• The rate of job losses in New York State eased through September 2003 and closely approximated national trends (see Chart 1).
  
  [D]
• New York City's job market continued to contract through September 2003. Although the rate of loss has eased, the City's job losses equal about 85 percent of total jobs lost in the state since the beginning of the recession (see Chart 2). Layoffs and reduced compensation in the securities industry have had a negative ripple effect across the area. However, according to the Securities Industries Association, Wall Street is poised for a turnaround with forecasts of increased compensation and hiring in 2004.¹
  
  [D]
• Rochester's greater relative concentration of jobs in the troubled manufacturing sector contributed to its weaker employment performance since the start of the recession. In Syracuse, which is somewhat less reliant on manufacturing jobs than Rochester, manufacturing cuts were offset by gains in the retail, trade, professional, business, education, and health services sectors.
• The Hudson Valley, including Rockland, Putnam, and Dutchess counties, has recorded job gains. These areas have added business and professional service jobs.
• The office vacancy rate in Midtown Manhattan was among the lowest rates of the nation's largest office markets. Rents, however, have decreased by 26 percent from peak levels(see Chart 3). The Downtown Manhattan office vacancy rate increased slightly to 10.9 percent in third quarter 2003, though it remains below the national average of 16.9 percent. Local government tax incentives have been used to attract tenants downtown and some office space is being converted for residential use, which could alleviate downward pressure on commercial rents.
  
  [D]
• Appreciation in home prices moderated across the state in third quarter 2003. Appreciation also slowed from double-digit gains in Nassau, Suffolk, and Dutchess counties. Affordability has weakened as income levels have failed to keep pace with rising property values and slightly higher mortgage rates.

• The average delinquency ratio reported by the state's large insured institutions, those with total assets over $10 billion, declined through the second quarter 2003 (see Chart 4). After peaking in the fourth quarter 2002, delinquency ratios have improved across most loan categories. The large bank C&I delinquency ratio has declined, but at 5.11 percent was almost double the rate in mid-2001.
  
  [D]
• Conditions for large bank C&I loans may be improving. The September 2003 Shared National Credit Review, jointly released by the federal banking agencies, indicated that credit quality of large syndicated loans has stabilized. Moreover, the Federal Reserve's October 2003 Senior Loan Officer Survey suggested that demand for C&I loans may be stabilizing as, for the second consecutive quarter, fewer large banks reported weaker C&I demand.
• The state's insured institutions with assets less than $10 billion also reported improved credit quality trends. Smaller institutions generally did not experience material credit quality weakening during this economic downturn, which was primarily centered within large bank C&I lending portfolios.

• NIMs among the state's insured institutions with less than $10 billion in assets contracted during the first half 2003 (see Chart 5). These institutions tend to be more reliant on net interest income than larger banks. A 45-year low in long-term interest rates reached in June 2003 contributed to a decline in asset yields, while deposit costs neared floors.
  
  [D]
• During the third quarter 2003, the yield curve steepened as long- and intermediate-term interest rates increased. While a steeper yield curve is traditionally positive for bank NIMs, the benefits tend to lag yield curve changes.
• New York's median ratio of long-term assets-to-average earning assets remains above the nation's (see Chart 6). A significant number of residential mortgage lenders and the popularity of long-term mortgage products in metropolitan areas of the Northeast contributed to the higher ratio. Insured institutions with high concentrations of long-term assets may face margin compression, asset depreciation, and extension in asset duration should long-term interest rates rise, thereby heightening the importance of proper interest rate risk management practices.
  
  [D]

¹ Frank Fernandez. Economic and Securities Industry Outlook. SIA Research Reports. Volume 1v, No. 9. October 6, 2003.