New York’s resiliency is being severely tested, as it faces massive budget deficits and jobless rates kept low only by those fleeing the dismal scene. Foreign tourists keep spending, but natives of the Big Apple are feeling the pinch as a nation wonders not when, but if, the economic downturn will ever end. For more on this, see the following article from Housing Predictor.
Tourists flock to Times Square by the millions. Broadway shows are selling out, many packed by audiences from foreign countries at discount ticket rates. New York City is a maze of pedestrians on any given business day with people hurriedly moving from place to place. To the naked eye little seems to have changed in the last year in many areas of the Big Apple.
But during a four day stay in the city that never sleeps talking with dozens of bell boys, hotel employees, real estate investors, financial experts and business people it becomes clear that New York is in economic crisis, strained by the same pains that hurt cities all over the country.
The single strongest factor that seems to be holding New York City businesses in check are foreign tourists. Only a small percentage of visitors at the Empire State Building, restaurants and other sites we took in spoke English. New York is a major destination for foreign emigrants and visitors. Tourists from Germany, France, Japan, the Old Soviet Union and so many other foreign lands had us feeling like foreigners in our own country.
It’s a strange feeling to feel like a visitor in your own home country. America has changed more over the last decade into a growing melting pot of foreign nationals, and its economy has been driven to a large degree by the changes. Wall Street traders saw rapid deterioration of the financial world and took advantage of it developing new trading instruments that triggered the financial crisis.
More than a year after the meltdown on Wall Street, hundreds of thousands of those once employed by the major investment houses are still looking for work. However, lower unemployment rates in New York are attributed to more people leaving the state because of higher taxes and unemployment than any other state in the country.
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New York Governor David Paterson realizes how bad off the economy is. “New York is 16 to 20 months behind the rest of the country in terms of the economy,” said Paterson. As economies go the state has always trailed others in economic downturns, buffered by its world leading financial markets.
The strain of the fallout from the financial crisis is taking its toll. The governor is pushing for the state to address a $10-billion budget deficit over the next two years, including a $3.2-billion deficit in the current fiscal year, and a forecast $6.8-billion next year.
Forty-eight state governments are ailing with financial hardships due to a lack of income from property taxes and other forms of revenue. All attribute their economic straits to the real estate crash. Every economic depression in U.S. history has been attributed to real estate crashes except two.
The new economy being developed out of the economic crisis is changing the lives of millions of people. In New York Wilfrid Paul has gone back to driving an airport shuttle to JFK and LaGuardia airports, while his two boys and wife run his restaurant. For 20 years Paul ran a successful restaurant in Queens, but over the past three years business has dropped to half of what it was.
Making the mortgage on his $475,000 home purchased during the boom has become more challenging. The home, which Paul estimates to now be worth $300,000, is upside down as a result of the housing crash, but he remains optimistic that things will improve. “We’ll know something by the middle of next year,” said Paul driving to JFK. “Things will get better soon.”
The foreclosure epidemic is emerging more slowly in New York than many other places. U.S. banks are on pace to double foreclosures in the coming year with more than 20-million vacant homes sitting across the country.
The near Ponzi-scheme economy that got its birth on Wall Street is still plunging even as the New York Stock Exchange exhibits strength climbing from its earlier year crash. Many of the most prominent people in financial services at the Securities Industry and Financial Markets Association (SIFMA’s) annual meetings in New York heard Treasury Secretary Tim Geithner remain resolute. “The economy is improving,” he said.
The question attendees seemed to be asking more than anything else was, “Can we ever get out of this mess?” Few seemed as confident as Geithner. The organization may help develop the future of new regulatory financial reforms for the industry.
The total national debt, including public and private is now about $60-trillion.
This article has been republished from Housing Predictor. You can also view this article at Housing Predictor, a real estate analysis and forecasting site.