Federal Reserve Bank of New York regional economic briefing

7/30/2019 Federal Reserve Bank of New York regional economic briefing

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The views expressed here are those of the presenters and do not necessarily represent the

views of the Federal Reserve Bank of New York or the Federal Reserve System.

Regional Economic Press Briefing

November 29, 2012


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Regional Economic ConditionsJason Bram, Senior Economist


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Overview

Overview of the regional economy before Sandy New York City on a solid growth trajectory New Jersey still sluggish

Long Island & upstate New York flat

Puerto Rico still bottoming out, no signs of recovery yet

Breaking down the costs of Sandy Physical damage (homes, property, infrastructure, etc.) Loss of economic activity (due to power, transportation outages)

Welfare costs (pain & suffering, quality of life, lost leisure time, etc.)

Bottom line Short-run disruptions substantial and widespread across NYC metro region Hard-hit communities, individuals, businesses face long road to recovery

Regional economy overall likely to bounce back quickly

FEDERAL RESERVE BANK OF NEW YORK 2


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Regional Economic ActivityIndex of Coincident Economic Indicators (CEI)

3Source: Federal Reserve Bank of New York; Puerto Rico Government Development Bank.Note: The Puerto Rico composite index is based on a different methodology than the indexes produced by the FRBNY.

84

86

88

90

92

94

96

98

100

102

104

106

Jan07 Jul07 Jan08 Jul08 Jan09 Jul09 Jan10 Jul10 Jan11 Jul11 Jan12 Jul12

New YorkState

New Jersey

New YorkCity

Puerto Rico

Index (December 2007 = 100)

Shading indicates NBER recession

LastBriefing(April)

May05

Apr08

Apr08

Nov09

Jan08

Oct09

Nov10

Oct


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Total EmploymentSeasonally Adjusted Index

Source: Bureau of Labor Statistics and Moodys Economy.com. 4

88

90

92

94

96

98

100

102

104



UnitedStates

New Jersey

Puerto Rico

New YorkState

New YorkCity


Oct

Last Briefing(April)


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Total EmploymentSeasonally Adjusted Index


88

90

92

94

96

98

100

102

104



UnitedStates

New YorkCity

LongIsland

Upstate NY


Oct

Last Briefing(April)


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Regional Unemployment RatesSeasonally Adjusted Rates


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%



UnitedStates

New York State

NewJersey

New YorkCity

LastBriefing(April)

9.7%

9.3%

7.9%Oct

8.7%


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Assessing theAftermath of Sandy


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Scope of Physical Damage

Residential real estate & property: Largely in flood-prone areas

Scattered wind-related damage across the region

Commercial real estate & property: Flooding of office buildings (NYC) and retailers along coastlines

Damaged or destroyed equipment (e.g., computers, vehicles)

Infrastructure: Mass Transit: subways, PATH, NJ Transit Rail, LIRR,

Metro North, Amtrak

Power Infrastructure: power lines, transformers & other equipment

Other Public Infrastructure: roads, bridges, tunnels, water & sewersystems, beaches, boardwalks, airports, seaport, schools,hospitals, etc.



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Impact on Economic Activity

Short-term effects: + Pre-storm increase in activity: consumers stocking up

- Disruptions: transportation, power, water, schools, etc.

+ Offsets to activity decline: postponed or shifted within region

+ Recovery of activity: rebuilding, repair, replacement

Each full-day equivalent of lost regional output $3.8 billion Represents roughly 1.1% of quarterly regional GDP

Knocks roughly 0.4% off quarterly U.S. GDP growth (annual rate)

Long-term effects: Research suggests little long-run effect on GDP

However, local consequences (population and activity relocations)may be persistent



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Empire State Manufacturing Survey

Headline index little changed in November; employment index down Roughly 70% of respondent pool is in upstate NY

Response patterns were not much different for upstate vs. downstate firms

Supplemental questions on Sandy: major disruptions todownstate NY firms

Most upstate manufacturers saw no reduction in business activity Every downstate respondent reported some reduction in activity

Over 90% of downstate firms shut down or severely crippled for at least a day

40% reported shut down or severely crippled for at least 5 days

Biggest contributing factors to reduced business

Downstate: Loss of power, loss of communications, workers unable to get inUpstate: Customers affected, supply chain disruptions

Making up for lost output is harder for service firms thanfor manufacturers



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Weekly Initial Jobless ClaimsSeasonally Adjusted

Source: Bureau of Labor Statistics and Haver Analytics.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Jan10 Apr10 Jul10 Oct10 Jan11 Apr11 Jul11 Oct11 Jan12 Apr12 Jul12 Oct12

Nov 10

New YorkState

New Jersey

11

+28,000

+45,000


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Employment TrendsBefore and After Previous Disasters

Source: Bureau of Labor Statistics and Moodys Economy.com.

70

75

80

85

90

95

100

105

110

115

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

QuartersBeforeDisaster

Hurricane KatrinaNew Orleans Metro Area

Northridge Earthquake

Los Angeles County

Hurricane AndrewMiami-Dade County

9-11 AttacksNew York City

Index (Disaster Date = 100)

New York Cityemployment back in

line with existing trend

QuartersAfter

Disaster

12


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Wage and Salary Income TrendsBefore and After Previous Disasters

Source: Bureau of Labor Statistics (QCEW) and Moodys Economy.com.Note: Income data was smoothed using a four-quarter moving average.

80

90

100

110

120

130

140

-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Hurricane KatrinaNew Orleans Metro Area

Northridge EarthquakeLos Angeles County

Hurricane Andrew

Miami-Dade County

9-11 AttacksNew York City

QuartersBefore

Disaster

QuartersAfter

Disaster

Index (Disaster Date = 100)

13


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Welfare Costs

Impact on quality of life often not included in loss estimates

Loss of life

Pain & suffering, quality of life, lost leisure time, etc. Grief and stress associated with loss of homes, personal valuables

Days/weeks spent without power, heat, water School children relocated to other schools

Additional time spent commuting, traveling

Often difficult to quantifytotal cost likely in the billions

Examples:3 million commuters x 10 extra hours x $20/hour = $600 M3 million homes without power x $500 value to avoid power loss = $1.5 BWaiting in gas lines, inability to communicate, etc.



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Impacts of Hurricane Sandyon Schools and Students


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New York City SchoolsPublic School Closures: Nov. 5

Nov 5

ClosedReopened All public schools

closed first week,most reopened onNov. 5

87 still closed asof Nov. 5

16Source: New York City Department of Education


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New York City SchoolsPublic School Relocated and Reopened: Nov. 8

Nov 8

ClosedReopenedRelocated

44 schools still displacedas of Nov. 8; studentsre-located to otherschools

23 schools stilldisplaced as ofNov. 16



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New York City SchoolsPublic School Attendance: Nov 8

Nov 8

0% to 35%35% to 70%70% to 85%86% to 100%



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School Closures Outside NYC

New Jersey: Roughly 60% of 2,400 schools still closedon November 7 700 still without power on November 7

NJ relatively slow in coming back18% still closed on November 9

Long Island: Most schools closed for full week, and morethan 100 schools require repairs due to Sandy damage



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Potential Educational Impacts

Research shows loss of school days leads to adverse effectson student learning Of particular importance, an agreement allows students to make up

three and a half days of lost time

Psychological effects

Relocations of families disrupt education

Closed schools can substantially disrupt parents work and

other schedules



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Summary

Breaking down the costs of Sandy Physical damage (homes, property, infrastructure, etc.)

Loss of economic activity (due to power, transportation outages)

Welfare costs (pain & suffering, quality of life, lost leisure time, etc.)Most schools shut down for days; some for substantially longer

Bottom line Short-run disruptions substantial and widespread across tri-state region Hard-hit communities, individuals, businesses face long road to recovery

Regional economy overall expected to be back on track by early 2013

Looking ahead It takes time, but devastated communities typically recover from disasters How can we mitigate impacts of future disasters?



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Intelligence From the Hardest Hit AreasClaire Kramer, Officer, Regional Outreach


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Overview

Outreach Team Gathers intelligence about emerging local issues, economic problems, and

financial concerns from the ground up

Identifies knowledge gaps for which the FRBNY is uniquely suited to addressand produce actionable analysis

Ongoing relationships with community organizations, business groups, and

government agencies throughout the region

Sandy-Related Conversations Contacted 40+ service organizations operating in the hardest hit areas

of the region

Organizations include local, state, and federal housing and businessagencies; chambers of commerce; and economic development authorities

Focus on small business and housing market conditions



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Small Business Recovery

Access to Credit is Top of Mind

Collateral losses limit ability to obtain loans/lines of credit

High demand for SBA loans at favorable terms

Gap financing needed for short-term cash flow while firms restartoperations and wait for SBA and insurance settlements

Local loan programs filling short-term financing needsup to $25k.Examples include NYC Department of Small Business Services, NYBankers Association and NY Business Development Corp, and Hudson

County Economic Development Corporation



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Insurance Coverage Wont Make Firms Whole

Companies lacked flood insurance

Major storm damage due to salt water

Business disruption insurance policies may not cover damage due towater, wind, or power outages

Many firms hold such policies, especially service industry firms

Demand for adjusters is greater than capacity

Insurance companies have set up mobile claims operations inheavily affected areas



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Business Trade Groups are Engines of Recovery

Businesses located in areas with active business organizations arefaring better than those in areas without such infrastructure

Service organizations in affected areas also sidelined by the stormbut used websites and social media to communicate with memberswhile operations were closed

Self-help cooperatives among business owners have sprung up toshare resources and space



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Business Owners Facing Key Decisions

Investment: Firms on waterfront discussing getting big generatorsystemsbut logistical problems remain (i.e. where to locategenerators). Renters with short-term leases hesitant to take out loansto renovate spaces they may not be able to retain

Relocation: Sandy is prompting relocation discussions. New Jerseyor upstate New York where (higher ground) land is cheaper are inconsideration, especially for waterfront firms

Closing Shop: Business owners close to retirement age areconsidering not reopening at all



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Housing Recovery

Shelter is Top Priority For Federal, State, andLocal Authorities

Estimated 40,000 New York City residents need shelterlikely to below estimate

Housing service providers report that most families who lackedpower, heat, or hot water, but whose homes did not sufferstructural damage, preferred to brave elements

Many public housing tenants refused to evacuate or relocate out offear that a Katrina-like condemnation might take place



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Housing Recovery

Counseling and Service Resources Available

State Housing Task forces formed to identify housing priorities,catalog vacant rental housing units, and investigate temporaryhousing options

Housing counseling and service providers aggressively marketingemergency loan programsexamples are Neighborhood HousingServices of NYC and Asian Americans for Equalityin hard hitneighborhoods

Over longer term, Center for NYC Neighborhoods will deployresources to support housing counseling and legal services forhomeowners filing insurance and FEMA claims and seekingassistance from mortgage providers



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Housing Conditions in the RegionJaison Abel, Senior Economist


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Overview of Regional Housing Conditions

Many of the regions housing markets have begun to recover Home prices reached a bottom in late 2011

Home sales and building activity have stabilized

Signs of housing-related stress have eased somewhat Negative equity share has edged down remains below national levels

Fewer homeowners are becoming delinquent on their mortgages

Challenges remain going forward The hardest hit places in the region continue to struggle

A large and growing backlog of foreclosures exists in the region



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The Geography of the Housing BustChange in Home Prices, March 2006 April 2009

Source: CoreLogic Home Price Index (including distressed sales).

Decline more than U.S.

Decline less than U.S.

Increase

32


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Measures of Housing Activity


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Regional Home PricesCoreLogic Single-Family Home Price Index, Seasonally Adjusted

Source: CoreLogic Home Price Index (including distressed sales); Aggregation and seasonal adjustment by FRBNY staff .

60

65

70

75

80

85

90

95

100

105

110

Mar06 Sep06 Mar07 Sep07 Mar08 Sep08 Mar09 Sep09 Mar10 Sep10 Mar11 Sep11 Mar12 Sep12

DownstateNY

UpstateNY

UnitedStates

NorthernNJ

Index (U.S. Peak of March 2006 = 100)

Shading indicatesNBER recession Dec11Apr09

Bust Continued Decline Recent

4.1%

2.3%

1.3%

6.2%

Percent ChangeDec11-Sep12

Sep

34


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Home Price Changes in the RegionCoreLogic Single-Family Home Price Index, Dec11 - Sep12

Source: CoreLogic Home Price Index (including distressed sales);Seasonal adjustment by FRBNY staff.

0% or Less0% to 3%

3% to 6.2%

6.2% or More

United States = 6.2%

Newark

GlensFalls

ElmiraBinghamton

Fairfield

Edison

Kingston

Buffalo

Rochester Syracuse

Utica

Albany

Ithaca

NYC

35

NYC


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Regional Home SalesIndex of Single-Family Repeat Sales, Four-Quarter Moving Average

20

30

40

50

60

70

80

90

100

110

2006 2007 2008 2009 2010 2011 2012

DownstateNY

UpstateNY

NorthernNJ

UnitedStates

Q2

Index (2006Q1 = 100)

Shading indicatesNBER recession

36Source: CoreLogic.Note: Data trimmed to Q2.


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Regional Home Building ActivityIndex of Total Residential Home Permits, Four-Quarter Moving Average

Source: U.S. Census Bureau and Moodys Economy.com. 37

10

20

30

40

50

60

70

80

90

100

110

2006 2007 2008 2009 2010 2011 2012

Indexed to U.S. Peak (2006Q1 = 100)

Dotted line smoothes fluctuationscaused by regulatory change in NYC

Downstate NY

Upstate NY

Northern NJ

United States

Q3



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Mortgage Originations by Credit ScoreShare of First Mortgages

Source: FRBNY Consumer Credit Panel/Equifax. 38

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

United States760 or More

NY-NNJ Region760 or More

Shading indicatesNBER recessions

Q3


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Measures of Housing Stress


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25%

8%

20%

65%

32%

47%

51%

Negative EquityShare of Mortgages with Amount Owed Greater Than Home Value

22%

8%

18%

59%

29%

43%

40%

0%

10%

20%

30%

40%

50%

60%

70%

UnitedStates

NewYork

NewJersey

Nevada California Florida Arizona

2011Q4

2012Q2

40Source: CoreLogic Negative Equity Report (with revised historical data).


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Pipeline of New DelinquenciesShare of Mortgages Entering Severe Delinquency (90+ Days)

Since Previous Month

41

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

2005 2006 2007 2008 2009 2010 2011 2012

Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS) as of Sep 1, 2012.

Downstate

NY

UpstateNY

UnitedStates

NorthernNJ

Aug


B kl f F l


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Backlog of ForeclosuresShare of Mortgages in Foreclosure

Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS) as of Sep 1, 2012. 42

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2005 2006 2007 2008 2009 2010 2011 2012

DownstateNY

UpstateNY

UnitedStates

NorthernNJ

Aug


A N b f D i F l


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Average Number of Days in Foreclosure2010 to 2012Q2

Source: CoreLogic. 43

318

503481

312

236 230

516

0

100

200

300

400

500

600

UnitedStates

NewYork

NewJersey

Nevada California FloridaArizona

Days

Judicial Judicial Judicial

G h f R i l H i S


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Geography of Regional Housing StressPercent of Mortgages in Foreclosure

44Source: CoreLogic LoanPerformance (LP) and Lender Processing ServicesMortgage Performance data (LPS) as of Sep 1, 2012.

5% or Less5% to 7.5%

7.5% to 10%

10% or More

New York

CityNewark

GlensFalls

Elmira Binghamton

Fair-

field

Edison

Kingston

Buffalo

Rochester SyracuseUtica

Albany

Ithaca


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Summary

Like the nation, housing conditions in the region haveshown steady signs of improvement Home prices have generally increased throughout the year

Other measures of housing-related activity have stabilized

Indicators of housing-related stress have eased somewhat

However, many of the hardest hit places in the regioncontinue to struggle

Housing stress is concentrated in northern New Jersey, parts

of the Hudson Valley, and Long Island

Going forward, a large and growing backlog of foreclosurespresents a challenge to broadening and strengthening theregions housing recovery



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Potential Impacts of Sandy

A large number of homes were damaged or destroyed bySandy, particularly along the coasts of NY, NJ, and CT NY: +300,000 (~4% of housing stock)

NJ: +70,000 (~2% of housing stock)

No doubt, rebuilding will be difficult and costly

Research indicates that housing markets impacted bysevere storms see a temporary dip in home prices andsales activity followed by a rebound

If enough homes are destroyed, prices may increase immediately

Longer run questions following Superstorm Sandy: Will demand for coastal properties fall?

Will costs of homeownership increase?FEDERAL RESERVE BANK OF NEW YORK 46


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Appendix

N Y k Cit S h l


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New York City SchoolsPublic School Reopening

0

23

39 40

59

62 63

0

37

44 43

2825

24

87

27

4 40 0 0

0

10

20

30

40

50

60

70

80

90

100

Nov5 Nov7 Nov8 Nov9 Nov13 Nov14 Nov15

Open

Relocated

Closed


N Y k Cit S h l


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New York City SchoolsPublic School Attendance

Source: New York City Department of Education

0

10

20

30

40

50

60

70

80

90

100

Nov8 Nov9 Nov13 Nov14 Nov15

Relocated Reopened Unaffected Total

49

R t R gi l H P i A i ti


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Recent Regional Home Price AppreciationCoreLogic Single-Family Home Price Index, December-September

Source: CoreLogic Home Price Index (including distressed sales); Seasonal adjustment by FRBNY staff.

9.6%9.0%

8.5%

7.9%

6.4%

6.2%

4.9%

4.0%

3.5%

3.3%

2.8%

2.7%

2.7%

2.0%

1.4%

1.2%

1.1%

0.2%

-1.3%

IthacaBinghamton

Glens Falls

Kingston

Elmira

United States

Buffalo

SyracuseGreater NYC

Albany

Rochester

Bridgeport

Utica

Newark

Long Island

Bergen Hudson Passaic

Warren Cnty NJ

Edison

Poughkeepsie

50

Geography of Regional Housing Stress


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Geography of Regional Housing StressPercent of Mortgages Delinquent 90+ Days

51Source: CoreLogic LoanPerformance (LP) and Lender Processing ServicesMortgage Performance data (LPS) as of Sep 1, 2012.

3% or Less3% to 4%

4% to 5%

5% or More

New York

CityNewark

GlensFalls

Elmira Binghamton

Fair-

field

Edison

Kingston

Buffalo

Rochester SyracuseUtica

Albany

Ithaca

Areas Included in Aggregate Regions


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Areas Included in Aggregate RegionsUpstate NY, Downstate NY, and Northern NJ

Downstate NY

Northern NJ

Upstate NY

Documents

Federal Reserve Bank of New York regional economic briefing