I recommend Greg David’s blog piece issued yesterday on New York City’s economy citing Eastern Consolidated’s recent Employment Alert. It is always good to review New York City’s statistics to understand how the city is doing. Our soon-to-be-issued Manhattan Economic Indicators carefully analyzes the fourth quarter data and provides commentary on what the statistics mean for the coming year.
I also recommend the New York Times recent article on how the International Monetary Fund is trimming its estimates for global growth. It covers a lot of bases on the state of the global economy.
The I.M.F. cut its growth forecasts for almost every region in the world. For Europe, the I.M.F. expects the region to contract by 0.1% instead of its earlier forecast of 1.4% growth, issued in September.
Its forecast for the United States did not change, but it did warn that American banks face exposure to the European debt crisis.
Much of the talk these days is about Europe and the current negotiations between Greece, its private lenders and the European Central Bank. Why does this news matter here in New York?
First, so little is moving in the market because of the uncertainty that a lack of resolution to this Greek debt has generated. The Greek government is due to pay 14.4 billion euros to bond holders in March, or it will default. Officials are trying to get the banks to agree to a 50% “haircut.” The ultimate agreement will have a significant impact on the banks and the ECB whether they agree to the cut or not. The impact from a default would be significant and right now the market believes that banks will agree to the 50% discount. But this effective write-down will hurt banks’ capital just as the last Basel III agreement is requiring banks to increase capital ratios. How this all will be resolved in the next two months is still anyone’s guess.
This is why Wall Street is quiet, why the office leasing market has stalled, why fewer large office buildings have traded and why financial service companies are shedding jobs: because the outlook in Europe is still so unclear.
It’s important to stay informed on this and many other economic-related topics as much beyond our five boroughs affects New York City’s economy.