The economic outlook for NYC in ‘25? Trump-driven uncertainty is the word.

What’s the economic outlook for New York City in 2025?

In a word, "uncertain," according to Lauren Melodia, deputy director of economic and fiscal policies at The New School’s Center for New York City Affairs.

There’s less talk of recession, the city’s made big strides in employment since the pandemic and more progress could follow if the Federal Reserve drops interest rates, said Melodia, co-author of the upcoming report “New York City’s 2025 Economic & Budget Outlook: Leaning into Local in the Face of Inequality and Uncertainty.”

But she ticks off a long list of looming threats that could affect the pocketbooks of New Yorkers. She said the reelection of Donald Trump, combined with Republican control of Congress, could spell the end of untold local health care and education jobs as well as force cuts in social safety net spending, exacerbating poverty and income inequality.

“There's a lot of uncertainty,” Melodia said. “Not just with the recent election, but also global conflict and crises, climate change.”

There's a lot of uncertainty. Not just with the recent election, but also global conflict and crises, climate change.

Lauren Melodia, deputy director of economic and fiscal policies at The New School’s Center for New York City Affairs

Some of the upside: The city’s economy has been growing faster than the national economy in the last year, but it has plenty of catching up to do. Compared to the pre-pandemic period, the U.S. economy now boasts 4.4% more nonfarm payroll jobs, while New York City has grown by just 1.1%, according to the report.

Lower interest rates could spur more growth, Melodia said. But any potential gains could be offset by another Trump policy promise – the “mass deportation” of undocumented New Yorkers. She said those immigrants serve a critical role in the local workforce and economy, across a multitude of sectors, through their collective purchasing power.

Among the most far-reaching proposals from the Trump administration is the threat to shut down the U.S. Department of Education. According to the report, $2.5 billion in federal funding to support public K-12 and early care programs in New York City would be at risk “if the new administration were successful in radically reducing the role of the federal government in supporting local education.”

And that’s just one federal agency. Trump appointed Elon Musk, the world’s richest person, and Vivek Ramaswamy, founder of a biotech company, to run an advisory commission tasked with cutting federal spending. The pair say they hope to cut $2 trillion in spending by 2026.

Separately, the city’s Independent Budget Office also found uncertainty in the coming year, writing in December, “NYC’s economy has been stabilizing post-pandemic, although the current trajectory does not yet factor in … federal risks,” including changes in federal tariff, immigration, government restructuring and tax policies.

But Melodia’s report argues that local officials have the power to shape what’s to come, notwithstanding the uncertainty brought by the new administration.

“Rather than wait to see what transpires in Washington or point fingers, New York’s policymakers and advocates need to work together to use local policy to confront real challenges,” the report states.

Gothamist met with Melodia to discuss the new report and the city’s economic future. What follows is a transcript of the conversation. It’s been lightly edited for length and clarity.

The Trump administration has indicated it’s quite serious about mass deportations, including of New York City’s undocumented immigrant population. In what ways could mass deportations affect the city’s economy?

The idea has already had an impact on the city's economy. I mean, it's already stoked fear amongst immigrant households and is having a chilling effect. There are an estimated 500,000 undocumented residents in New York City. That's probably an underestimate of the amount of people it's going to impact because there's tons of people who live in households with mixed status.

You're going to have fewer people out in the economy spending money. Likely people holding back from work, certainly if there is more of a concerted [deportation] effort. Once we know more about what this plan is going to look like, I think it is absolutely going to have an impact on the entire city economy, because there are a lot of people who are going to stop working because they're concerned about getting deported.

According to our analysis, some of the industries where we see a high percentage of undocumented workers include accommodations and food services. Other services, which could include anything from like nail salons, laundromats. Construction jobs is another key area where we see a lot of undocumented people working, and the retail sector. All of those could have a direct impact from a deportation plan, and then it's going to have this spillover effect into the economy.

Another area where we will likely see impact of a mass deportation plan is small businesses. There are so many small business owners who are immigrants themselves who are not just workers, but business owners.  I think that that's another area that we might see an impact of people feeling really vulnerable and either shutting down businesses or changing the types of goods and services they're selling.

You say Republican majorities in Congress and the incoming Trump administration put at risk federal funding that New York relies on. Could you break that down? What areas of the city’s economy are most threatened by cuts?

The New York City Office of the Comptroller estimates that there's $100 billion annually flowing from the federal government to the city. Only a small portion of that goes directly into the city budget to support the services that the city maintains and public infrastructure projects.

A lot of that money, $87 billion of it, really goes directly to people through things like Social Security benefits, cash assistance, the food stamps program, as well as providing health care coverage to people in programs like Medicaid. The city is on high alert that they need to be ready to deal with any shortfalls that are going to impact city services.

One of the industries that's really important in the city is the health care and social assistance sector. In 2024, 1 in 5 payroll employees in the city worked in health care or social assistance. A lot of the demand for those services comes from people having access to health care.

If that is eroded, then there could potentially be an impact on jobs in that sector and services in that sector. Likewise with the SNAP program – food stamps. There's so much money that gets spent in grocery stores in New York city that comes through the SNAP program. It's obviously important for sustaining families in need and there's a lot of families facing hardship in the city right now, so to have any impact on those kinds of programs not only hurts the vulnerable families that are subsisting off of those programs right now, but also could impact consumer demand and business viability in the city.

Which of the city’s demographic groups would you say have been left behind by the pandemic?

The city has technically gained back all of the jobs that were lost as a result of the pandemic at this point, but they've shown up in different industries and they've benefited different types of workers. Looking back to early 2020, we've seen a real disproportionate impact of economic growth and recovery from the pandemic.

It's tended to benefit more privileged people in the labor market, white workers, people with bachelor's degrees, and it's left behind a lot of other people. I think one of the things we're most concerned about is the real decline in employment rates and labor force participation rates of men of color in particular in the city.

Black men continue to have a higher unemployment rate, but we've also seen them start dropping out of the labor market likely because they're not getting access to jobs as quickly as other workers are. We've also seen a real spike in unemployment amongst 18- to 24-year-olds. They've had the highest increase in their unemployment, and they now have the highest unemployment rate at 13.6%.

Another group that's also facing high unemployment that I think is really important in highlighting right now is noncitizens.

We have a 6.5% unemployment rate amongst this group, and it's a lot larger than it was before the pandemic.

Going forward, what can local government officials do about these challenges?

The city and state really should consider spending more money on targeted initiatives to boost demand for workers, which can also facilitate more consumer spending and more growth, creating more jobs. There's a bunch of initiatives that are on the table, like making sure the MTA's capital plan is fully funded so that the MTA can proceed with a bunch of huge projects that are going to require a lot of construction workers to complete.

There's a big demand to build more renewable public energy that could also boost a lot of jobs in manufacturing, utilities and construction. Obviously, building more housing would also be a big boom.

Another way to increase the number of high quality jobs in the city is also to just make existing low wage jobs better. We can improve people's income.  It would also then allow people to spend more money in the economy, generating more economic growth. We've seen the impact of things like this in the past. The doubling of the minimum wage before the pandemic in the 2010s really did contribute to sustained strong growth in the city that produced more jobs and reduced inequality.

The ones that come to mind for me are really the health care and social assistance industry, where we've got home health care aides and child care workers making really low wages.  I think it's challenging to think about that because the state and city would be on the hook for paying a lot of those wage increases because a lot of those jobs are tied to city and state contracts and federal spending.