A few times last year, I wondered whether the financial crisis might also dictate the end of prosperity for New York City. While I still worry that the city's glory days are in the past, it has clearly escaped collapse thanks to the Wall Street bailout. The New York Times has an article today that explains just how big a role the bailout likely played. In fact, the recession for the city is now expected to be much less severe than thought -- and relatively benign when compared with what the rest of the U.S. is going through.
Here's a chart from the article that compares the effect of this and some past recessions on New York City and the rest of the U.S.:
The Times explains how much milder the recession is thought to be by turning to Moody's economist Mark Zandi and Mayor Bloomberg:
Mr. Zandi said he expected the job losses in the metropolitan area to end within a couple of months and to amount to less than 4 percent of the region's total employment at the peak of the last boom. By contrast, the nation lost more than 6 percent of its jobs over the last two years.
City officials agree. Mayor Michael R. Bloomberg and his lieutenants have been telling audiences that the recession will cost the city 100,000 fewer jobs than they had forecast a year ago.
Considering that the financial sector, which led the recession, was heavily concentrated in New York City that's a pretty impressive feat. But since the government put an enormous amount of money and numerous emergency measures in place to stabilize Wall Street, this makes sense:
Economists say the hundreds of billions in loans and aid the federal government pumped into the city's banks fueled a quick reversal of Wall Street's fortunes. That turnaround saved thousands of high-paying jobs and the controversial bonuses that go with them, averting a sharper drop in tax collections and consumer spending that would have brought more layoffs. "A lot of us had expected there would be 60,000 or 70,000 jobs lost directly in the financial services sector," said James Parrott, an economist with the Fiscal Policy Institute.
"Then there would have been a spillover effect," he said, referring to the widely accepted idea that each job on Wall Street supports two others in and around the city.
One way in which the city clearly benefits is directly from the spending and taxes of those in the financial industry. I've noted this before. But the indirect results are also significant. If Wall Street had laid off thousands more, some would have left the industry and city, causing real estate there to further worsen and more shops and restaurants to close.