Prepared by Richard Plehn, Lisa Ann Pollakowski, Vanessa Ollarves.
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THE U.S. AND NEW YORK CITY ECONOMIC OVERVIEW
National Trends
The U.S. economy entered 2026 with modest momentum but rising strain beneath the surface. Real GDP grew at a 2.0 percent annual rate in the first quarter, a rebound from late 2025, supported by business investment, exports, and a recovery in government spending.
That headline strength masked a less balanced expansion. Consumer spending, the economy’s main engine, slowed noticeably, while capital outlays tied to artificial intelligence and data infrastructure carried a disproportionate share of growth.
Inflation reaccelerated, with the Federal Reserve’s preferred measure running near 3.5 percent in March and higher on a quarterly basis, driven in part by energy prices. This has kept policymakers cautious and interest rates elevated.
The labor market remained resilient, though hiring showed signs of cooling.
Overall, the economy appeared durable but uneven, with growth increasingly reliant on investment while households faced mounting pressure. Risks tilted toward slower activity if inflation persists or external shocks intensify.
New York City Trends
New York City’s economy at the end of the first quarter of 2026 presented a familiar mix of resilience and imbalance. Tax revenues and wage growth held up better than expected, supported in part by strong earnings in the securities industry and steady gains in high-income sectors.
Beneath that surface, the labor market showed limited breadth. Job creation remained concentrated in lower-wage fields such as health care and social assistance, while many higher-paying industries, including finance and professional services, saw little or no employment growth. Overall employment gains slowed sharply compared with prior years.
Commercial real estate offered a brighter note. Manhattan office leasing strengthened and vacancy rates edged lower, aided by conversions and renewed demand for top-tier space.
At the same time, rising rents and a persistent affordability crisis continued to weigh on households and public finances.
The result was an economy still expanding, but unevenly, with growth dependent on a narrow set of sectors and ongoing fiscal pressures. The durability of that balance remains uncertain.
