When the coronavirus outbreak first hit U.S. soil, New York City was quick to be dubbed its initial epicenter. And early on, nonessential businesses in the city were forced to shutter temporarily in an effort to curb the spread.
Nonessential construction was also put on hold when the health crisis was at its worst. And now, the industry is still struggling to get back into the swing of things.
Though construction was one of the first industries to get the green light to resume work following New York's string of restrictions, New York City is still down 25,000 construction jobs compared to the number available before the pandemic began. And if things don't pick up soon, real estate investors could feel the pain.
New York City needs a revival
New York City has struggled to overcome the impact of the pandemic. The city's jobless rate is still higher than the national average -- almost twice as high, in fact. And certain industries, such as hospitality, are still struggling to recover from the events of the past year.
While the city added 41,300 jobs in May, the biggest gains in that arena came in restaurants and the arts. All told, New York City's available jobs are sitting at 510,000 below pre-pandemic totals. And on a percentage basis, only Los Angeles and San Francisco have regained fewer jobs than New York City.
But still, the loss of construction jobs is especially brutal for a city that's attempting to move past the blow the pandemic dealt it. Unlike notoriously low-paying restaurant jobs, construction job wages are notably competitive, especially given the fact that they don't tend to require advanced degrees. And the longer it takes to restore those jobs, the longer the city's economic recovery will take.
Furthermore, if the city is down construction jobs, it also means it can't move forward with building projects that were put on hold at the start of the pandemic. That, too, could hurt the city's recovery, not to mention the investors who stand to benefit from those projects.
A big reason construction jobs are lagging in New York City is that projects requiring federal funding are largely on hold as the Biden administration attempts to move forward with an infrastructure plan. And what's unfortunate is that before the pandemic, construction in the city was booming.
New York City's construction industry added jobs for eight consecutive years through 2019, making it the fastest-growing industry during that time. Construction spending also grew an average of 20% in that period, reaching a record $61 billion in 2019.
But then the pandemic struck, and spending -- which is expected to remain flat for the next two years as construction projects hang in limbo -- declined by $5 billion. In fact, only two new projects of more than 300,000 square feet applied for permits during the first three months of 2021. In comparison, 405 comparable permits were applied for last year.
While spending, as well as jobs, should increase as federal funding comes through, right now, New York City's construction industry is in a bit of a holding pattern. Real estate investors may need to sit tight and wait things out -- and hope that the projects they're involved in will eventually get off the ground.