An Old Town's New Trick: New York Creates More Jobs

When is a high unemployment rate not a concern? When it's a sign of a growing economy.

At least that's how economists are explaining why they are not concerned about New York's 8.7 percent unemployment rate - almost double the national average, and one of the nation's highest.

Instead, the prospect of opportunity - the city created 60,000 new jobs last year - is enticing workers back from other states or getting them out knocking on doors. One sign of this: The city's total labor pool increased by 3 percent last year. "This usually happens in young cities, not mature ones," says Rae Rosen, a senior economist for the Federal Reserve Bank of New York. "People are flooding back."

The New York example might be useful for other older cities that are also lagging behind the national economy. For example, Baltimore (8.2 percent unemployment) and the Washington (7.8 percent) are still losing jobs. Other large cities with relatively high unemployment rates include Los Angeles (6.8 percent) and Detroit (6.5 percent). However, both cities have started to add new jobs.

The New York example shows how an older city can rebound. Much of the bounce has come from the service sector - advertising and law firms, accountants and management consultants. Yet there have also been governmental actions that have spurred businesses.

The New York model

In his State of the City speech last week, Mayor Rudolph Giuliani said he would continue his efforts to restructure New York's economy by revitalizing the private sector. He plans to do this by continuing to make the city a safer place to work and live, lowering taxes on business, and continuing to hype the city as being the "capital of the world."

Another Giuliani initiative is moving people on welfare to workfare. The welfare rolls have dropped by nearly 300,000 people. Economists believe some of these people have rejoined the work force. Still, many other New Yorkers, who have been discouraged, are now back pounding the pavement.

"The economy is purring along so the unemployed have become optimistic that opportunities are available," says John Wieting, the regional commissioner of the Bureau of Labor Statistics.

For example, this past March when the newly renovated Roosevelt Hotel advertised for workers, some 4,000 hopefuls lined up to apply for 700 jobs. "Some of the people had been out of work for some time," recalls Jim Heineman, the general manager. "But, that didn't matter, we were looking for people with genuine smiles."

Those who are returning are finding a relatively buoyant job market. Indeed, the want ads are filled with job offers for computer operators, management consultants, and retail positions.

According to the Conference Board, a New York business research organization, the level of help-wanted advertising shows that new jobs are being created here at a faster rate than the national average. "It's a market that has returned to health," says Ken Goldstein, a labor economist with the Conference Board.

In addition, new commercial and residential construction has increased the demand for welders, plumbers, concrete workers, and other tradesmen. Even manufacturing, in decline for years, has stabilized. "We're still losing jobs but the pace has slowed," says Mr. Wieting.

Where the job growth is

Although Wall Street is roaring, the big brokerage houses, trying to avoid the boom-bust cycle, have not increased their employment in a significant way. "It's not like the boom years in the 1980s, it's more of an income or payroll effect than an employment effect," says Wieting.

Insurance, too, is lagging and commercial banking in New York is still contracting.

Instead, much of the job growth is in business and consumer services, and retail trade. There are help-wanted ads, for example, at many Starbucks coffee shops, which are paying as much as $8 per hour.

Some economists, such as Ms. Rosen, are concerned that the city might be seeing a mismatch in jobs available and the skills of those looking. "We have a disproportionate number of people with postgraduate degrees and a disproportionate without high school diplomas," she says. Labor Department statistics show that in 1996, unemployment among teens, blacks, and Hispanics remained far higher than the national average.

Despite these problems, Rosen believes the economic evidence shows the New York economy is bouncing back. "The recession is always longer and deeper here. The economy marches to the tune of a very different drummer." This time, however, the tune is an upbeat one.