New York could plunge into a recession not seen since the 1970s based on job loss projections during the COVID-19 pandemic, according to a report from the city's Independent Budget Office released on Wednesday.
According to the IBO's rough estimate, NYC would lose $9.7 billion in tax revenue for fiscal years 2020 and 2021 based on a scenario in which there are 475,000 jobs lost over 12 months. That is about 4.6 percent to 10.5 percent less revenue than a previous forecast over the two fiscal years, according to the report.
The largest tax revenue drops are from income and sales taxes, which are "very sensitive to economic conditions," the report says.
Based on the job losses, it would be the worst recession the city has seen since the 1970s.
"There are two strikes against us at this time: one, is we're at the center of the disease at this point in the United States, and that's taking a huge toll," Ronnie Lowenstein, the director of the IBO, told Gothamist. "And also because the city is particularly reliant on industries that are being particularly hard hit."
In the last two recessions New York City fared better than the rest of the country, Lowenstein explained.
"In the Great Recession—'08, '09—we lost about 138,000 jobs, and as a percent of total employment, those losses were way less than what happened at the U.S. level," she said.
From 2001 to 2002, NYC lost about 160,000 jobs. "There was some very specific circumstances that helped New York recover, not the least of which was funds from the federal government after the bombing of the [World Trade Center], and I think a welling up of pride in the city," Lowenstein remarked. "Tourism rebounded quickly because people wanted to support the city."
In the downturn starting 1989, the city lost twice as many jobs as the 2001-2002 recession, when the city fared worse than the country as a whole, she said.
In the 1970s fiscal crisis, "all of that was happening at the same time as a very much longer term structural decline."
Lowenstein added: "People were moving out of town. Households were moving out. Businesses were moving. Headquarters were moving out. It was a combination of bad things happening, in the '70s. It really hurt the city badly."
As the coronavirus pandemic claims more than 10,000 lives, New York City is at the center of the global crisis, exacerbating the city's financial vulnerability during the pandemic. Stay-at-home policies have decimated industries the city relies on, like restaurants, retailers, and the tourism sector.
"That's going to mean a really big impact on tax revenues," Lowenstein said. "The other thing that's notable about all of that is that the sectors that are being hit hardest tend to be low-pay and moderate-pay sectors."
The IBO's projections estimates the local economy would add jobs in the second quarter of the fiscal year 2021 with "job growth remaining slow through the end of 2022."
IBO's report added, "Given how little is known about the persistence of the Covid-19 crisis and how long the economy must remain shut, however, there is great uncertainty about how the depth and duration of the expected recession and the strength of any post-recession bounce—let alone the recession's eventual impact on tax revenue."
Earlier this year, Mayor Bill de Blasio laid out a $95.3 billion preliminary budget, but due to the pandemic, de Blasio is expected to cut a summer youth employment program, postpone an early education program expansion, among other measures to reduce the budget.
The federal government's $2 trillion stimulus bill allotted government funds of $1.4 billion to the city and about $4.1 billion to the state—a dollar amount de Blasio and Governor Andrew Cuomo called "immoral" and "terrible," respectively. Cuomo said Sunday he wants the next stimulus package to allocate funds based on where the needs are greatest to help close the estimated $10 to $15 state budget deficit.
Lowenstein agreed that the $2 trillion bill, called the CARES Act, provided little direct cash for the city or state.
The IBO is putting together further projections next month as a part of its review of the de Blasio administration's finalized budget.