yellowlight-1-150x150-3529858As the Legislature weighs Governor Cuomo’s proposed budget for the fiscal year starting April 1, New York’s leading index of business cycle indicators is flashing bright yellow.

The Labor Department reports that its Index of Coincident Economic Indicators (ICEI) dropped in December at a 2.6 percent annual rate. It was the fourth consecutive month in which the Index has dropped.

Since the inception of the ICEI in 1970, such a four-month decline has never occurred outside a recession in New York.

The ICEI model combines and weights key economic indicators including private sector employment, the unemployment rate, average weekly hours of manufacturing workers and sales tax collections. As the Labor Department website cautions, the index “does not predict how the state’s economy may be performing in the future.” However, the Index is the closest thing we have to a general current conditions and trends report for the state. Here’s how it’s looked over the past year:


Measured on a year-to-year basis, the index level in December was up only 0.9 percent over December 2015.  That was the third weakest such growth in a non-recession period since 1970.

Over the past 47 years, when the index has performed like this, it has always pointed to a recession, as illustrated  below (with last few months circled in red).


So, does this means New York is headed into a recession now?  Not necessarily. In an increasingly tech-dominated economy less reliant on manufacturing employment, the factors used to produce the ICEI may have become less indicative of overall conditions. In addition, the ICEI as it now stands is based on preliminary labor market data that is regularly revised, including a big annual re-benchmarking of employment numbers now underway. When the adjusted numbers come out in March, they could result in some upward (or downward) adjustment to the ICEI.

On the other hand, a similar New York economic index maintained by the Federal Reserve Bank of New York has been paralleling the trend in the state’s Index. New York State ranked among the bottom 10 (slowest growing) states in the forward-looking State Leading Indexes report from the Philadelphia Federal Reserve, which is designed to predict a six-month growth rate in coincident indexes. The next State Leading Index report is due out in February.

At the very least, the indicators are a strong fiscal caution signal for the state government, although schools are predictably clamoring for much more than the $1 billion aid increase Cuomo has proposed, and the governor’s own “free” tuition promise (among the out-year program expansions) could be much more costly than he’s willing to admit.

On the revenue side, Cuomo’s proposal for a full three-year extension of the so-called millionaire tax is also risky. The investment-, business profit- and bonus-driven incomes of very highly paid people are notoriously volatile, dropping further and faster on a percentage basis than those of most taxpayers when economic conditions falter, especially when the stock market drops. Keeping the top rate higher, which has further boosted Albany’s already heavy dependency on the highest earning 1 percent, not only increases the risk of a revenue dive but threatens to hamper the state’s recovery from a recession, as happened in the early 1990s.

President Trump and congressional Republicans have advocated tax reform plans that would eliminate or curtail the federal deductibility of state and local income taxes, which would substantially raise New York’s net tax price relative to other states with low or no such taxes.

Last but least, another big state budgetary risk factor is the impact of Congress’ coming reworking of Obamacare and likely changes to the Medicaid program, which could cost the state billions of dollars.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

You may also like

What a New Jersey “Millionaire Tax” Really Means for New York

Hoping to jumpstart a bandwagon effect, advocates of soak-the-rich tax hike proposals in New York State are hyping a tax increase in New Jersey as evidence that New York needs to do the same. Read More

New York State Has Dug Itself Into Its Deepest Hole On Record

"State's Financial Hole Deepens" is the headline on Comptroller Thomas DiNapoli's press release accompanying the August cash flow report. Read More

State Forces School Districts To Give Raises—And Layoffs

Months of bad decisions and inaction by New York state officials have put school districts in the awkward position of having to give pay raises to most teachers while laying off others. Read More

Even After Aid Cut, New York Will Spend Most on Education

If New York was a country in 2016—the most recent year for global education spending data—it would have boasted the highest per pupil expenditure in the world, even after subtracting 20 percent of state aid. Read More

The CDC’s Nursing Home Death Count Is Even Less Complete Than New York’s

The result is that a major public health disaster affecting New York's nursing home residents is not being accurately documented by either of the agencies responsible for protecting them – because state officials are refusing to share the true numbers, and federal officials haven't yet asked for them. Read More

New Yorkers Paid Less in Federal Taxes in First Year of New Federal Tax Law

Federal income taxes paid by New Yorkers decreased by nearly $3.4 billion in 2018, the first year of the new federal Tax Cuts and Jobs Act (TCJA), according to newly released Internal Revenue Service data. Read More

The Health Department Stalls a FOIL Request for the Full COVID Death Toll in Nursing Homes

The state Health Department is offering a new explanation for why it won’t provide the full death toll of coronavirus in nursing homes: it can’t find the records. Read More

The DOJ’s Probe of Coronavirus in Nursing Homes Appears to Leave Out Most Victims

The U.S. Justice Department's newly announced inquiry into coronavirus in New York's nursing homes comes with a crucial caveat: It will look only at government-operated facilities, which represent a small fraction of the state's nursing-home industry. Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.