Friday, September 7, 2007

NYC | Just a C for Growth? (Comment)

August 31, 2007–A Business Council study compares the 2005 economy with the 1995 economy... and says NYC rates a C. The study is reported on here: New York City and State Lag in Economic Growth (NY Sun).


The Business Council has done some great work, e.g., on workers' compensation. But this study - c'mon. Who are we do believe–the Council or our own lying eyes?

Do the authors remember that the City of New York was attacked by terrorists on September 11 and the business community was on the edge of a diaspora? The fact that NYC has bounced back since 9/11 is impressive.

Perhaps NYC should be grateful to get a C since the study gives a good portion of the group to which NYC is compared (i.e., the upstate counties) an F.

But there is a deep flaw embedded in the study. It uses five variables and compares each county with the nation. Three of the five variables–population, jobs and total personal incomes–are biased against dense counties like the five boroughs of NYC, which are harder to grow from a population or jobs standpoint. It's easier for populations to grow rapidly from tiny numbers in the deserts of Arizona and Nevada counties than it is in a settled city like New York. However, NYC has its own upstate reservoir while the desert communities depend for their water on snow falling in distant states.

The value of residential and commercial real estate is one test of the City's economic magnetism. The recovery and growth of values since 9/11 speaks for itself.

What may happen in the future to Wall Street jobs and incomes and the value of real estate given the collapse of the subprime lending industry is another matter. It is as true today as it was in the 1980s that the City's economy is highly dependent for its performance on Wall Street's brains and skills. But meanwhile don't slam the City with unfair comparisons. Give it an A for its recovery from the disheartening months after 9/11.