A food truck vendor pushes his cart down an empty street near Times Square in New York. | AP Photo
The coronavirus has wreaked havoc on New York City’s economy, sending bedrock industries into a tailspin and dragging a city budget from years of record growth into near chaos, within less than a week.
A leading financial watchdog, the Citizens Budget Commission, estimated the city could lose $5 billion in revenue in the upcoming fiscal year, based on the prior two recessions.
Yet unlike downturns of the past, this fiscal crisis was hastened by orders from the city government, suddenly bringing unprecedented challenges to the city’s economy. On Monday, all bars and restaurants — a staple of New York City’s vibrant nightlife — were ordered to shutter or provide only takeout. Broadway and movie theaters have gone dark by order of the state. And with travel restrictions from Europe, the partial closure of the Canadian border and increasingly stringent rules on domestic trips, the hospitality industry is in free fall.
Almost overnight, these edicts have decimated the arts, entertainment, hotel and food industries, which accounted for roughly 10 percent of the city’s 4.7 million private-sector jobs as of December.
“In a recession people might go out to eat less, or go to a less expensive restaurant,” Andrew Rein, head of the budget commission, said in an interview. “That is not the same thing as saying ‘No one is going to go out to a restaurant at all.’”
Over the past week, as the virus reached crisis levels, gyms and yoga studios shut their doors, stores began closing early and Uber and Lyft drivers were ordered to eliminate shared rides for everyone but couples. And with the exception of some costumed characters in Times Square and grocery store employees, scores of workers who rely on per-diem pay are gearing up to apply for unemployment.
The economic pain will largely depend on the severity of the city’s action to slow the virus. Stretching out the timeframe in which New Yorkers become infected is designed to alleviate the pressure on the city’s health facilities. Commerce and employment will be the collateral damage.
“Ironically, the more effective you are in reducing exposure and slowing down the pace of the contagion, the longer it will take for it to be over,” said Kathy Wylde, head of the Partnership for New York City. “So the economic damage is inverse to the success in slowing the disease.”
The de Blasio administration will soon face the consequences of its safeguards: The actions intended to protect the health of New Yorkers will simultaneously complicate the health of the budget, which must be balanced and passed by July 1. The annual spending plan, which hit a record $95.3 billion this year, relies on revenue from personal income and business taxes that contract in times of fiscal crisis.
The mayor’s directives are a double hit for many artists who rely on hospitality jobs to compensate for the unpredictable wages of show business.
Kailey Marshall is a Colorado-born lyricist and songwriter whose newest show, “Songs for Slutty Girls,” was set to premiere at the Brooklyn performance venue Littlefield. That is no longer on the table.
“I don’t know if I’ll ever get to do the show at this point,” she said. “That’s my biggest fear.”
Her job as a manager at popular New York City eatery Westville is also up in the air as the restaurant switches to delivery and takeout only. Because of the reduced shifts up for grabs, she opted to apply for unemployment. But with the system completely overloaded, she has not been able to get the process moving through the state Department of Labor.
Marshall and an untold number of other workers will provide the first peek into the breadth of the virus’ economic impact next month, when the state releases figures showing the decrease in income taxes withheld from salaried and hourly paychecks.
“If businesses start laying people off, you’re going to see dips in withholding right away,” Ana Champeny, director of city studies for the budget commission, said in an interview. “But it won’t be all of the impact. You won’t get a full sense until you see what the rest of the picture is.”
That is because more than a third of personal income taxes — the city’s most volatile pot of cash, which makes up 14 percent of total revenue — comes from capital gains made by the wealthiest New Yorkers. These are closely tied to the economy, making them less predictable, and the decrease in collections will not become apparent for months. Raw job and tourism numbers similarly will not be known for some time.
On Monday, City Comptroller Scott Stringer predicted a $3.2 billion hit to the budget over the next six months, based on a number of assumptions that will all have an effect on tax revenue. Real estate transactions are down 20 percent since the onset of the coronavirus in New York, leading to a drop in tax revenue for the city. The retail industry has taken a similar hit, while restaurant sales were projected to be down by 80 percent. Both will deplete sales tax collections. And hotels, which pay property and room occupancy taxes, are expected to operate at 20 percent of capacity through the summer.
The American Hotel and Lodging Association predicted Wednesday that a worst-case scenario would mean the loss of nearly 50,000 hotel jobs in New York State. And for many owners in the city, the numbers are already far more bleak.
“There is one hotel in the midtown area that is at 2 percent occupancy, and another that is in the 10 to 11 percent range,” said Vijay Dandapani, chief executive of the Hotel Association of New York City.
The industry, which employs around 55,000 people in the five boroughs, was already facing falling room rates because of a glut of supply and competition from home-sharing platforms. And for most owners, the coronavirus comes at an inopportune time: On July 1, a hefty biannual property tax bill is due to the city, and many companies are cutting staff now. Marriott International announced Tuesday it is beginning to furlough what will likely amount to tens of thousands of workers. Housekeeping staff, Dandapani said, are typically the first to go.
To stem a rush of bankruptcies, Dandapani is asking the city to delay the collection of property taxes.
And he is not alone. Andrew Rigie, head of the New York City Hospitality Alliance, has asked the city to suspend all taxes, fines and fees to local businesses, along with freezing the paid sick leave law. Council Member Ydanis Rodriguez asked for a 60-day rent freeze for small businesses. On Wednesday, Council Speaker Corey Johnson joined the chorus, indicating that the city should waive fines and fees and look at deferring certain tax payments. But forgoing already reduced tax collections would be a Faustian bargain for an administration already bracing for unprecedented cost shifts from the state that officials predicted could top $1 billion.
The city comptroller and the budget commission have called on de Blasio administration bean counters to immediately begin trimming away at the city’s budget. Saving, however, has not been the mayor’s strong suit.
Since coming into office in 2014, de Blasio had increased city spending from roughly $75 billion in his first budget to $95.3 billion in his latest plan unveiled in February. And throughout that time, the administration has forced agencies to cut and find efficiencies in spending on a far smaller scale than under previous mayors.
“It hasn’t been what this administration has focused on,” said Rein, head of the budget commission.
The City Council, which typically holds two rounds of budget oversight hearings to drill down into spending before submitting a list of their own pet programs, has shut down for the time being. Johnson and Latonia McKinney, head of the Council’s finance division, told members in a pair of emails this week that budget hearings and meetings have been put on hold and that members did not need to submit budget proposals. However, lawmakers are working on a way to get back up and running.
“The Council’s charter-mandated powers remain the same. We can still pass legislation and can have meetings and hearings via teleconference as needed. As for the budget process, we are a co-equal branch of government and will work to secure a budget that serves this city in these difficult times,” Council spokesperson Jacob Tugendrajch said in a statement.
Stimulus spending is largely the job of the federal government. But the city will nevertheless need to boos its own spending for health care and targeted aid programs to affected small businesses. The Department for Small Business Services, for example, is offering zero-interest loans for companies with fewer than 100 employees and grants for companies with fewer than five workers.
The agency and the city’s Office of Management and Budget, which is currently re-estimating revenue ahead of its executive budget proposal next month, were mum on how much total cash would be available and when the money would start flowing to recipients. None of it has thus far made it into the hands of entrepreneurs.
“We are taking aggressive steps to slow the spread of the virus and mitigate the economic impact,” spokesperson Laura Feyer said in a statement. “The administration is closely monitoring this rapidly evolving situation.”
One Queens bar owner, who recently received some high-profile assistance from the mayor, is not waiting for the administration this time around.
“It’s time to pivot,” said Loycent Gordon, owner of Neir’s Tavern.
On Tuesday, Gordon was in the midst of creating a delivery system for his bar and restaurant through which neighbors could order to-go pints of Guinness or carry-out cocktails alongside a St. Patrick’s Day meal of corned beef, cabbage and Irish soda bread. Small business services, he said, did reach out. But he fears that assistance will arrive too late.
“I appreciate the offer … but the logistics of making it happen and having cash in hand — I can’t wait for that,” he said.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
