US Economy after 911

By PATRICK McGEEHAN

New York City’s economy bounced back after Sept. 11 with surprising speed and is much healthier now than its slow-growing job market indicates, according to a report released yesterday by the Federal Reserve Bank of New York.



Graphic: New York Bounces Back Labor market data shows that there are 100,000 fewer private-sector jobs in the city than there were five years ago. But the report, which offers an analysis of the economic effects of 9/11 over the past five years, showed that the city has been recovering at least as fast as the nation by other measures. Most notably, average incomes have been rising faster for city residents than for other Americans, it states.

The report’s authors also concluded that the economic effects of the terrorist attacks were sharp but short-lived and had largely disappeared by the end of 2002. In the first months after the attacks, some analysts had predicted that the damage to the economy would be permanent.

Indeed, the report noted, the bursting of the stock market bubble of the late 1990’s has had a more lasting effect on the city’s job market.

“People keep asking, why are we 100,000 short of this last peak?” said Jason Bram, a Fed economist and a co-author of the report. “What’s surprising is not how low it is now, but how high it was in 2001.”

Mr. Bram said that at the rate the city was creating jobs, it would take another 18 months to recover the rest of the 225,000 jobs lost between early 2001 and the second half of 2003. But he said his analysis showed that the job market was no weaker now than it would have been had the attacks never happened.

“We still would have had pretty big job losses, owing to a national recession and a couple of key industries like new media and dot-coms and the financial sector taking a big hit,” Mr. Bram said.

Other analysts, however, were less sanguine about the strength of the city’s rebound. A recovery that does not replace the jobs lost in a recession is not cause for much celebration, they said.

“It’s a little bit startling and also depressing when you try to measure an economy and forget about job growth,” said Steve Malanga, a senior fellow at the Manhattan Institute, a conservative research organization. “When you forget about job growth, you are forgetting about opportunity for all in a city like this.”

James A. Parrott, chief economist at the Fiscal Policy Institute, a liberal watchdog group, said most of the income gains have gone to wealthier residents, and have not been shared by the typical city worker. He said that the average overall income increase masks the fact that hourly wages of most residents have been declining since 2002, when adjusted for inflation.

“If you look at family costs and energy costs and the cost of health care, I’d be hard-pressed to make the case that real living standards are rising for average New Yorkers,” Mr. Parrott said. “The polarization trend if anything is more pronounced in New York City than it is nationwide.”

The Fed report’s conclusions also run counter to some other studies of the effect of Sept. 11, including one published by the federal Bureau of Labor Statistics two years ago. Many of the high-paying jobs in finance, technology and professional services that were lost immediately after the attacks had not been recovered by the end of 2002, said Michael Dolfman, the regional commissioner of labor statistics.

The big financial services firms in Manhattan sent tens of thousands of jobs out of the city in the fall of 2001 and many did not return. But with their profits rising rapidly to new highs, those firms are again filling high-paying positions in Manhattan and contributing to the recovery of the city’s job market in the past two years.

In May, New York City’s unemployment rate dropped to 5 percent, its lowest level in nearly 18 years. Mr. Bram said that if measured by the number of city residents with jobs, which is derived from a different survey than the payroll estimate, the city’s economic health appears even rosier, with household employment surpassing both the pre-9/11 peak and the previous high mark reached in 1969. The number of city residents with jobs rose above 3.6 million in May.

One explanation for the discrepancy between those two types of employment measures, he said, is that significantly more city residents are “reverse commuting” to jobs in the suburbs.

“This still is such a Manhattan-centric economy but less so than in the past,” Mr. Bram said.

Indeed, New York City accounts for only about 2.7 percent of the nation’s private-sector jobs now, down from about 3.3 percent in 1989, Mr. Bram said. But those New York jobs pay considerably better on average than the national norm. He said the “New York City premium” — the difference between the average wages in the city and in the nation — was about 63 percent now, compared with about 20 percent in 1980, and almost 68 percent in 2001.

Mr. Bram acknowledged that other economists and analysts “have this perception that all the growth is in the high end.” But he said he believed a lot of the job losses had been incurred in low-paying industries like apparel and other manufacturing and that much of the gains had come in the middle of the job spectrum, especially among the self-employed and small businesses.