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U.S. 2020 Economic Conditions and Commentary Considering COVID-19 and Continuing Economic Developments

Sep 22, 2020

Where We Are – September 2020 Observations

This is part three of a series of posts focusing on year-to-date economic conditions in light of the impact of the COVID-19 pandemic. To read more, see part one, part two , part four, part five, part six and part seven.

E.  Detailed Summaries From Federal Reserve Bank Districts

1.  Federal Reserve Bank of New York

Summary of Economic Activity

Economic growth in the Second District has stalled in the latest reporting period, even as the spread of the virus has remained subdued and more businesses have gradually reopened. Employment overall has been little changed, though retailers and wholesalers have reported staff increases, as more restrictions have been lifted. Input prices accelerated somewhat, while selling prices have remained steady. Retail activity continued to expand, though it remains well below pre-pandemic levels, while tourism and travel have remained depressed. Home sales have been mixed, with the single-family sales market strengthening but other segments flat to weaker. Commercial real estate markets have softened further—particularly for office and retail space. Residential and commercial construction activity have remained weak. Finally, banks reported increased loan demand, tighter credit standards, and further widespread increases in delinquency rates. Overall, business contacts have become less optimistic about the near-term outlook.

Employment and Wages

The labor market has been generally flat since the last report, though retailers and wholesalers indicated that they had added staff as more restrictions have been lifted. A major upstate New York employment agency and a payroll processing firm both reported that hiring activity has picked up somewhat since midyear. However, a major New York City agency specializing in office jobs indicated that hiring has remained sluggish, as fewer people are leaving jobs and companies have been reluctant to on-board new workers remotely. These contacts noted a marked increase in job seekers.

Some businesses have noted less trouble bringing back furloughed workers and hiring new ones in recent weeks, as unemployment benefits were scaled back. However, a number of companies noted that concerns about child care and the upcoming school year remain constraints on worker availability.

Business contacts have mixed expectations about their likely staffing levels in the months ahead. While more manufacturers said they anticipated staff increases than reductions, the reverse was true among service sector businesses—especially those in the information, transportation, and warehousing industries.

Wages have generally been mixed but mostly steady, on balance, with declines in leisure and hospitality, information, and wholesale trade, but increases in retail, real estate, and construction. Looking ahead, businesses generally expect wages to remain steady.


Business contacts reported that input costs accelerated slightly, rising at a moderate pace, while selling prices were mixed but, on balance, little changed. While contacts in the finance and professional and business service sectors reported declines in selling prices, retailers noted some escalation in prices for the first time since the outbreak began in March, reflecting widespread increases in input costs. Notably, businesses in the leisure and hospitality and retail and wholesale trade sectors were somewhat more inclined to raise prices in the months ahead.

Consumer Spending

Retailers generally reported that sales, though still down substantially from a year ago, picked up in July and into August, as restrictions were lifted further. However, some reported softening in revenues in mid-August. A number of retail contacts mentioned difficulties in getting supplies on time. Some have also noted that safety concerns and capacity restrictions have limited customer traffic.

New vehicle sales softened in the latest reporting period, following a fairly strong rebound in May and June, according to dealers in upstate New York. This recent pullback is partly attributed to low inventories and reduced incentives, though inventory levels are expected to improve in the fall. Sales of used vehicles have remained strong in recent weeks, with no significant inventory problems reported. Credit conditions were reported to be in good shape.

Manufacturing and Distribution

Manufacturing growth has slowed to a crawl in the latest reporting period, while activity in the wholesale trade and transportation and warehousing sectors has contracted modestly. A number of contacts in these sectors have noted difficulties and delays in getting a variety of inputs.

Looking ahead, manufacturers projected moderate growth in activity, while wholesalers and transportation and warehousing contacts anticipated little change. Businesses' overall capital spending plans remain depressed, though there have been scattered reports of companies investing in air filtration systems and other such equipment to enhance safety.


Service industry contacts generally reported that business activity has weakened since the last report and remains well below pre-pandemic levels. Information and professional and business services firms reported fairly widespread declines in activity, while those in leisure and hospitality and education and health reported flat-to-modestly-declining activity. The falloff in economic activity in central business districts, most notably Manhattan, has distressed local businesses that provide services to offices and workers, as well as firms throughout the metro area that service them. Contacts at both business service and consumer service firms generally anticipated little change in business activity the months ahead.

Tourism has remained depressed, with New York City hotels still running at well under half capacity, though weekend occupancies have increased. Hotels have also seen some business as homeless shelter alternatives. Ongoing restrictions on capacity, as well as trepidation among customers, have restrained business at restaurants, hotels, and other providers of consumer leisure and recreation services. A large expansion in outdoor dining has helped mitigate New York City's ongoing ban on indoor dining, though many restaurants have still seen sizable reductions in overall capacity.

Real Estate and Construction

Housing markets across the District have continued to diverge, as New York City's sales and rental markets weakened further, while markets elsewhere—particularly for single-family homes—have generally continued to show strength.

New York City's rental market has been particularly weak, with vacancy rates reaching multi-year highs in Manhattan and rents down roughly 10% from a year ago with increased landlord concessions. Rents declined more moderately in Brooklyn and Queens, and were little changed in the Bronx and across outlying portions of the metro area. The single-family rental market has been relatively strong across much of the District.

The residential sales market has been mixed. Sales of condos and co-ops in New York City have rebounded modestly from depressed spring levels, while prices have fallen as the number of listings has swelled. Elsewhere across the District, though, home prices have risen and bidding wars have been common, reflecting strong pent-up demand and a dearth of homes on the market, which has also restrained sales volume.

Commercial real estate markets have weakened further. Office availability rates continued to rise, while rents were flat or declining. Retail rents have also been flat to lower, as vacancy rates have risen to multi-year highs.

New construction activity has remained quite sluggish and well below year-earlier levels, though a few areas have seen a pickup in multifamily construction starts. Contacts in real estate and construction have become less optimistic, on balance, about the near term outlook.

Banking and Finance

Finance sector contacts generally noted continued weak business and have grown more pessimistic about the near term outlook. Small to medium-sized banks across the District reported higher demand for consumer loans, residential mortgages, and commercial mortgages, but flat demand for commercial and industrial loans and little change in refinancing activity. Bankers reported tightened credit standards across all loan categories except consumer loans, where standards were unchanged. Banks reported narrowing spreads across all loan categories and lower average deposit rates. Delinquency rates rose across all categories—particularly on residential mortgages—though banks continued to report more lenient policies for delinquent accounts across all categories.

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Timothy Speiss

Timothy Speiss is a Tax Partner in the Private Client Services Group and Vice President of EisnerAmper Wealth Planning LLC. He chairs our Asia Practice and is a member of the firm’s community service group, EisnerAmper Cares.

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