New York City’s economy has recovered faster than the state and the nation, but larger than expected city deficits and the slowly recovering national economy could keep unemployment high for years to come.
According to city comptroller John Liu, businesses gained 74,000 jobs in the first 10 months of this year. Restaurants, retailers and health care companies accounted for the majority of the new jobs.
But weak national economic growth and budget deficits for New York City will keep unemployment rates high for some time. Liu’s office doesn’t expect the rate to fall below 9 percent until 2012.
The comptroller estimates that the city's annual deficit will rise from $766 million this fiscal year to more than $6.6 billion in 2014. Mayor Michael Bloomberg’s office has forecast no budget gaps this year and a $5.6 billion gap in 2014.
The comptroller's estimates were higher, as he argued that the reduction in state aid will add billions to the deficit. In addition, the comptroller said that the mayor's office assumed cost savings from collective bargaining agreements with the teacher and school supervisor unions. Finally, Liu said the city underestimated overtime expenses as it has in previous years.
“While many have argued that the pension system is to blame for rising budgetary constraints, it is merely one of many costs that the City incurs,” said Liu in a statement. “As we have found, relying heavily on predictions of labor contract negotiations and consistently underestimated overtime costs contribute to our budget gaps, especially when added to the expected loss of state aid and rising debt created by our expanding debt service.”
But Liu was optimistic about the city’s future revenues. He calculated the city will collect more real estate taxes as the market continues improving and will also see an increase in revenues from businesses paying more taxes.
State Comptroller DiNapoli warned that Mayor Bloomberg’s plans to balance the budget through layoffs and service cuts could have “major implications for the City.”
“New York City is taking steps to control spending, but maintaining core services will be difficult in the coming years,” DiNapoli said in a press release. “The federal stimulus funds are going away and the city is expecting an unrealistic level of help from the state for education funding. All of this means hard times for the city’s schools and its neediest citizens.”
Both men said that the city’s annual costs to service its debt as a percent of the total budget will continue to rise.
Wall Street Also Recovers
While the city government struggles to balance revenues and spending through cuts to workers and services, Wall Street is on track for another stellar year of profits and bonuses.
State Comptroller Thomas DiNapoli says 2010 could be the second most profitable year on record for New York City’s securities and financial firms. In the first nine months of this year, they earned $21.4 billion. Last year’s record $61.4 billion was due in large part to the billions of dollars in federal assistance to support the financial industry after its near collapse in the fall of 2008.
For workers at Wall Street firms, the comptroller estimated that average bonuses will be larger than last year even as the total pool of money is expected to be smaller: fewer employees after thousands of layoffs will divvy up the money.