New York City could lose 475,000 jobs over the 12 months, the worst it has faced since the early 1970s, and experience a shortfall of USD 9.7 billion in tax revenue due to the COVID-19 pandemic, a report by New York City Independent Budget Office (IBO) said.
In a fiscal brief issued Wednesday, the budget office said the COVID-19 pandemic and the public health restrictions imposed to help limit the spread of infections have delivered a severe blow to the economy, leading to very large and abrupt job losses that are unprecedented in their scope and pace.
Given the staggering job losses, IBO said it assumes that the US economy has entered a recession even though official statistics have not yet captured the scenario.
In a pared-down economic forecast, IBO projected that that the local economy could shed roughly 475,000 jobs over the 12 months spanning the second quarter of calendar year 2020 through the first quarter of 2021. It produced that the local economy will gradually begin to add jobs starting in the second quarter, with job growth remaining slow through the end of 2022.
IBO said in terms of its impact on employment, a recession in which the city lost 475,000 jobs would be the worst it has faced since the early 1970s.
New York state is the epicenter of the coronavirus pandemic in the US and has close to 200,000 confirmed cases. New York City’s death toll from COVID-19 surpassed 10,000 after city officials added to the tally more than 3,700 people presumed to have died because of coronavirus but had never tested positive.
“IBO estimates that such a scenario would result in a combined shortfall of USD 9.7 billion in tax revenue from the city’s major tax sources for fiscal years 2020 and 2021, it said adding that the shortfall in tax revenue could continue into 2022.
IBO said it has based its estimates on a forecast of the U.S. economy in recession for the first three quarters of calendar year 2020, with real gross domestic product (GDP) falling by about 4.5 percent for the year as a whole.
While the recession is assumed to end with a modest rally in the last quarter of calendar year 2020, we anticipate little further growth until the latter half 2021, in line with the premise that consumer and business confidence will remain weak until there is a medical or epidemiological resolution to the further spread of COVID-19.
The brief noted that damage from the pandemic is particularly intense in New York City because the city’s economy relies heavily on industries that have been largely shut down in order to limit the spread of the coronavirus. These include the retail, transportation, tourism, leisure, and entertainment industries.
IBO estimated that retail employment will fall by 100,000 starting in the second quarter of calendar year 2020 (a loss of 60,000 jobs is expected in this quarter alone), with loses continuing through the first quarter of 2021. Over the same period, 86,000 jobs could be lost in hotels and restaurants along with a combined loss of 26,000 jobs in the arts, entertainment, and recreation industries.
Although finance and professional services are also expected to see declines in employment, IBO projects the most severe job losses will be disproportionately concentrated in sectors with low- and moderate-paying jobs. The only major sector of the city economy likely to avoid job losses over the next year will be health care, it said.
The projected shortfalls would leave the city with essentially no growth in tax revenue for 2020 and a 4.2 percent decline in tax revenue for 2021 compared with 2020, it said.