Why N.Y.C.’s Economic Recovery May Lag the Rest of the Country’s

New York, whose diversified economy had fueled unparalleled job growth in recent years, is now facing a bigger challenge in recovering from the pandemic than almost any other major city in the country. More than one million residents are out of work, and the unemployment rate is nearly double the national average.

The city had tried to insulate itself from major downturns by shifting from tying its fortunes to the rise and fall of Wall Street. A thriving tech sector, a booming real estate industry and waves of international tourists had helped Broadway, hotels and restaurants prosper.

But now, as the virus surges again in the region, tourists are still staying away and any hope that workers would refill the city’s office towers and support its businesses before the end of the year is fading. As a result, New York’s recovery is very likely to be slow and protracted, economists said.

“This is an event that struck right at the heart of New York’s comparative advantages,” said Mark Zandi, chief economist for Moody’s Analytics, a Wall Street research firm. “Being globally oriented, being stacked up in skyscrapers and packed together in stadiums: The very thing that made New York New York was undermined by the pandemic, was upended by it.”

Mr. Zandi said he expected that it would take New York about two years longer than the rest of the country to recover all the economic losses suffered during the pandemic. “It’s going to be a long slog” that will last into 2023 for the nation and possibly until 2025 for New York City, he said.

So far, New York has been regaining jobs slower than other big cities. As of September, employment in the city was still down more than 600,000 jobs from a year before, according to the state Labor Department.

In September, more than 2.3 million New York State residents were collecting unemployment benefits, said James Parrott, an economist with the Center for New York City Affairs at the New School. Of those, at least 1.3 million were city residents who were either out of work or severely underemployed, he said.

Those losses are concentrated in five key industries — restaurants, hotels, the arts, transportation and building services — that rely on travel, tourism and business activity, Mr. Parrott said. Workers who staff office buildings have been laid off, awaiting a return of professional service workers to their offices.

“A lot of those things which we had celebrated as having helped to diversify the city’s economy in the Covid economy turned out to be big liabilities,” he said.

The cratering of the local economy is on stark display along many Manhattan blocks where offices are mostly empty, streets are lined with shuttered stores and restaurants and normally bustling gathering spots, like Bryant Park, are eerily quiet.

The city’s struggle to dig out of its financial hole and the looming possibility of major cuts to services and programs will likely become a dominant issue in next year’s mayoral election, with voters judging candidates on their economic blueprints.

Still, a top city official, Vicki Been, the deputy mayor for housing and economic development, disagreed with the economists’…

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