When Wall Street crashed back in 2009, dire commentators predicted the imminent decline of New York. I was far more optimistic about the city’s future, writing in The Atlantic, “the financial crisis may ultimately help New York by reenergizing its creative economy.” I noted that New York is a global city with a diverse economy. While finance makes up a large share of the city’s wage bill and tax revenues, a sizable chunk also comes from media and entertainment, arts, culture, music, fashion and design.
But what actually surprised me a bit was the rise of New York City's tech industry in recent years – part of a broader shift to urban tech. New evidence from economist Michael Mandel backs this up. New York City’s share of private employment across America, according to Mandel, is at its highest in more than two decades. And driving this recovery has been the city's burgeoning high-tech industry, including information and media.
Mandel’s report, prepared for the Bloomberg Technology Summit held in New York at the end of September, focuses on the growth in what he calls New York’s unique “tech/information sector.” This includes companies that span the traditional high-tech industries as well as information and media corporations. This list encompasses start-ups like Gilt Group and Etsy, East Coast offices of tech companies like Google and Facebook, and major news/information corporations such as Time Warner, Thomson Reuters, and the New York Times Company. As Mandel writes:
Without these pillars of the information economy — serving as clients, investors, sources of talent and ideas, and major employers of tech workers in their own right — the New York City tech boom could not have even begun.
You could argue this is an overly broad definition. Should media and publishing companies really be lumped in with high-tech firms? But of course the media business is grappling with the incredible disruption brought on by the impact of digital technology. The frenetic pace of change has generated huge numbers of innovative tech jobs in traditional media corporations, with high demand for online skills and developers in even the most traditional newsrooms.
The graph to the right, from Mandel’s report, shows New York’s tech/information sector pulling away from the rest of the country, especially after 2009.
Finance and real estate remain the largest sector of the New York economy, generating $91.3 billion in wages in 2012, a third of the city’s total. But the tech industry has pulled into second place, outpacing private health care and generating $29.9 billion, or 11 percent of the city’s total wages. Since 2007, the tech sector has grown 11 percent, adding 26,000 jobs and $5.8 billion in wages, while finance sector wages have declined by $13.4 billion. In fact, the report estimates – and this is just a conservative estimate – that about a third of all private sector job growth since 2007 has come as a result of this tech/info sector boom and its spillover effects.
Mandel’s research provides compelling evidence that New York's tech boom has been a quintessentially urban phenomenon. The city itself, he finds, saw an 11 percent gain in tech employment, compared to a 6.9 percent decline in the suburbs, as the graph below from Mandel's shows. (As I wrote about this summer on Cities, New York City — a place which had very little venture investment a couple of decades ago — hauls in nearly $2.5 billion a year in venture capital funding, most of it in lower Manhattan neighborhoods spanning the Flatiron District, the Meat Packing District, Soho, the Village, and Tribeca. All told, urban zip codes attracted more than three quarters of the venture capital flowing into the greater New York region).
Much of N.Y.'s established tech/information industry is centered in Manhattan, which accounts for 88 percent of the metro area’s tech jobs. But tech has surged in Brooklyn. King’s County registered 21 percent growth in the tech-information sector according to Mandel’s figures (see the table below), the second fastest rate of growth of any county in the nation save for an Francisco. Manhattan was ninth, with nearly 10 percent growth.
New York is obviously a large global city and has especially served as a center for U.S. and global media. But this tech surge in recent years also has to do with the increased preference for urban living and the improvement of New York itself as an attractive place to live and work.
As part of The Atlantic's CityLab summit last week, I chatted with Robert K. Steel, New York's deputy mayor for economic development. He spoke about the borough's improved public safety, new real estate development in Dumbo, good transportation connectivity and high quality of life. He explained, "Now Brooklyn is the place where lots of the new economy companies want to be."
Fred Wilson, managing partner of Union Square Ventures and Flatiron Partners, made a similar point in our conversation last week as part of NYU’s Urbanization Project. Start-ups don’t need tax incentives, he noted. Business follows talent, and talent, he added, is drawn to a great place to work and a great place to live. Like Steel, he highlighted the role of public safety, lower crime and improved quality of place in creating the environment for attracting top tech talent. "This is more art than science," he said. And "artists, for the most part, congregate in cities. It is a social kind of thing that requires being able to hang out with people in coffee shops and bars. It is not this isolated scientist in a lab kind of thing."
Manhattan remains the city and region’s commercial and business hub, benefiting from its office buildings, converted industrial and loft spaces, and, most of all, its centrality in the region’s transit system. But Brooklyn is drawing lots and lots of tech talent, providing wide appeal for singles and families alike.
New York's unique blend of tech and media, along with its mass of talent from across disciplines, position it well in today's emerging urban tech economy, where success comes from more than just pure engineering. As Mandel pithily pointed out, in the new economy, "Silicon Alley" is more than just a cute nickname.