NEW YORK (Reuters) - New York City’s current recession, though “quite severe” for people who lost their jobs, looks surprisingly shallow and brief when compared with previous downturns, a report said on Friday.
One of the main reasons is the financial sector’s swift rebound, which should boost the city’s tax coffers, the report by the Independent Budget Office said.
The city could receive $540 million more tax revenue in fiscal 2012, which will begin July 1, 2011, than Mayor Michael Bloomberg predicted, although it is still facing an estimated $2.6 billion shortfall.
About 173,000 jobs will have been cut from the third quarter of 2008, when hiring peaked, to the first quarter of 2010, the IBO, which is the city’s equivalent of the Congressional Budget Office, said.
That is considerably less than the forecast for 254,500 pink slips that the fiscal watchdog made in May of 2009.
The city’s current recession should only last six quarters; in contrast, the 2001 recession stretched to 11 quarters and the 1989 recession dragged on for 15 quarters.
New York City should win back lost jobs in fiscal 2013 and more than half of the new positions will be in just three sectors: health, education and business services.
Recessions drive more people to seek help from social programs, increasing demand for everything from homeless shelters to welfare and public health programs.
The cost of rental subsidies, which help move people from shelters into apartments, will hit $207 million next year from $122 million last year, the report said.
Cash welfare grants will soar 19 percent to $1.6 billion in fiscal 2010 from fiscal 2009.
“This represents the largest annual increase in the budget since welfare reform began in the mid 1990s,” the fiscal watchdog said.
New York City has one of the biggest U.S. public hospital systems, and it will be strained by rising demand for its services. The Health and Hospitals Corporation, which runs the city hospitals, will see its shortfall leap to $1.5 billion in fiscal 2011, up 86 percent over fiscal 2010, the report said.
Before new positions will be added in the health sector, the Health and Hospitals Corporation could send out pink slips to 2,600 people due to its rising deficit, the report said.
A key financial gauge monitored by credit analysts, debt service, will more than double to just under $6.3 billion in fiscal 2012, rise to $6.6 billion the following year and top $6.8 billion in fiscal 2014, the report said.
In the post-war period, only one of the city’s recessions, the 1981 to 1982 downturn, was milder than the current one.
And the city was hit much harder in the 1970s.
“The longest and deepest period of job losses in the post-war era was 1970 to 1977 — which spanned a period of brutal structural change in the city’s economy, two national recessions, and the city’s near bankruptcy — during which the city lost 635,200 jobs,” the report said.
For the full report, see:
Editing by Kenneth Barry