New York Faces Lasting Economic Toll Even as Pandemic Passes

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The city’s prosperity is heavily dependent on patterns of work and travel that may be irreversibly altered.

As the national economy recovers from the pandemic and begins to take off, New York City is lagging, with changing patterns of work and travel threatening the engines that have long powered its jobs and prosperity.

New York has suffered deeper job losses as a share of its work force than any other big American city. And while the country has regained two-thirds of the positions it lost after the coronavirus arrived, New York has recouped fewer than half, leaving a deficit of more than 500,000 jobs.

Restaurants and bars are filling up again with New Yorkers eager for a return to normal, but scars are everywhere. Boarded-up storefronts and for-lease signs dot many neighborhoods. Empty sidewalks in Midtown Manhattan make it feel like a weekend in midweek. Subway ridership on weekdays is less than half the level of two years ago.

The city’s economic plight stems largely from its heavy reliance on office workers, business travelers, tourists and the service businesses catering to all of them. All eyes are on September, when many companies aim to bring their workers back to the office and Broadway fully reopens, attracting more visitors and their dollars. But even then, the rebound will be only partial.

The shift toward remote work endangers thousands of businesses that serve commuters who are likely to come into the office less frequently than before the pandemic, if at all. By the end of September, the Partnership for New York City, a business advocacy group, predicts that only 62 percent of office workers will return, mostly three days a week.

Restoring the city to economic health will be an imposing challenge for its next mayor, who is likely to emerge from the Democratic primary on Tuesday. The candidates have offered differing visions of how to help struggling small businesses and create jobs.

“We are bouncing back, but we are nowhere near where we were in 2019,” said Barbara Byrne Denham, senior economist at Oxford Economics. “We suffered more than everyone else, so it will take a little longer to recover.”

At 10.9 percent in May, the city’s unemployment rate was nearly twice the national average of 5.8 percent. In the Bronx, the city’s poorest borough, the rate is 15 percent. Workers in face-to-face sectors like restaurants and hospitality, many of whom are people of color, are still struggling.

“While the recovery has probably exceeded expectations, unemployment remains staggeringly high for Black and brown individuals and historically marginalized communities,” said Jose Ortiz Jr., chief executive of the New York City Employment and Training Coalition, a work force development group.

At the same time, hundreds of small businesses, which before the pandemic employed about half of the city’s work force, didn’t survive. And many that did are saddled with debt they took on to survive the downturn and owe tens of thousands of dollars in back rent.

“I have a huge amount of debt to pay back because I had to borrow all over the place to stay alive,” said Robert Schwartz, the third-generation owner of Eneslow Shoes & Orthotics. He closed two of his four stores, but kept open branches on Manhattan’s Upper East Side and in Little Neck, Queens. “We’ll survive, but it’s going to be a long, slow recovery.”

One crucial factor in the city’s economic trajectory, civic and business leaders say, is addressing safety concerns. Violent crime has risen since the pandemic hit — including a high-profile Times Square shooting in May that wounded two women and a 4-year-old girl — and the police have recently increased Midtown foot patrols.

“The negatives of New York life are worse,” said Seth Pinsky, chief executive of the 92nd Street Y, a longtime cultural destination on the Upper East Side.

“Crime is going up and the city is dirtier,” added Mr. Pinsky, who served as president of the city’s Economic Development Corporation under former Mayor Michael R. Bloomberg. “It’s critical that we get the virtuous cycle going again.”

On Friday, Mayor Bill de Blasio said on a radio show on WNYC that the city had more police officers in the subway than at any time in the last 25 years. “We want to really encourage people back, to protect everyone,” he said.

Nonetheless, worries about crime are frequently cited by workers who have returned. “There are questions from employees about safety in the city and increased concern,” said Jonathan Gray, president of the financial behemoth Blackstone. “My hope is that as the city fills up there will be less of that.”

New York is certainly feeling less deserted than it did a few months ago. Nearly 195,000 pedestrians strolled through Times Square on June 13, more than twice the typical number in the bleak winter days when the coronavirus was raging. That’s a long way from the 365,000 who passed through daily before the pandemic, but the totals are edging higher, according to Tom Harris, president of the Times Square Alliance, a nonprofit group that promotes local businesses and the neighborhood.

When Mr. Gray returned to Blackstone’s Midtown headquarters last summer, there were just 16 other people spread over 19 floors. Today, there are more than 1,600, and Blackstone is asking all employees who have been vaccinated to return.

“It’s gone from feeling super lonely and now it’s feeling pretty normal,” Mr. Gray added.

Wall Street and the banking sector are pillars of the city’s economy, and they have been among the most aggressive industries in prodding employees to go back to the office. James Gorman, the chief executive of Morgan Stanley, told investors and analysts this month that “if you want to get paid in New York, you need to be in New York.”

Many firms, including Blackstone and Morgan Stanley, have huge real estate holdings or loans to the industry, so there is more than civic pride in their push to get workers to return. Technology companies like Facebook and Google are increasingly important employers as well as major commercial tenants, and they have been increasing their office space. But they have been more flexible about letting employees continue to work remotely.

Google, which has 11,000 employees in New York and plans to add 3,000 in the next few years, intends to return to its offices in West Chelsea in September, but workers will only be required to come in three days a week. The company has also said up to 20 percent of its staff can apply to work remotely full time.

The decision by even a small slice of employees at Google and other companies to stay home part or all of the week could have a significant economic impact.

Even if just 10 percent of Manhattan office workers begin working remotely most of the time, that translates into more than 100,000 people a day not picking up a coffee and bagel on their way to work or a drink afterward, said James Parrott, an economist with the Center for New York City Affairs at the New School.

“I expect a lot of people will return, but not all of them,” he said. “We might lose some neighborhood businesses as a result.”

The absence of white-collar workers hurts people like Danuta Klosinski, 60, who had been cleaning office buildings in Manhattan for 20 years. She is one of more than about 3,000 office cleaners who remain out of work, according to Denis Johnston, a vice president of their union, Local 32BJ of the Service Employees International Union.

Ms. Klosinski, who lives in Brooklyn, said that she had been furloughed twice since last spring and that she had been idle since November. She said she feared that if she were not recalled by September, she would lose the health insurance that covers her husband, who suffered a stroke and a heart attack.

“I’m worried about losing everything,” she said.

Also weighing on the city’s outlook is the decline in visits by tourists, who are venturing back in dribbles, not in droves.

In 2019, New York welcomed over 66 million out-of-towners, and they spent more than $45 billion in hotels, restaurants, shops and theaters. City officials expect that it will take years to draw so many visitors again, especially the bigger-spending foreign tourists and business travelers on expense accounts.

Ellen V. Futter, president of the American Museum of Natural History, said domestic tourism was rebounding faster than she had expected. “The local population is out and about and happy to be so,” Ms. Futter said. But the scarcity of international visitors “is going to tamp down the pace of recovery,” she said.

That lag will spell prolonged pain for many businesses. Employment in hotels and restaurants is about 150,000 lower than it was before the pandemic, while the number of jobs in the performing arts is down about 40,000.

To be sure, there are signs of a strengthening economy. After many residents fled the city last year, high-priced condos are again being snapped up, and the rental market is showing signs of firming after price drops.

Rudin Management, the real estate giant, is trimming back the concessions it offered to attract tenants at the height of the pandemic. “I’m getting calls from people saying their son or daughter or grandson or granddaughter is graduating and asking for an apartment,” said William C. Rudin, the firm’s chief executive. “We didn’t get those calls for a year.”

New Yorkers are also getting out more. When the Rockaway Hotel in Queens opened in September after years of planning, a hip destination in a historically working-class beach neighborhood, “people who lived four blocks away would take hotel rooms for the night because they wanted a staycation,” said Terence Tubridy, a managing partner.

Since indoor dining resumed in February, the 53-room hotel’s weekend occupancy rate has been 80 percent, Mr. Tubridy said. Along with more visitors recently from California and the Midwest, he reports a flood of inquiries about weddings and birthday parties.

As the hotel prepares for its first opportunity to serve the bustling summer crowds at Rockaway Beach, Mr. Tubridy is looking to add 100 employees to his current staff of 180.

Amy Scherber is also seeing signs of better days. When the pandemic struck, she was forced to close all but two of her Amy’s Bread shops in New York City and lay off more than 100 employees. She wound up making cakes and pastries herself in a kitchen in Long Island City, Queens.

But now, Ms. Scherber has rehired some of her employees, and a crew of four bakers is handling the pastries while she oversees the steadily increasing production of baguettes and other loaves. She has reopened her store in Chelsea Market, a Manhattan tourist destination, and is preparing to reopen other retail locations. Her wholesale business is also rebounding as restaurants that were closed for months are again ordering dinner rolls.

“In the last couple of weeks, we finally have seen the business starting to pick up a bit,” said Ms. Scherber, who started her operation 29 years ago. She is hopeful about a strong recovery, she said. But she added, “I see the city taking several years to be the economy it was.”

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