Federal Reserve Bank of New York
Summary of Economic Activity
Economic activity in the Second District remained flat in the latest reporting period. Labor market conditions continued to moderate, with ongoing cooling in labor demand and increased worker availability across the District. On balance, employment and wage growth were little changed. Selling price increases remained modest. Manufacturing activity was little changed, and shipments were flat. Consumer spending held steady, and tourism activity in New York City was nearly back to normal pre-pandemic levels. Housing markets remained solid, with home prices edging up. Commercial real estate markets held steady. Activity in the finance sector continued to weaken as delinquency rates worsened. Looking ahead, businesses anticipated little improvement in economic conditions.
Labor Markets
Labor market tightness continued to moderate, with ongoing cooling in labor demand and increased labor supply across the District. Contacts at employment agencies noted hiring activity in both New York City and across upstate New York has slowed as firms are approaching hiring decisions with greater hesitancy. Hiring has shifted to be primarily for replacement, rather than growth, and with uncertainty pertaining to the presidential election ahead, many firms have put hiring plans on hold. It has become much easier to find workers, particularly for firms offering remote or hybrid work options. Still, some contacts from industries that require in-person work reported some difficulty finding skilled workers, particularly in the skilled trades. Multiple contacts reported that worker attrition has declined to exceptionally low levels, and job candidates are lingering on the market for longer.
On balance, employment was little changed. Firms in construction and information services reported some reduction in headcounts, but employment grew among retail, wholesale, and education and healthcare firms. Still, contacts continued to report that there are no signs of major layoffs on the horizon. Wage growth has held steady at a moderate pace and even declined slightly for some roles, as more workers have become available.
Prices
Selling price increases generally remained steady and modest. Input prices continued to increase at a moderate pace. A food wholesaler in the region reported that tariffs and duties were contributing to elevated costs that were being passed on to customers. Although manufacturers reported only modest increases in prices paid for inputs, freight and raw material costs continue to weigh on firms in some industries. By contrast, with slowing construction activity and lower demand, the prices for building materials, especially lumber and concrete, have declined substantially. Businesses expect little change in pricing pressures in the coming months.
Consumer Spending
Consumer spending on the whole held steady during this reporting period. Still, spending on entertainment and recreation continued to decline, and retail spending was subdued. Consumer spending sagged in New York City compared to the same time last year, though some parts of the District, such as the Hudson Valley, saw an increase.
Auto dealers in upstate New York reported that sales picked up strongly since the last report, with particularly brisk sales in July making up for the slow business in June caused by a cyber-attack on software used by auto dealers. New car inventory has generally continued to build, and most customers now have a good selection from which to choose. Used car sales have also remained solid now that a more normal gap between new and used car prices has returned. Still, there has been a continued shift to older models of used cars for affordability reasons.
Manufacturing and Distribution
Manufacturing activity was little changed. Shipments were flat, though orders declined modestly. Transportation and warehousing firms reported a modest increase in activity, while wholesalers reported that activity continued to grow moderately. Contacts reported little change in supply availability and delivery times. Manufacturers anticipated modest improvements in economic conditions in the months ahead.
Services
On balance, activity in the service sector held steady. Activity declined in the information and the leisure and hospitality sectors following increases in the previous reporting period and remained weak in the business services sector, while businesses providing education and healthcare services saw a moderate bump up in activity. Optimism among service firms remained weak.
Tourism activity in New York City continued to move toward normal pre-pandemic levels. Hotel room rates are near record highs and are anticipated to rise even more in the fall when business travel normally picks up. Visits to the Statue of Liberty—a proxy for international visitors—were just about at pre-pandemic levels. However, a local tourism expert noted that international travel to New York City has been sluggish. Visa processing delays and reduced long-haul flight schedules have resulted in notably lower visitors from China, while visits from Latin America have been curbed by economic woes at home.
Real Estate and Construction
The supply of homes for sale has risen slightly in much of District, though demand has continued to outpace supply, and home prices have continued to edge up. The frequency of bidding wars has declined slightly across the District, though homes continued to hold their value. New York City saw a surge in signed contracts after a sluggish early part of the year. In upstate New York, outmigration from the region has improved inventory, and demand remained solid. In New York City, potential buyers worn down by high rents have lost their resolve to wait for lower mortgage rates and are contributing to elevated demand. Contacts reported increased uncertainty has dampened activity in the housing market due to court-mandated changes in compensation practices for real estate agents taking effect this reporting period.
The residential rental market remained exceptionally tight, and new leasing activity in New York City was the highest since 2008. Bidding wars on rentals there have remained fairly widespread, and concessions have been low. Rents in New York City have remained flat at high levels, though many New Yorkers are saving money by renting even smaller apartments.
Commercial real estate markets held steady, on balance. The office market in New York City improved slightly, with some decline in vacancy rates and an increase in asking rents. The industrial market was unchanged, with demand at a long-term low and vacancy rates remaining above pre-pandemic levels.
Construction contacts reported that activity decreased slightly. A commercial real estate developer in the District noted that difficulty obtaining credit has constrained new development and has led to a pause in a number of ongoing projects.
Banking and Finance
Activity in the broad finance sector continued to weaken. Small-to-medium-sized banks reported no change in loan demand, though demand for refinancing picked up from low levels. Credit standards tightened slightly, particularly for business loans and commercial mortgages. Deposit rates declined noticeably. Loan spreads were mostly unchanged. Delinquency rates continued to rise, particularly for consumer loans.
Community Perspectives
Community leaders noted difficulty accessing and operationalizing recent federal grants for funding to non-profits, community groups, and state and local governments, in part due to the limited availability of workers with the right skills to execute the work. To address this shortfall, state and local governments are establishing programs and industry partnerships to develop fast-track training. Public-private partnerships have been integral to the development of workforce skills in areas necessary for the implementation of new community investments and improvements in technology infrastructure, including green energy installation and high-tech manufacturing.
For more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy.