Rae Rosen, senior economist and vice president at the Federal Reserve Bank of New York, delivered an economic outlook address to a meeting of the Long Island City Partnership at the MetLife Building on Queens Plaza West on February 9. The charts and graphs she showed along with her narrative revealed an economic situation that shows no sign of pending improvement.
She began by saying that New York City’s growth during the downturn between late 2008 and now was greater than growth in the rest of the country, but that has not continued to be true. At the moment, it is slightly behind. The United States is currently producing at the old, pre-2008 level of output, but that is at best a partial recovery, since by now growth was expected to be greater. Also, the recovery as far as it goes has been achieved with 5.7 million fewer workers. Rosen showed a “spider chart” containing lines from past recessionary recoveries and the current one, with that current one looking feeble by comparison.
Blame it on the enormity of the event that got us into this recession, she said: the housing collapse. It was of such magnitude, with so many long-term consequences that the recession has proven steeper than earlier ones, such as the dot-com crash of a dozen years ago. Home foreclosure rates continue to build. Another spider chart displayed a picture of housing cycles then and now. Houses are now worth less than they were, she said; and the perhaps foolish practice, circa 2006-7, of using one’s house as an automatic teller machine is no longer possible. The year 2008 signified a withdrawal of growth from the economy. The only thing that currently looks good on yet another spider chart is real exports, she said.
Rosen observed that initial claims for unemployment compensation are down now, explaining that when they are on the increase, they are the consequence of an increase in firings and layoffs. When initial claims are down, firings are down, but with hiring remaining down also, or not showing an increase over the course of several consecutive quarters, there is no appreciable recovery. The unemployment rate is coming down but the participation rate is declining too, she said, adding that while productivity is rising, compensation is declining. She predicted that growth would be slower in the rest of 2012, undercutting a spurt of growth during the last quarter of 2011. How can we grow at all with 5.7 million fewer workers, she asked rhetorically, answering that our technology is wondrous enough to keep us moving with a diminished labor force. She replied to a comment that a trend exists to replace entry-level workers with unpaid interns that she didn’t see such a trend affecting the economy much.
We who live in New York might not be able to see the problems as well as those in, say, California, where the economic situation is grave, Rosen continued. When she was asked if New York, even if at the moment it has a statistically slower economy than the rest of the country, might actually be making a separate recovery, she said no: it would not take much to put us in the same rut with the rest of them.
The great monster that threatens us all is the housing situation, Rosen said. Any settlement with the banks notwithstanding, the march of foreclosures cannot be stopped, and the economic ramifications will affect us all.
She was asked about the Greek economic crisis, especially after she said that all signs point to a continued, perhaps greater, European recession. She wouldn’t speculate about what would happen should Greece default, declining to make further observations about the international scene. When asked what she thought might happen in the situation with Iran, she said she had no idea. One man brought it all back to the local economic level with a long disquisition to which she replied by saying that revenues are down in New York this year, with the worst economic burden being education, in her view. Another man asked her to please consider that our slow growth might “gain traction” during the year. She remained pessimistic.
LICP President Gary Kesner thanked Rosen for her provocative address, and said that though he found it “depressing news”, he said he remains bullish on Long Island City.
