As the pandemic stretches into a third year, the Omicron variant has added another speed bump on New York’s path back to normal, injecting further uncertainty into the economic outlook and threatening to worsen the already lopsided recovery of the city.
Office workers were again sent home, reversing the steady rise in subway ridership and hurting small businesses in central business districts. A survey of large companies by the Partnership for New York City, a business advocacy group, found that 75% of employers have delayed their plans to return to work.
The past two months were meant to be uplifting, with the arrival of foreign travelers offering a ray of hope to the hundreds of thousands of workers whose jobs depend on tourists.
Instead, hotel occupancy rates have plummeted. Temporary closure signs filled restaurant windows, bank branches and public libraries hampered by sick employees. Broadway shows came to an abrupt halt, some permanently.
Now, Omicron’s surge is easing, with the average number of recorded daily cases down more than 80% from their peak in early January. But its effects are still lingering, especially for blue-collar workers.
Like other waves of coronavirus, this one has inflicted disproportionate pain on employees who must report in person, deepening the economic divide that has defined the fragile jobs recovery in New York, the slowest of any major US city. .
In December, New York-area service-sector employees worked an average of 22.9 hours per week, down from December 2020, when the average was 25.4 hours, according to compiled data. by Gusto, a payroll platform. Working hours fell even further in the first two weeks of January, despite a sharp drop in new virus cases.
“Clearly Omicron is doing significant damage here,” said Mark Zandi, chief economist at Moody’s Analytics. “New York City will bounce back, but it won’t fully bounce back for a long time.”
Still, parts of the city’s economy are booming. Wall Street firms like JPMorgan Chase, the city’s largest private employer, posted huge profits in 2021, with big pay rises for bankers. That has helped push overall personal income in New York to higher levels than in 2019, putting city and state finances in a healthier position than economists had expected.
In a report released this month, the city’s independent budget office described a “remarkably stable” fiscal outlook for New York City, based on end-November conditions. Billions of dollars in federal pandemic aid, including stimulus checks and expanded unemployment benefits, had helped replenish the city’s lost tax revenue.
But given the uncertain impact of the Omicron variant, economists at the budget office are now warning that their outlook was potentially too optimistic. (And the stock market also started the year on a wild and volatile run, with the S&P 500 index down 7% this month, after gaining 26.9% in 2021.)
The latest wave of the virus has been hugely disruptive for small businesses like Land to Sea, a cafe and event space that opened in Brooklyn’s Williamsburg neighborhood in October.
On Dec. 16, the cafe kicked out customers mid-day because an employee had been exposed to the virus. It took so long for the rest of the staff to receive the test results that the cafe closed for two days and then switched to takeout only for 17 days. (Everyone ended up testing negative.)
When an employee tested positive this month, Emily Shum and Eva Zhou, the co-owners, struggled with confusing and changing federal guidelines regarding isolation periods. They decided to require the employee to present a negative test before returning. “We are still very cautious,” Ms Shum said.
A particularly troubling economic indicator is the city’s labor market, which has historically lagged the nationwide recovery. New York City had an unemployment rate of 8.8% in December, according to a jobs report released last week, compared to 3.9% nationally.
New York City is not expected to recoup all of the jobs it lost during the pandemic until the end of 2025, according to the Budget Office’s forecast, while the national economy is expected to surpass pre-pandemic employment this year.
Compared to other major cities, a disproportionate share of New York’s workforce is made up of low-wage jobs that depend on tourism and full office buildings.
“The risk is to have a more permanently polarized society between haves and have-nots,” said James Parrott, an economist at the Center for New York City Affairs. “We already had a chasm between them before, but the longer it goes on, the wider it gets. This has serious implications for the quality of life in New York.
The chasm could widen with the recent rebound in the housing market, which has heightened concerns about the city’s affordability.
While rental prices fell in the early months of the pandemic, according to the StreetEasy listing site, they have now surpassed pre-pandemic levels in neighborhoods like Manhattan’s Financial District and Downtown Brooklyn, where many white collar workers are working remotely. The median rent in SoHo, where rents rose the most last year, is now $6,002.
In the second half of 2021, more apartments sold in Manhattan than at any time in the past three decades, driven by demand for luxury buildings, according to brokerage firm Douglas Elliman. In Brooklyn, the average selling price is nearly $1.2 million, a 21% increase from before the pandemic.
“Rising rents mean people are moving back to town, more tax revenue, more jobs,” said Nancy Wu, chief economist at StreetEasy. But, she added, “it will be even more difficult for a tenant to find affordable housing.”
Omicron’s surge has only added financial uncertainty for workers like Erik Owusu, who was sent home at the start of the pandemic after hosting banquets at the Crowne Plaza Times Square hotel.
Last month, he became an Uber driver, despite fears of contracting the virus. He hopes enough tourists will return in the spring for the Crowne Plaza to reopen and call him back.
“This pandemic has really messed up everyone’s plans,” Owusu said.
As of mid-December, 74% of available hotel rooms in the city were occupied. But that plunged to about 40% in the second week of January, according to STR, an industry research firm.
The increase in foot traffic at the three major airports that serve New York City has also been reversed. In November, airports handled more than nine million passengers, down about 15% from pre-pandemic levels.
But in the first week of January, passenger numbers were down about 34% from the same week in 2019, according to the Port Authority of New York and New Jersey.
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Even though international tourists are returning in large numbers, economists predict a permanent decline in business travel.
Gabriele Marinello, who is based in London and operates a platform that publishes scientific research, flew to New York as soon as travel restrictions were lifted in November, hoping to meet funders and clients in person. potentials. He traveled with three of his employees and booked a three-month stay at an Airbnb in Brooklyn.
But as Omicron cruised across town, most of his meetings turned into Zoom calls.
“I enjoy in-person meetings,” Mr. Marinello said. “It’s a bit of a shame that this is the time we live in.”
During his first days in office, Mayor Eric Adams repeatedly urged businesses to call their employees back to the office, suggesting businesses should start with three days a week and slowly increase to five.
“It’s time to get back to work,” Adams told CNBC in an interview this month.
In mid-January, 22% of employees in the New York area visited their offices, according to Kastle Systems, a security company that tracks access card reads in office buildings – against the peak of 37% from last year in early December.
Even financial firms like Goldman Sachs, which had been among the most aggressive in returning to the office, said during the Omicron wave that employees could work from home until February.
Security concerns have added to employees’ reluctance to return to the office, business leaders say. After a series of violent attacks this month, including the death of a woman who was pushed into an oncoming subway train in Times Square, Mr Adams unveiled an ambitious public safety plan, including by calling for changes to state bail laws.
The future of office buildings, the main contributors to the city’s property tax base, is particularly uncertain. Although office leasing activity increased in the final months of 2021, vacancy rates continued to rise, ending the year at 20.4%, nearly double the pre-Central rate. pandemic, according to Cushman & Wakefield, a real estate firm.
In the area around Grand Central Terminal, 30% of commercial space on the ground floor is vacant or still closed, according to the Grand Central Partnership, a group that promotes businesses in the area.
Just a few months ago, San Cheng thought his all-you-can-eat seafood restaurant, Crab House in Midtown Manhattan, was finally past the worst days of the pandemic.
The Delta variant surge had faded and daily cases had fallen to some of the lowest levels of the pandemic. Office workers were once again filling Midtown and foreign visitors were expected to start returning.
With that optimism, Mr. Cheng decided in late September to expand Crab House, building an outdoor dining area primarily to accommodate diners who were unvaccinated and banned from eating indoors. But the structure was only used a handful of times before the cold weather, and the Omicron variant scared diners away.
Even now, more than 60% of reservations at Crab House are canceled on average, Cheng said.
Through it all, he remains hopeful that his business will endure.
“We are still happy with our future,” he said. “Otherwise we won’t make it, you know?”
Lananh Nguyen contributed report.