New York’s economy is the worst in America

(CNN Business) — The United States economy is returning to normal. But the recovery remains uneven and some states are falling behind in the race to return to pre-pandemic strength, especially New York.

Although the economies of several states have already fully recovered, and are even outpacing their pre-covid levels of economic activity, New York is by far the worst performing state, according to the Return to Normal Index created by CNN Business and Moody’s Analytics.

The index shows that the US economy as a whole returned to normal by 93% on June 18. But New York was only at 83%, leaving it with the furthest to return to its pre-covid shape.

New York is not the only state below the 90% mark, although it is at the bottom of the list.

How bad is New York’s performance compared to the other 49 states?

In 2019, before covid-19 hit, New York had the third strongest economy among the US states, behind only Texas and California. The state’s gross domestic product, the broadest measure of economic activity, was nearly $ 1.8 trillion, on par with Italy’s GDP. More than $ 1 trillion of that came from economic activity in New York City. The state contributed more than 8% to the total GDP of the United States that year.

In 2020, New York’s GDP fell to $ 1.7 trillion. That may not sound like a big difference, but we’re talking trillions of dollars here. When states that are economic powerhouses underperform, it is not good for the recovery of the entire nation.

New York’s GDP contracted by 5.9% last year, a decline greater than the total for the United States GDP it suffered, placing it 47th out of 50 states on economic growth.

The employment situation looks even worse. With 7.8% unemployment, New York has one of the highest unemployment rates in the country. Unemployment in the United States as a whole stood at 6.1% in April and fell to 5.8% in May.

Why is New York lagging behind?

The most important factor is the extent of the economic destruction that New York City suffered during the height of the pandemic, when it was the epicenter of the outbreak. This led to stricter lockdown protocols than in many other parts of the country.

On top of that, New York City’s economy relies heavily on service-driven industries. But the offices are still almost empty and only a few workers commute. That’s bad news for coffee shops, dry cleaners, and lunch spots that support the office infrastructure.

“More specific to New York City is also the business travel and tourism that just stopped,” said Matt Colyer, an economist at Moody’s Analytics. It is unclear when those travelers will return.

And the challenges don’t end there: One of the components of the Return to Normal Index that slows New York the most is the shortage of restaurant goers, according to Colyer. The state is still 40% below its pre-pandemic diner volume, while the nation as a whole is down just 13%.

“I think with New York lifting its restrictions last week, I would expect some of that gap to close,” Colyer told CNN Business.

The state has been more cautious than most in lifting restrictions to prevent further outbreaks of the virus. But the economic effect of the scars will be a factor for a while.

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