Everyone knows New York City's economy has boomed under Mayor Giuliani, but the details are still a shock: Private-sector employment rocketed upward by more than 430,000 jobs over nearly eight years—the longest expansion ever. Gotham's economy now employs 3.72 million people—more than ever before, except for a brief moment at the end of the 1960s. The percentage of New Yorkers who are employed is at an all-time high, as well.
This unprecedented expansion presents New York with an historic opportunity to create a dynamic new 21st-century economy, with significantly more jobs than the city has ever seen. But old impediments could easily prevent the new economy from achieving lift-off.
Gotham remains the nation's most heavily taxed, heavily regulated city, with a chronic shortage of office and residential space. As a result, every major expansion for decades has collapsed into a steep recession—wiping out the gains and returning the city to Square One.
Remember how bad things were in 1994? The 1989-â€™92 recession had wiped out 325,000 private-sector jobs—a tenth of New York's workforce—and the city's optimism died.
The city and state governments, predictably, made things worse. In 1990, with Wall Street's decline causing shortfalls in tax collections, the Dinkins administration enacted the highest single-year tax hike in city history—$800 million in new taxes. In 1991 alone, the year most of the new taxes went into effect, New York lost an astonishing 192,000 jobs. No U.S. city had ever hemorrhaged so much employment in so short a time.
So what caused New York's dramatic, and wholly unexpected, economic turnaround?
Obviously, the â€˜90s Wall Street boom played a leading role. Over the decade, investment banks generated 45,000 new jobs in the city—about half of what they'd produced in the previous decade—and were indirectly responsible for 90,000 more.
But '90s New York also created hundreds of thousands of jobs that have little to do with Wall Street. Here a key factor—perhaps the key factor—in sparking economic growth has been the city's success in controlling crime.
Taking office in 1994, Mayor Giuliani was keenly aware that government's inability to ensure order and safety had imposed a heavy toll on New York businesses. One 1989 study found that 83 percent of the city's small businesses had been victimized by serious crime over the previous three years.
Then the law-enforcement innovations of Giuliani and top cop William Bratton completely reshaped the city's economic fortunes. Most visibly, the crime drop brought the tourists roaring back. In a 1992 Zagat survey, crime-wary travelers placed New York dead last among major U.S. cities as a preferred destination. But in the â€˜99 survey, New York—now the safest big city in the nation—ranked No. 1.
Times Square, just a few years ago the embodiment of urban disorder, is a perfect symbol for the tourism turnaround. With crime down 57 percent in the area, employment has shot up 25 percent.
But the impact may be even greater outside Manhattan's main business districts. "The foundation of the city's economic revival has been the restoration of a sense of order in neighborhoods," says Kenneth Adams, president of the Brooklyn Chamber of Commerce. From mid-1998 to mid-2000, the city's four outer boroughs contributed about 45 percent of all new job growth in the city.
Take downtown Brooklyn. In the late '80s, high crime rates had mugged the area's reputation. When recession hit, major development ground to a halt. But crime in the neighborhood is down 55 percent since 1994. And the borough's major builder, Forest City Ratner, has opened or has put under construction about 700,000 square feet of retail space in the area since 1998.
New York's main business districts have experienced their own rebirths, led by a striking boom in technology jobs that sprang from the city's indigenous strength as a center of culture and commerce.
As the number of home computer users started to grow in the early â€˜90s, New York began to attract software firms looking to tap into the city's arts and entertainment industries to provide content for CD-ROMs. By â€˜95, such new media companies employed an impressive 27,000 people in Gotham; by the end of â€˜99, nearly 140,000.
"When I used to tell people back in the 1980s that we were based in New York, they would ask me why," says Gerald Cohen, chief executive of Information Builders, the city's largest software company. Now, maintains Cohen, "you have to be in New York to be in this business."
The current shakeout among Silicon Alley Internet firms is unlikely to change this new reality. "New York now has so many experienced technology workers that, as new technologies emerge, people will form new companies here," Cohen predicts.
Silicon Alley, the booming neighborhoods and low crime are vital assets for New York's future growth. But will the next mayor do what's needed to preserve these gains?