From the Federal Reserve:
Federal Reserve Bank of New York
Summary of Economic Activity
Economic growth in the Second District slowed to a crawl in the latest reporting period, as demand from households and businesses weakened amidst ongoing labor shortages, supply backlogs, and elevated Covid levels. Business optimism about the near-term outlook has also eroded further. Businesses continued to report widespread increases in selling prices, input prices, and wages, as well as ongoing difficulty obtaining necessary supplies. Despite severe labor shortages and high turnover, businesses have continued to add workers and plan to continue doing so in the second half of the year. Both manufacturing activity and consumer spending have been flat in recent weeks, while tourism activity has accelerated. There were pronounced signs of easing in the home sales market, whereas the rental market was increasingly robust. Commercial real estate markets were mixed but generally steady. Construction activity has picked up, with a good deal of multifamily residential development in progress. Finance-sector contacts reported some weakening in activity, while regional banks reported widespread declines in loan demand and refinancing activity, as well as tighter credit standards and steady delinquencies.
Labor Markets
Businesses continued to report widespread labor shortages, restraining both new hiring and retention, though one employment agency noted that workers have become more reluctant to change jobs. Particularly acute labor shortages were reported in technology and healthcare occupations. Still, a sizable proportion of businesses indicated that they continue to add staff—particularly in the wholesale trade and information sectors, as well as in transportation and professional & business services. One contact noted increasing job openings for call centers. Firms in all major industry sectors except finance plan to add staff in the second half of this year.
Businesses continued to note widespread wage increases and anticipated further increases in the months ahead. One employment agency noted that more employees are using counter-offers to raise their salaries in their current jobs. Wage gains have been most pronounced in the construction, transportation, and warehousing sectors.
Real Estate and Construction
Housing markets have been mixed since the last report, with the rental market continuing to strengthen but the sales market weakening noticeably. Both in New York City and across the metropolitan region, there has been a steady and pronounced decline in signed contracts in both May and June, going against normal seasonal trends. A leading local real estate authority attributed this drop-off in sales to a combination of low affordability, rising mortgage rates, and increased uncertainty. There has also been a rise in the inventory of available homes—though it is still quite low—but not a reduction in prices thus far. Real estate contacts in upstate New York continued to characterize the market as strong, though less so than in recent months—for instance, bidding wars still occur but with fewer bidders competing and some sellers have lowered their asking prices.
In contrast, residential rental markets have strengthened noticeably, with substantial escalation in rents, low vacancy rates, and brisk leasing activity. In New York City, rents rose sharply during the 2nd quarter, setting new records, and rental vacancy rates are at a 20-year low. Rents have also risen sharply in upstate New York. With rents rebounding to well above pre-pandemic levels in New York City and elsewhere, affordability has been a widespread and growing concern.
Commercial real estate markets have been mixed since the last report. Office markets across the District were steady to slightly weaker, with vacancy rates edging up in Manhattan and the Lower Hudson Valley but little changed elsewhere. Office rents were flat to up slightly and close to pre-pandemic levels, except in Manhattan. The industrial market has remained firm, with vacancy rates leveling off but rents continuing to rise briskly. The market for retail space has remained sluggish.
Construction activity has been mixed but picked up somewhat overall. Nonresidential construction starts have remained exceptionally low, whereas multifamily residential construction starts have increased across most of the District, with the notable exception of Manhattan—though even there a sizable volume of construction is still in progress.
