Jason Bram and James A. Orr
Unlike much of the nation, New York City has seen a robust rebound in employment since the recession. In early 2012, employment here reached 3.86 million, the largest number of jobs ever recorded. Yet the city’s unemployment rate has risen in recent months and is now 10 percent—its peak during the recession—and well above the 5 percent rate seen before the downturn. This lack of improvement reflects the fact that the number of employed residents of the city has not rebounded at all from its losses during the 2008-09 downturn. While commuters from outside the city have always been a part of the employment scene, particularly in Manhattan, the recent divergence between the brisk growth in jobs in the city and the lack of growth in the number of employed residents in the city is unprecedented. Moreover, this gap between the two measures continues to widen, raising some questions as to how strong New York City’s recovery actually is. In this post, we explore several alternative explanations for the lack of growth in the employment of city residents in the face of a sharp recovery and expansion of jobs. While there are several potential explanations, the stagnation of resident employment remains largely a puzzle.
Two estimates of New York City employment are reported each month—the count of the number of jobs (based on a survey of business establishments) and a count of the number of people employed (based on a household survey). Between August 2008 and December 2010 the establishment survey showed that New York City lost 130,000 jobs, or about 4 percent of total city employment, and the household survey showed comparable declines. As of June 2012, however, the establishment survey showed that city employment had rebounded by almost 200,000, reaching an all time high, while the household survey showed no rebound at all. In fact, the unemployment rate, which is calculated from the household survey, has recently crept up—from 9.1 percent in December to 10.0 percent in June.
As shown in the chart above, employment levels, based on these two measures, do not typically match up for a number of reasons. In New York City, establishment-survey levels are typically higher due to substantial net in-bound commuting; in addition, that survey counts a person that works two jobs twice. However, some of this gap is offset by the fact that the household survey defines employment more broadly, in particular, including the self-employed and unpaid family workers. A thorough discussion of these differences, as well as past divergences at the national level, can be found in this study, which also highlights the role of pre-Census population estimates and ensuing Census adjustments in distorting household survey employment trends. However, such distortions do not appear to be a significant factor in New York City’s recent episode. What is so unusual now is not the size of the gap, but rather the divergence from its historical trend—it had gradually been diminishing over time—and the speed with which it has grown.
We look to three possible explanations for why these two employment measures have diverged so sharply in New York City. First, and most obvious, is commuters. Jobs in the city held by people who commute from the rest of the metro area are counted in the establishment survey, but not in the household survey. If most of the new jobs were going to commuters and few to city residents, that would help explain some of this divergence. When comparing the two measures of employment for the remainder of the metro area, however, we find no offsetting gap; that is, we see the same sharp divergence for the broader metro area that we see for New York City. So taken at face value, these numbers suggest that, if city residents are not benefitting from the resurgence of job growth, neither are commuters.
A second possible explanation for the rise of the gap might reflect the treatment of self-employed workers in the two surveys. As the recovery took hold, it could have been the case that large numbers of workers shifted from self-employment (counted in the household survey, but not the establishment survey) to a job in a business (counted in both surveys). This shift would not be reflected in the household survey, because the worker was already counted as employed, but it would show up as a rise in the establishment survey. While current self-employment data are not available for New York City, nationwide data indicate that there has indeed been a shift away from self-employment since 2009. If a similar pattern occurred in New York City—even to a considerably greater degree—it would only explain a fraction of the divergence between the two employment measures.
Finally, multiple jobholders could be a factor. A resident of the city who holds two jobs would be counted as one employed person in the household survey, but counted twice in the establishment survey. An increase in multiple jobholding in the city during this recovery would give rise to a gap. As with the self-employed, we do not have direct evidence of multiple jobholding among New York City residents, nor is there evidence of a rise in multiple jobholding in this recovery at the national level. So unless the city deviates significantly from the nation, this explanation holds little water.
So what are we left with? There seems to be no single over-riding explanation for the gap between the two employment measures. Other indicators of the city’s economy are indicating a healthy recovery, particularly the low office vacancies and rising rents. These developments are consistent with the establishment survey’s estimate of considerable job growth. We will look to future monthly data releases, as well as annual benchmark revisions in early 2013, to help clarify this situation.
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.