Slow Job Growth Reflects Omicron’s Economic Toll

January 26, 2022 Greg David, THE CITY

Melba’s Restaurant in West Harlem, Jan. 20, 2022. Photo by Ben Fractenberg/THE CITY

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This article was originally published on Jan 20 at 7:55pm EST by THE CITY.

Even with the city filled with tourists and office workers coming back to their desks, New York gained only 26,000 jobs in December, a pace that would put full recovery from the pandemic recession more than a year away.

But now the Omicron variant has emptied offices and pummeled tourism — a jolting sign of the Omicron case surge’s toll on the city economy while business owners also weather a transition in city leadership.

Melba Wilson has seen the latest pandemic wave play out to dismal effect at her famed Melba’s restaurant in Harlem. When the Omicron variant began sweeping New York in mid-December, Melba’s saw its business cut in half and she had to let go of several staff members.

Now as January ends, Wilson remains worried about the future. Mayor Eric Adams has yet to deliver on his campaign promise to allow restaurants like hers to use propane to heat their outdoor spaces.

Maybe even worse, she found his comment that workers such as hers were “low-skilled” demoralizing, causing her to wonder if the mayor understands the plight of this crucial industry.

“People looked at that as a slap in the face and not what we expected to come out of the mayor’s mouth,” she said earlier this week. “That was not a great way to start off the relationship.”

The mayor has not apologized for his comment but has tried to put the focus on “low wage workers” both on a CBS This Morning interview a few days later, and in a statement to THE CITY.

“I clearly was referring to low-wage workers. I myself worked as a cook, a dishwasher, and a mailroom clerk when I was young. You can’t do those low-wage jobs from home. As I’ve stated on multiple occasions, we need companies to bring workers back to the office to support these low-wage workers,” the statement said.

As a major force at the New York Hospitality Alliance, a trade association of restaurants and nightlife venues, she said she intends to ask the new mayor for a meeting to see if the damage can be undone.

Even before the variant arrived in the city, New York’s economy was stalled, despite a modest return to the office and a surge in tourism early in December.

With the small gain in December in data released last Thursday by the state Labor Department, New York remains 413,000 jobs below the record set in February 2020 (using seasonally adjusted numbers), or 9%. Nationally, the U.S. is only 2% below the peak, and many other cities have exceeded their pre-pandemic totals.

The city’s unemployment rate in December declined slightly to 8.8% but remains more than double the national figure of 3.9% and is a result mostly of people leaving the workforce not becoming employed. People who are not looking for work are not counted as unemployed in the statistics.

“Since June, 107,800 city residents have exited the labor force,” said James Parrott, an economist at the New School. “If their numbers are added back to the unemployment rate calculation, the city’s December unemployment rate would be 11.2%.”

People grab drinks at McSorley’s Old Ale House in the East Village, Dec. 26, 2021.
Photo by Hiram Alejandro Duran/THE CITY

Wall Street Waits

What seems certain given decisions by employers like Wilson is that the first two months of 2022 are likely to show a decline in jobs.

What is uncertain is whether the tensions between the mayor and key business sectors will further complicate the recovery, and meanwhile why the real estate market shows such strength.

December numbers for the crucial leisure and hospitality industry show worrisome stagnation. Hotel occupancy for the week of Dec. 11 soared to 81%, the highest of any market in the country. Yet neither the hotel nor restaurant industries added more than a couple of hundred jobs.

Occupancy plunged after the December high point. January is traditionally the weakest month of the year for tourism in the city, and the situation is far worse for hospitality businesses.

“The general sentiment of what I’m hearing is that so many restaurants and nightlife venues are extraordinarily slow, and it’s extra tough this year because they lost so much holiday business they were counting on,” said Andrew Rigie, executive director of the Hospitality Alliance. “And now we’re almost two years in to crisis so the challenges are compounding.”

Omicron has also reversed what had been a significant return to in-person work in the city’s business districts. Earlier this month, occupancy at New York City office buildings was only 28%, according to data from Kastle Systems, and may have slipped further in the last two weeks.

The mayor’s efforts to convince CEOs of the major financial firms to order their workers back to the office has failed in the short term. Goldman Sachs and others have established Feb. 1 as a possible date to return to what are now empty offices but there have been no public statements lately reflecting whether they intend to keep that deadline or extend their period of remote work.

Adams’ remarks on the issue also caused a storm of controversy when he called service workers “low-skilled.”

“My low-skilled workers, my cooks, my dishwashers, my messengers, my shoe shine people, those who work at Dunkin Donuts, they don’t have the academic skills to sit in the corner office,” Adams said.

In early December, the new Margaritaville Hotel in Times Square had been completely booked, a bartender who asked not to be identified, noted recently. Now the hotel’s occupancy rate has plunged into the teens. “And now I am regarded as low-skilled,” he added.

No Propane

The lack of propane heating for outdoor dining is also exacerbating the tensions with the hospitality industry.

After allowing propane heaters for outdoor spaces at the start of the pandemic, former Mayor Bill de Blasio, at the urging of the Fire Department, prohibited their use last year.

As a candidate, Adams said he would reverse the decision, but his administration has not acted since.

Wilson is hamstrung by the delay.

“We have no outdoor dining for those who prefer it or are not vaccinated,” she said. “I am in an old building and it would cost tens of thousands of dollars to put in electric heat. No restaurant has money like that.

Meanwhile, the city’s real estate industry has rebounded dramatically in what is regarded as a sign of confidence that a full recovery is coming even if it is delayed.

The median net-effective rent in Manhattan in December jumped to $3,392, the highest for that month in more than a decade.

This week the city released its property tax assessment roll. It shows the assessed value of multi-family buildings increased by 8% and office buildings soared by 11% over the previous year, despite low occupancy rates. The numbers mean real estate in the city is worth more than before the pandemic and will generate property tax revenue not currently expected.

“The release of New York City’s tentative property assessment roll suggests a bright spot for New York City’s finances amid uncertainty in the city’s economic recovery,” said state Comptroller Thomas DiNapoli.

Even hard-hit Manhattan retail space is perking up. The number of ground-floor vacant spaces in major corridors dropped to 266 from 282 at the end of last year, according to a quarterly report from the real estate firm CBRE. SoHo filled almost a quarter of its vacant spaces, including with new leases for jewelry and luggage retailers.

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