Beige Book Report: New York
November 30, 2022
Summary of Economic Activity
Economic activity in the Second District continued to decline modestly in the latest reporting period. Business contacts have become increasingly pessimistic about the near-term outlook. Both selling prices and input prices have continued to increase at a fairly brisk pace, while wage growth has moderated. Hiring picked up slightly as worker shortages eased somewhat, though fewer businesses plan to add staff in the months ahead, and there have been some announcements of layoffs. Manufacturing activity picked up slightly. Consumer spending was mixed but little changed overall, while tourism has remained strong. The home sales market weakened noticeably, and the rental market also showed signs of softening, amidst growing concerns about housing affordability as evictions and homelessness have reportedly risen. Commercial real estate markets stabilized, and construction activity has remained sluggish. While conditions in the broad finance sector improved slightly, regional banks reported weakening loan demand, tightening credit, and rising delinquency rates.
Labor Markets
Employment rose moderately as hiring picked up somewhat, and there were scattered signs of further easing in labor shortages. An upstate New York employment agency noted that hiring activity has remained fairly steady, led by strong demand for finance and tech workers, but indicated that the labor market has cooled. A New York City agency reported steady demand for workers and continued brisk hiring activity. Recent layoff announcements in New York City's finance and tech sectors have yet to yield any increase in job candidates.
Wholesale and transportation & warehousing firms reported a brisk pickup in employment, while leisure & hospitality firms reported a pullback in hiring. Information firms continued to report widespread increases in staff, and manufacturers reported moderate job growth. However, firms in almost all industry sectors have scaled back hiring plans somewhat for the months ahead.
Business contacts across a wide range of industries reported some slowing in wage growth, as did employment agencies in both New York City and upstate New York. The steepest wage growth continued to be reported in the education & health and leisure & hospitality sectors. Businesses across all sectors continue to project widespread wage hikes in the months ahead.
Prices
Business contacts continued to note broad-based escalation in the prices they pay. The steepest increases were reported from the leisure & hospitality sector. Contacts across most industries expect continued widespread escalation in costs in the months ahead.
Selling price increases remained widespread overall but slowed noticeably in the retail and education & health sectors. Retailers also do not plan any significant price hikes in the months ahead, whereas firms in most other sectors anticipate somewhat widespread increases in their selling prices.
Consumer Spending
Consumer spending has been little changed in recent weeks. Nonauto retailers reported that business has edged down and expressed widespread pessimism about the upcoming holiday season. Auto dealers in upstate New York reported scattered signs of a pickup in sales of new vehicles, as supply disruptions and chip shortages have eased somewhat. However, many dealers continue to face inventory shortages, hampering sales of new vehicles. Inventory levels are expected to increase somewhat in the coming months. Used vehicle sales also remain sluggish. Consumer confidence across New York State edged down in October but remained fairly high.
Manufacturing and Distribution
For the first time in a number of months, manufacturing activity expanded slightly in recent weeks, and wholesale trade activity edged up. However, contacts in the transportation & warehousing sector reported a slight dip in activity. Looking ahead, manufacturers have become increasingly pessimistic about the near-term outlook, while transportation, warehousing, and wholesale trade firms continued to express mild optimism.
Services
On balance, activity in the service sector has weakened since the last report. Businesses providing professional & business and education & health services reported modest declines in activity, and contacts in the leisure & hospitality sector indicated more pronounced weakness. Moreover, contacts in these sectors have become somewhat more pessimistic about the near-term outlook, anticipating flat to declining activity in the months ahead.
Tourism activity in New York City remained quite strong in October and early November. Weekend hotel occupancy rates remained high, and midweek occupancies have risen to near typical pre-pandemic levels—reflecting leisure visitors extending weekends with remote work and a gradual rebound in business travelers. Bookings for meetings at the Javits Convention Center and New York City hotels have also risen. International visitations have also continued to increase, especially from Europe, though the strong dollar has reportedly reduced spending per visitor.
Real Estate and Construction
The home sales market weakened noticeably in recent weeks, and the rental market showed signs of softening. Real estate contacts in upstate New York reported softening demand, reduced sales activity and buyer traffic, fewer multiple offers, and price reductions. Similarly, in and around New York City, sales of both single-family homes and apartments fell, especially at the high end of the market, though prices have held steady. The inventory of available homes remains low across the District: it has drifted up slightly in upstate New York but has remained steady in and around New York City. With homes now taking longer to sell, many sellers have taken their homes off the market.
Residential rental markets have weakened, except at the high end of the market, where many potential buyers are instead opting to rent. Overall, rents across New York City have declined, and concessions have edged up for the first time in a year. Vacancy rates across New York City, though still quite low, have risen modestly.
Commercial real estate markets have shown further signs of stabilizing. Office vacancy and availability rates continued to edge up in New York City but were little changed elsewhere. Office rents were steady to up slightly across the District. The industrial market has been mixed, with rents resuming an upward trend but vacancy rates continuing to climb.
Contacts in the construction sector continued to report deteriorating business conditions but were somewhat less pessimistic about the near-term outlook than in the last report. New office construction starts remained exceptionally low throughout the District, though there was some pickup in New York City and Long Island. New industrial construction has largely dried up. In New York City, multifamily construction starts, though still quite low, have risen modestly in the latest reporting period, and there is a moderate volume of ongoing construction.
Banking and Finance
Contacts in the broad finance sector report that conditions, though still poor, have improved slightly. Small to medium-sized banks reported lower loan demand across all segments and a widespread drop in refinancing activity. Credit standards were tighter, especially on business loans and commercial mortgages, while loan spreads remained essentially unchanged overall. Finally, delinquency rates increased for all categories of loans.
Community Perspectives
Housing affordability and food insecurity remain top concerns among communities across the District. As the post-pandemic evictions moratorium has expired, there has been a rise in evictions and homelessness across the region. Many New Yorkers in market rate housing face growing rent burdens as leases come up for renewal. Some households are forgoing healthier and more expensive food items to buy less costly bulk items, and the use of food pantries continues to increase. SNAP applications have increased due to high food prices, but staff shortages have impeded processing of these applications.
For more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy