By Katie Honan

The Covid-19 pandemic will cast a long shadow over New York City's economic recovery, impacting employment levels, real-estate sales and tax revenue for years to come, according to the city's fiscal watchdog.

In a report released Wednesday, the Independent Budget Office predicted the city will collect $11.3 billion less in tax revenue through fiscal year 2023, compared with estimates the office compiled before the pandemic.

New York City was hard hit by the virus in the spring last year and is currently fighting a second wave. More than 25,000 residents are confirmed or believed to have died from Covid-19, according to data.

During the second quarter of 2020, nearly 878,000 jobs were lost in the city, the report says. About 20% of those jobs came back in the third quarter of 2020, according to the IBO. While jobs will slowly return in the next three years as more people are vaccinated and social-distancing measures ease, employment in the city will likely stay below 2019 levels, the report said.

The city's real-estate industry also continues to struggle, as many Manhattan offices remain empty because employees have been able to work remotely, the report says. Remote working and the desire for more space also prompted some New Yorkers to move to the suburbs and other parts of the country.

The report predicts property sales in 2020 will be the lowest since 2010, the year following the financial crisis. Taxable real-estate sales are expected to be just $59 billion in 2020, compared with around $100 billion a year earlier, the report says. The number is expected to rebound a bit to around $80 billion in 2021.

The city's other revenue streams have taken hits as well. Sales tax collections fell by $438 million, or 5.6%, in 2020, records show. The IBO predicts another year of decline, with a decrease of $367 million for 2021.

The authors of the report were optimistic that the city's economic recovery, which began over the summer, would accelerate in 2021.

"But this optimism is tempered by the knowledge that the city and the world are still treading in unknown waters, with much about the coming months to be determined by the course of the pandemic," the report says.

Mayor Bill de Blasio, a Democrat, has balanced the city's budget this year by tapping into the city's reserves and other cost-saving measures. He has also urged federal lawmakers to provide billions in aid to the city as part of a coronavirus relief package.

IBO officials, however, said in the report that they don't see any federal bailout coming in time to close the budget gap for next year. Without the aid, the city will have to continue to dip into savings or introduce further cuts.

The mayor, who has one year left in office, could increase taxes and fees, the IBO report said. However, Mr. de Blasio has previously promised not to increase taxes controlled by the city to generate revenue.

A spokesman for the mayor didn't immediately respond to a request for comment. Mr. de Blasio has repeatedly said the city's recovery is tied to federal and state help, as well as the vaccine rollout, which has so far been slow.

"I feel very, very positive about where the city's going to go in 2021 and beyond," the mayor said at a press conference Tuesday. "We're already seeing some very promising signs, real investments coming into the city in our technology community, life sciences, a lot of what is going to indicate the future of New York City."

But the city's leisure and hospitality industry has been devastated by the pandemic and faces a long road to recovery, the report says.

At the end of 2019, nearly 466,000 people worked in that industry, which includes restaurants bars, and other entertainment. The IBO estimates that by the end of 2020 nearly 217,000 of those jobs were lost.

The city's hotel occupancy rates also have plummeted. The rate was around 40% in October 2020, compared with 92% during the same month in 2019.

Around 200 of the city's 700 hotels in the city have shut down for good or temporarily, and 63 are being used by the city to house homeless individuals, according to the IBO.

(END) Dow Jones Newswires

01-06-21 1335ET