Risk Rap

Rapping About a World at Risk

New York City Shakedown

NYC Sunset 1932

There are a number of sobering assessments surfacing concerning the economic crisis and its impact on regional economy of New York City and the Tristate area.

One estimate is that the reconfiguration of the banking industry will result in 100,000 high paying job losses in the Tristate area. That includes NYC, Northern New Jersey and Southwestern Connecticut. I originally thought that figure was a bit high but when you consider that a bloated Citibank can lob off 10 to 20 thousand jobs at the drop of a pink slip it might not seem too drastic a prognostication. I’m not sure if this figure includes ancillary businesses that are sustained by relationships with banks and their employees but whatever the composition of the number it will have a major impact on the regional economy of the Tristate area.

Job losses will remove significant buying power from the local economy. It will place added strain on the housing market, erode usage fees of buses, trains and road tolls and will curtail sales and property tax receipts. This will put enormous pressure on state and local governments and public school districts to deliver vital services like education, police, ambulance, road maintenance and other public services.

Another labor market statistic I learned was that the economic crisis will result in the loss of 30,000 construction jobs. This number according to some economists is an optimistic “soft landing” prediction for the industry. The construction industry is a major driver of jobs and economic activity in the Tristate area. As personal income, business revenue and tax receipts abate demand for new housing construction and renovations, commercial buildings and public works construction and infrastructure improvement and maintenance will decelerate.

The financial services industry shepherded America’s economic transformation to a services based economy. This transformation strengthened the banking industry by creating an economy that became increasingly dependent on the manufacturing of collateral such as housing construction and real estate development projects. This development allowed banks to finance more leverage in the credit markets and created the credit marketing frenzy of the last decade. America’s banking system exponentially expanded to accommodate the Titanic growth of the credit marketing industry. But like the Titanic after it hit the unforeseen sub-prime iceberg the industry has way too much capacity and needs to downsize as lending activity sinks into the black depths of recession.

New York City has long been considered the center of the worlds financial system. The downsizing of the banking industry is the equivalent of the shut down of steel mills in Pittsburgh and the closing of car manufacturing plants in Detroit. Citibank and Merrill Lynch are the General Motors and US Steel of NYC.

Music Video: Gene Kelly & Frank Sinatra, New York, New York

Risk: public services, banking, regional recession, cities

October 15, 2008 Posted by | cities, credit crisis, economics, pop, recession, taxation | , , , , , , , , , , | Leave a comment