“Wall Street Must Recover Before City Can Overcome Recession, Economists Say.”
That’s the headline over Patrick McGeehan’s NY Times article Wednesday about an interview with economists at the Federal Reserve Bank of New York. He repeated this message in a follow-up story on unemployment rates on Thursday.
What are the prospects for a Wall Street recovery? Not good, according to McGeehan’s sources at the Fed.
Quoting one of them, Fed regional economist Rae D. Rosen, McGeehan reports that “Wall Street still appears to be shrinking. The latest figures from the State Labor Department showed that the number of jobs in the city’s securities industry declined by about 2,000, or 1 percent, in February, while most other sectors were adding jobs.”
The reasons for this continuing contraction are less important than the message it sends to others who use it to guide their own investment and hiring plans.
“The fact that securities industry employment is still declining is a concern because that’s a leading indicator,” Rosen said. “In every other recession, securities employment turned up first.”
Rosen’s comment reflects the reality that New York City’s finances still depend on Wall Street’s success. Michael Daly, writing in the Daily News, agrees. “Like or not, we are as dependent on Goldman Sachs as Detroit is on General Motors,” Daly says.
Remarkably though, there’s been little mention of our dependence on Wall Street at the public hearings being held by Mayor Michael Bloomberg’s 2010 Charter Revision Commission. Neither has there been any discussion of our other fiscal mainstay: real estate development. On Monday, the charter hearings move to Queens.
It is improbable that the charter revision commission sees no relationship between how City Hall is structured and New York’s economic viability. More likely, the commission assumes that our current structure, with a strong mayor, a weaker Council, and much weaker borough presidents, has to stay in place, regardless of the path NYC’s economy needs to take.
That structure may have seemed right in 1989, when a pre-Internet Wall Street and residential/retail development promised to be reliable long-term engines for the city’s tax revenues, and those industries demanded a strong mayor to guarantee policies that would protect their investments in NYC’s real estate.
Today, they want even stronger control, through the mayor-dominated City Planning Commission. Writing on April 18 in Crain’s New York Business.com, Steven Spinola, President of the Real Estate Board of New York, says “sound land-use planning is the foundation for the future improvement, growth and prosperity of the whole city….[We need] to reform the land-use sections of New York’s City Charter.”
Spinola’s first two suggestions: “Put the City Planning Commission in charge of developing the capital budget…” and “amend the City Charter to provide that the City Planning Commission [and not the City Council] makes final determinations on all administrative land-use permits….” The subtext is that traditional residential and retail development still are the way to go.
But the city’s current fiscal crisis, driven by the 2008 mortgage derivatives crash, Wall Street’s contraction, and the real estate slow-down, demonstrates the city’s vulnerability to a traditional residential/retail development-based economy and underlines the urgency of broadening our tax base.
City Hall can play a crucial role here. It can design use land use, transportation, and tax incentive policies to encourage more diverse industrial growth throughout the five boroughs: essentially multiplying the number of baskets holding our economic eggs.
The charter revision commission, together with elected officials, the press, and the public, owes it to us to examine if a strong-mayor City Hall is the best way to make this happen. Whether a commission that owes its existence to such a strong mayor can do this, remains to be seen.
CityPragmatist 