Federal Reserve Bank of New York
Summary of Economic Activity
Economic activity in the Second District was little changed this reporting period. Employment increased slightly and wages continued to increase moderately. Selling price increases remained modest. Manufacturing activity was little changed, and service sector activity was flat. Capital spending plans were strong, with some investments already underway. Consumer spending increased slightly. Housing markets remained solid, with home prices continuing to edge up. Commercial real estate markets worsened. Activity in the broad finance sector increased slightly after an extended period of decline. Many contacts reported hesitancy in decision-making due to heightened uncertainty surrounding the presidential election. Looking further ahead, businesses were now somewhat optimistic conditions would improve.
Labor Markets
On balance, employment in the region increased slightly, though at a slower pace than in the last report. Employment reductions were reported among business services, information services, construction, and retail firms. However, manufacturers increased headcounts slightly for the first time in many months, and employment increases were reported among leisure and hospitality, education and health, wholesale, and transportation firms. There were no signs of major layoffs in the region and hiring plans generally remained solid.
Demand for workers remained subdued, and worker availability continued to increase. Contacts at employment agencies in New York City and upstate New York noted steady demand for labor in financial services but indicated that demand for tech workers has remained soft. A contact at a regional tech firm reported a reduction in hiring plans for entry level roles, noting that college job fairs have had considerably more jobseekers than in recent years. More generally, hiring was subdued and was largely for replacement rather than growth, as businesses remained hesitant to make hiring decisions due to uncertainty surrounding the presidential election. Several contacts noted that turnover rates remained exceptionally low.
Wage growth, while still moderate, slowed somewhat. With more workers available, there has been less pressure on employers to provide outsized raises, except in rural areas where labor supply remains low.
Prices
Selling price increases remained steady and continued at a modest pace, while input price increases remained steady and moderate. Fuel remains an exception, and despite declines in the cost of fuel, a construction industry contact reported that fuel surcharges persist on invoices for the delivery of materials, keeping costs from falling as much. Further, a contact in the retail gas sector noted that prices at the pump have remained elevated, even as costs have dropped. Some contacts were on edge about the dockworkers’ strike and its potential impact on input prices, but such concerns were short lived. Businesses expect little change in pricing pressures in the coming months.
Consumer Spending
Consumer spending increased slightly this period. Department store contacts in the region reported growing sales in recent weeks after muted sales during the previous period. Consumers have been more discriminating, trading off less quantity for higher quality, particularly for accessories such as handbags and shoes.
Auto dealers in upstate New York noted that sales activity softened somewhat following unusually strong sales after June’s cyber-attack. Consumers now have a good selection of available inventory from which to choose. With increases in car prices and the cost of living more generally, it has become difficult for many households to afford a new car. Used car sales remained solid and fairly steady during this reporting period. Although credit conditions continued to tighten, creditworthy borrowers are still able to get auto loans.
Manufacturing and Distribution
Manufacturing activity was little changed. New orders declined slightly, while shipments were essentially flat. Firms in the transportation and warehousing industries reported little change in activity, while wholesalers pointed to a modest decline. Though supply availability worsened somewhat, delivery times were little changed. Several contacts reported jitters about the possibility of supply-chain bottlenecks around the dockworkers strike, but such concerns resolved quickly with the end of the strike. Manufacturing and wholesale firms grew quite optimistic that conditions would improve in the months ahead.
Services
On balance, activity in the service sector held mostly steady. However, activity increased somewhat in the education and health and leisure and hospitality sectors, and declined in the personal services sector. Of note, service sector firms reported a modest increase in capital spending for the first time in a while, and capital spending plans were strong. Still, optimism among services firms remained subdued.
Tourism activity in New York City edged down since the last report as typically busy fall weekends were quieter than expected. A New York City tourism expert reported that suburban residents have been visiting less often, due to concerns for public safety and the rise in remote work arrangements. With reduced visits, the restaurant industry has seen declining sales. Still, attendance at Broadway shows improved, with recent attendance just a bit below pre-pandemic levels. Hotel bookings for the months ahead have slowed somewhat as some travelers have put travel planning on hold.
Real Estate and Construction
The housing market remained firm. The supply of homes continued on a slow upward trend but remained near historic lows. Demand remained solid, though it was tempered by buyers’ uncertainty about the path of mortgage rates and home prices. Demand continued to outpace supply, and home prices edged up across the District. Although bidding wars became slightly less frequent, a substantial share of sales closed over the asking price, and cash sales remained an unusually large share of activity. Manhattan remained the exception, where inventory was at normal levels, closings were subdued, and prices moved down slightly.
The rental market eased slightly after an extended period of rising rents. Rents in New York City edged down slightly but remained at high levels. Demand for rental housing was strong, and new signed contracts continued to rise. Outside of New York City, rents edged up after bottoming out earlier in the year, and vacancy rates were slightly above pre-pandemic levels.
Commercial real estate markets weakened. The office market continued to worsen, albeit at a slower pace than last year. Demand for office space continued to decline, and vacancy rates rose across the District. The retraction in the industrial market following the pandemic boom continued. In northern New Jersey in particular, the industrial vacancy rate rose considerably as demand for space sagged.
Construction firms reported that activity continued to decline at a moderate pace. One business owner reported notably elongated construction times due to protracted permitting processes and utility-related delays.
Banking and Finance
Activity in the broad finance sector increased slightly after a period of persistent weakness. Still, small-to-medium-sized banks reported reduced demand for business and consumer loans, while demand for commercial and residential mortgages, as well as refinancing, held steady. Credit standards tightened for business loans, consumer loans, and commercial mortgages. Deposit rates continued to decline noticeably, and delinquency rates continued to rise for all loan types. However, with lower interest rates, banking contacts are optimistic that demand will rise and margins will widen in the months ahead.
Community Perspectives
Community leaders expressed concern about increasing food insecurity as the number of recipients for programs that distribute food and financial assistance, continued to increase. Processing delays for benefits programs combined with sustained high food prices post-pandemic have weighed on community members with fixed incomes, including elderly, low-income, and student populations. Direct funding of food programs from state and local governments for school-age and elderly people has provided stopgap funding where federal funds have been delayed or discontinued.
For more information about District economic conditions visit: https://www.newyorkfed.org/regional-economy.