I love being in New York, and not just for all the usual tourist things, fine as they are. It is more because I like the people and always seem to have the kind of interesting conversations I could not have anywhere else.
But New York, like the rest of the United States, has been battered by a downturn as deep as anything since the early 1980s. True, the city does not feel as dowdy and down and out as it did then, partly because there has been a huge investment in its infrastructure and partly because a generation of wealth-creation on a massive scale has given its businesses (and many of its people) resources that can be used to combat these tough times. The physical fabric of the place still glitters. But for everyone, with the possible exception of Goldman Sachs employees, this Independence Day weekend must rank as the least festive celebration for the US since the early 1980s, at least from an economic perspective. Consider this: since the recession first bit, 18 months ago, all the gains in employment made during the previous nine years have been wiped out, resulting in an unemployment rate of 9.5 per cent, the highest since August 1983.
The recession started in New York. Or at least it did in the sense that it was the unravelling of US financial practices that turned what was always going to be some sort of downturn into this really nasty one. So will the recession end in New York too? I think the answer is yes, but a yes with one disturbing qualification: the recovery may be pretty much a jobless one.
We are right now on the cusp. There were those dreadful employment figures last week which shook people here. But employment, and hence unemployment, lag behind the economy, reflecting decisions made three or more months ago. Through the first part of this year, things were dreadful. I was talking to a friend who runs a division of a large publisher: she said the monthly sales numbers were coming in 20 or 25 per cent, or more, below the previous year, and just when you couldn't believe it could get worse, they would come in 35 per cent down. But, and this is important, just the past couple of months, things seemed to have turned up. It wasn't great, but it was undoubtedly better.
Apparently, the same is happening in the shops. Three months ago, they were empty. No one was shopping at all. Voids were suddenly appearing in plush Mid-town. A luxury boutique would be there one day, and the next time you passed it, it would be boarded up. But now the shops seem pretty busy, particularly with foreigners, and some of the hotels are reporting full for this holiday weekend.
So, anecdotally, the New York economy seems to be mirroring Wall Street, which has had the best three months for nearly a decade. Of course, all share prices were doing was recouping the losses of the first quarter, and therefore, in absolute terms, prices remain depressed. Retail sales in Manhattan will not have recovered to the level of a year ago, but they will be up on the first quarter. Much the same seems to be happening in residential property. Prices of apartments are roughly 25 per cent down on a year ago, but they are now stable or falling only a little.
So the New York economy, or at least the Manhattan economy, seems to be on the turn. What about the US more generally? Here, you have to step back from the anecdotes and go to the data. This is mildly encouraging. The most-watched indicator in recent months has been the ISM manufacturing index, which reflects whether manufacturing companies expect to increase output. The balance is still negative, so there are still more firms contracting rather than expanding. The balance has been improving steadily for six months. If you plot that against the economy, as Capital Economics has done, you get a signal that growth should be resuming in the months ahead.
There are other positive signs. Car sales have been stronger, with Ford in particular seeing increases in output of several models. General Motors looks like coming out of Chapter 11 bankruptcy in the next few days. The Obama stimulus package should start to show through in increased spending on construction, among other things. It is perfectly plausible when we look back on this recession that we will see the US economy bottomed out some time around the middle of this year, and if that is overoptimistic, before the end of this year.
Unfortunately that says nothing about the recovery: its durability, its strength and, in particular, its ability to create jobs. What you see here in Manhattan is tremendous flexibility in the labour force. For example, some people are taking enforced extra holiday without pay. Others are being presented with an ultimatum: accept a 30 per cent pay cut or we will let you go. The self-employed are simply earning less and cutting costs accordingly. This flexibility should mean that though incomes fall, jobs are to some extent protected. But come the recovery, what will happen then?
I had not realised, until I looked more closely, quite how weak employment had been during the previous expansion. A result of that weakness as much as of the present pace of job losses, this is the first recession since the 1930s that has destroyed all the jobs created in the previous expansion. From the outside, the US economy seemed in recent years to be swinging along strongly, albeit in an unsustainable manner because it was dependent on borrowed money. But that growth was not creating many jobs and those that that were, we now know, could be swiftly destroyed.
That is a harsh lesson. I don't know what it tells us about job creation in the next expansion, except that it will probably be disappointing. But there is one powerful message from this, which is that there is no such thing as job security anymore and people will have to adapt to that. There are two responses people are making already. One is education; the other saving.
The extent to which the burden of recession has fallen on the less well-educated is striking. Overall, unemployment is 9.5 per cent. For people who have not graduated from high school, it is 15.5 per cent, up 6.6 percentage points on the year. For those who have a degree or higher, it is 4.7 per cent, up only 2.3 points.
So one powerful message is to improve education. The other is to save more. That is happening too. The more uncertain the job market, the more you need savings. I think the lack of savings in recent years will come to be seen as an aberration and Americans will go back more to the pattern of the 1950s and 1960s and save more.
People adapt. One of the unexpected thrills of being in New York is seeing the adaptability of people here. But then, as I say, I like the place.
Taking the High Line – lessons in community action from Manhattan
The director of one of New York's great art galleries told me I had to see the High Line. The retired Wall Street banker asked if I had heard about the High Line. And the author with whom I was having dinner said we really have to see the High Line, so let's skip the coffee and go.
The High Line has been open three weeks. It is a public park built on the tracks of a disused elevated old freight railway line running down lower Manhattan, a couple of blocks in from the East River. You start in the Meat Packing District, you climb up the steps on to the newly laid walkway – past designer benches, plants and amid designer-dressed people – for a mile and a half north through the old warehouses and new loft apartments. The next section is being completed now, and while there are doubts about the final section, it may eventually be possible to walk right up to 34th Street, 30 feet above New York.
So New York has a new park in a formerly gritty, but now fashionable, part of the city. It is a classic story of urban regeneration, well-executed, that brings benefits to the local economy and community. But more than that – and very New York – it is also a tale of community action and philanthropy. This was not a municipal project, though it eventually it got the blessing of Mayor Bloomberg and city funding. But, in the early years, it developed when two residents hit on the idea, created a "Friends of the High Line" support group, raised seed funding and drove the idea forward.
There are several lessons. One is that new public space, done well, can revitalise a whole area. Another is that things like this can't happen unless there is political support, and probably public money. But another, which seems to be the most powerful one, is that the best ideas often spring up spontaneously in communities. The former consensus was that the elevated tracks were an eyesore and should be pulled down. But two people had a vision and the city has an exciting new park. Community works.