New York’s Economy: An Update on the Ups and Downs

New York’s Economy: An Update on the Ups and Downs

Last updated on July 17th, 2023

Tax revenues are slowing. Spending is up.

Talk of an economic downturn continues, with a lot of speculation about when, how intense, and how long. What does all of this mean? Let’s take a look.

Starting with the NY State Budget

In May, New York State Comptroller Thomas DiNapoli released an Enacted Budget Report for FY 2023-2024. Spending is increasing by 3%. Much of the increase represents recurring expenses (i.e., full funding of school Foundation Aid, mental health service investments, and increased funding for health care and human services workers). There’s also temporary budget increases for emergency rental assistance and the MTA.

While the state’s reserve funds of $6.26 billion will help, there could be challenges ahead due to the new recurring costs occurring at the same time Federal Covid aid ends and a possible economic downturn. To address a budget gap, tax increases and/or spending cuts may need to be on the agenda for future budget discussions.

Turning to Tax Revenues

For state fiscal year (SFY) 2022-2023, New York’s tax revenue was $2.9 billion more than expected, but $9.5 billion or 7.8% less than the prior year largely due to a decrease in personal income tax revenue.  For SFY 2023-2024, revenues are projected to decrease for the second year in a row by 3.9%, as temporary federal aid is depleted and tax collections decline.

While personal income tax revenues are down, sales revenues are up but slowing. In the first quarter of 2023, sales revenues increased 7.1% over the same period in 2022, but slowed as the quarter progressed (from 9.2% in January to .03% in March).

By May, state sales tax collections increased 1.1% over the prior year, making it the third consecutive month where growth was lower than 2%, which can make it tougher to maintain fiscal balance, especially since much of the increase was from NYC collections (in fact, 47 out of 57 counties experienced a decline). Click here to see Monthly Local Sales Tax Collections by County and Region.


New York’s unemployment rate dropped from 4.1% to 3.9% from May of 2022 through May of 2023, with a steady decrease from March through May of 2023. The state’s labor force grew from 9,633,295 in May of 2022 to 9,703,853 in May of 2023, which includes steady growth continuing March through May of 2023. This positive momentum echoes what is happening nationally. According to, “Morgan Stanley seems to agree, telling clients that the May jobs report ‘continues to point to a soft landing for the economy,’ a Fed term for raising rates without triggering a recession.”


As reported by, “Inflation slowed in May to the lowest rate in two years (4%), largely due to  declining energy (i.e., gas and electricity) prices, the U.S. Bureau of Labor Statistics said. Still, household budget items are up and there may be more inflationary pressure with more infrastructure projects getting underway.

Interest Rates

According to, between May of 2022 and May of 2023, Federal Reserve interest rates increased from .75% – 1% to 5% – 5.25%. In other words, it’s more expensive to borrow money. The hope is periodic increases will help cool down inflation rather than lead us into a recession.


On June 8, RSM reported, “We estimate a 75% probability of an economic downturn over the next 12 months. While that is significant, it also implies a 25% chance of a soft landing for the economy.”

Credit Rating

As shared on, credit rating downgrades aren’t expected, but upgrades may slow down: “In the first quarter of 2023, Moody’s upgraded three times as many U.S. public finance credits than it downgraded… Local governments have seen similar upgrade momentum, even in cities like New York and Chicago that have projected budget deficits. Many have used unprecedented federal fiscal relief and better-than-expected tax collections to boost their reserves, and will likely benefit from the relative stability of property tax revenues.”

What Next?

For a while now, NY State Comptroller DiNapoli has regularly repeated the same message: “Being prepared for a slowdown is especially important in this uncertain economy.” If you agree and are looking for next steps, the Academy for New York State’s Local Officials is offering an upcoming webinar entitled “Multiyear Financial Planning” on July 19. It’s designed to “help local governments create an effective multiyear financial planning process that helps identify and manage potential fiscal difficulties before crises emerge.” The webinar discussion will include making good long-term revenue and expenditure projections; measuring benefits from proposed local actions; and documenting projections. Click here to register. 

While you’re focusing on staying up to speed on all of the factors impacting your municipality’s finances, you can trust RBT CPAs professionals to hand your accounting, tax, audit, and advisory service needs. RBT CPAs is here to help you succeed — give us a call.


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