, with particularly widespread price hikes in manufacturing and wholesale trade and moderate hikes in retail, transportation, and construction. A sizable share of contacts in all sectors except information plan to hike prices later this year.
Consumer Spending
Consumer spending has continued to grow, albeit at a somewhat more moderate pace. Non-auto retailers reported a continued increase in business, particularly for seasonal and travel-related merchandise. A major retail chain noted that its sales have continued to exceed plan, with sales in New York City picking up but still lagging the rest of the region. Retailers continued to express widespread optimism about prospects for the second half of 2021. Consumer confidence among New York State residents continued to improve in June, exceeding pre-pandemic levels and approaching record highs.
New vehicle sales were reported to be steady at high levels, while sales of used cars strengthened considerably. Sales in both categories remained well above pre-pandemic levels, despite low inventories. A persistent shortage of microchips is expected to constrain inventories and sales of new vehicles through the summer.
Manufacturing and Distribution
Businesses in the manufacturing, wholesale trade and transportation & warehousing sectors noted ongoing strong growth. Contacts continued to note supply disruptions, though to a somewhat lesser degree than earlier in the year. Looking ahead to the second half of this year, businesses in all these sectors remained widely optimistic about business prospects, with the main concerns being about shortages of workers.
Services
Service industry contacts also reported robust growth in the latest reporting period. Contacts in the information and leisure & hospitality industries noted particularly widespread improvement, while those in professional & business and education & health services reported more moderate gains. A major social services nonprofit noted that increased food donations have enabled them to expand their distribution efforts. Looking ahead, contacts in all these sectors continued to express widespread optimism about business prospects.
Tourism has strengthened further, particularly in New York City, even as the volume of international and business visitors has remained well below pre-pandemic levels. In New York City, hotel occupancy rates climbed above 60 percent in June, a post-pandemic high, though room rates have remained well below pre-pandemic levels. With most restrictions now lifted, many more New York City hotels, restaurants, museums, and entertainment venues have re-opened or eased capacity constraints. A survey of residents across the Northeast indicated that many are eager to visit New York City, and the city recently launched a large promotional campaign to draw more domestic visitors.
Real Estate and Construction
Housing markets have been steady to stronger in the latest reporting period. Sales markets outside New York City have remained quite robust, though volume has plateaued or edged back—largely due to lean inventories and high prices. In New York City, where inventories are not as low, sales volume continued to rebound, though the upward momentum has slowed. Home prices have been steady to higher across the District. In Manhattan, prices have stabilized well below peak levels of three years ago; across the rest of the New York City area, prices have been steady to slightly higher; and across upstate New York, prices have continued to rise.
New York City's rental market has shown signs of turning up. Rents are still down more than 10 percent from early-2020 levels across New York City, but they have begun to recover, with strong leasing activity continuing. This is generally attributed to a combination of people moving for better deals and a return to the workplace.
Commercial real estate markets have remained mixed across the District. New York City's office market has continued to slacken, with vacancy and availability rates continuing to trend up and rents drifting down. However, office markets across the rest of the District have been steady to modestly stronger—particularly in upstate New York. The industrial market has strengthened throughout the District, with vacancy & availability rates declining and rents up 5-7 percent from pre-pandemic levels.
New office construction has weakened from already sluggish levels, but multifamily residential construction has picked up outside Manhattan where it remains moribund. Construction sector contacts expect business to improve in the months ahead but expressed concern about the cost and availability of materials and labor.
Banking and Finance
Businesses in the broad finance sector indicate that activity has picked up since the last report. Small to medium-sized banks in the District reported increased demand for loans, driven by higher demand for consumer loans and commercial mortgages. Refinancing was unchanged on net. Banks reported further tightening in standards on commercial mortgages and C&I loans and higher spreads on consumer loan and residential mortgages. Delinquency rates were down in all loan categories except residential mortgages, where they were reported to be unchanged.
For more information about District economic conditions visit: www.newyorkfed.org/regional‐economy