The Outlook for New York
30th October 2012
Robert Kling, a Real Economist, is not optimistic.
The loss of key transportation infrastructure raises the cost of imports (food, construction materials, etc.), even as exports (financial services) go down. This drives down equilibrium real wages in many secondary industries (food service, for example), but the adjustment process is not at all smooth. Many small businesses fail and many jobs are lost.
In order to remain ongoing concerns, many financial services firms will “temporarily” relocate to suburban offices and to virtual offices. These “temporary” adaptations will become so well entrenched that many of these businesses will not return to Manhattan.