Although the New York economy is still growing, it is clear that it has lost considerable momentum in the wake of the sub-prime mortgage market meltdown.

This observation is based on a number of recent developments.

(1) Employment growth in the Big Apple has slowed from 1.7% in August 2007 to 0.5% in May 2008, while the unemployment rate in the city is over 5%.

(2) The New York Fed Index of Coincident Economic Indicators has gradually slowed over the past 12 months to sit at 3.5% year over year, a three-and-a-half-year low. The index did, however, increase in May 2008.

(3) According to the Conference Board, New York's online advertised job vacancies, have dropped from 312,700 to 265,000 postings, a decline of 15% over the past year.

From an industrial perspective, the most significant job losses over the past year have occurred in manufacturing (-4.1% year over year) and financial services (-0.9%).

However, the rate of job growth has also slowed significantly in professional services and leisure and hospitality services.

While employment growth and tightening credit conditions have weakened housing demand in New York significantly, the metro area has not suffered to the extent as many other cities in the U.S.

According to the most recent S&P/ Case Shiller Home Price Indices report,while house prices for the country as a whole have fallen by 13.4%, they are down by a more modest 8.4% in New York.

The weakness in financial services and professional services has, according to Colliers International, contributed to a sharp increase in commercial vacancy rates since the beginning of the year.

This softening in demand for existing office space, along with a significant increase in new supply, is likely to push New York office vacancy rates steadily higher well into 2009 and possibly beyond.

In the end, New York's economic health is likely to be challenged well into 2009 by the recent layoffs at Bear Stearns and Lehman Brothers and by the prospect of even more job losses in the financial sector and in those firms that support it.