The IBO expects the New York City unemployment rate to average a very low 4.0% in 2020 and 4.4% in 2021.

NEW YORK CITY—The New York City Independent Budget Office believes that the city's ongoing economic expansion will continue in coming years, but not at the recent breakneck pace.

The IBO recently released a 24-page fiscal outlook report that forecasts slower economic and job growth in the years ahead, but continued increases in tax revenue.

“IBO forecasts a continued deceleration in city employment growth over the next two years, more or less in parallel with the projected slowdown in the national economy,” the report stated. “Because health care and social assistance has historically been resilient in the face of cyclical shocks, we expect the sector will continue to add jobs throughout 2019 and 2020, providing a cushion that will prevent overall city employment growth from slowing even more sharply.”

The agency adds that job growth is expected to pick up once again in 2021, but the rate of growth will remain subdued relative to recent job growth numbers.

The city's record low unemployment rate of 4.0% registered in October, will continue to fall at least in the short term. The IBO says that current job momentum will cause the unemployment rate to drop further and bottom out at 3.6% by mid-year 2019 and average 3.7% for the full 2019 calendar year.

“With much slower growth projected to start late in 2019 and run through 2020, this trend will be reversed, the IBO stated in the report. “IBO expects the unemployment rate to average 4.0% in 2020 and 4.4% in 2021, both still low by historic New York City standards.”

A big plus for the New York City economy will be taxable real estate sales, which are predicted to grow 18% in 2018 to approximately $113 billion. That increase partly offset a nearly 30% decline in real dollar sales over the previous two years. Commercial sales have been volatile over the last few years, falling from an inflation-adjusted $83.9 billion in 2015 to $38.6 billion in 2017. Commercial sales were expected to rebound to almost $61 billion in 2018.

Commercial sales in 2018 were bolstered by a number of large corporate transactions, including the $1.8-billion in sales stemming from the purchase of Westfield Corp. by Unibail-Rodamco and the $1.4-billion in sales from the Time Warner-AT&T merger.

The IBO expects commercial sales to fall 12% in 2019 to approximately $54 billion.

Residential sales in 2018 are expected to fall 8% to $52 billion, which will break a record of six-year string of rising inflation-adjusted residential sales in the city. A key factor in the sales decline was a sharp drop in activity in Manhattan (19%), particularly in the $1 million to $10 million price category.

“In IBO's forecast, residential sales growth will not keep pace with inflation in 2019, and overall (residential plus commercial) real estate sales will fall by 7% to an inflation-adjusted $105 billion. Over the remainder of the forecast period overall sales are projected to rise at roughly the rate of inflation, eking out a real dollar increase of just $1 billion from 2019 through 2022,” the report stated.

IBO's forecast for tax revenue in the current fiscal year (2019) is $60.8 billion, a gain of 3.2% ($1.9 billion) from 2018. It should be noted that the city's tax revenue total in 2018 was 8.4% higher than the previous year. The agency forecasts large increases in 2019 revenue from the real property, general sales, general corporation and real property transfer taxes, with together will total $2.6 billion. Large declines in revenue from the personal income tax and the mortgage recording tax are also forecast for this fiscal year.

The agency expects total tax revenue growth will be faster in 2020 and subsequent years, but will still be modest compared with growth earlier in the post 2009 expansion. For 2020, IBO forecasts $63.2 billion in total tax revenue, 3.8% ($2.3 billion) greater than the 2019 forecast. It also projects that tax revenue will rise at an average rate of 3.7% annually over the final two years of the financial plan period and total $67.9 billion in 2022.