Manhattan transfer: New York’s finance folk flee

0:27The Economist Generational change both put kinks in the curves. And trends in the developing worlds don't match those in the developed one. We get a snapshot of the booze biz. And if you haven't heard of Sky is your God, then you need to get with the times. By some measures, this Chinese rapper is more popular than household names such as Eminem and Drake. Now he's on a global tour and could be coming to a stage near you.

1:03But first...

1:14If you were to take a trip to Midtown Manhattan during the middle of the week, you would see what looks like a city on the top of its game. Mike Bird is our Wall Street editor and a co-host of Money Talks, our weekly subscriber-only show on business, finance, and economics. And on Friday, he'll be on Checks and Balance, our show on American politics. He's a busy guy this week. New York appears to be booming in many different ways. It's a city that has really opened up a gap relative to other international financial centers. In the last decade, London and Hong Kong have both had domestic political problems which have really limited their reach in the world.

1:59I've moved to New York this year. It's a very, very fun place to live and certainly a great place to report. But there are some trends happening in the city, especially around employment and activity in the financial sector that are doing the city and especially its governing model some damage and that will limit the city's long term potential if they're not addressed. So what's going on? And you mentioned in particular the financial sector. So this is something that's been going on for quite a while, really. The share of total workers in New York City employed in finance and insurance has dropped from 11.5 % in 1990 to 7.7 % as of August this year.

2:49That's not a problem in and of itself. Lots of people work in lots of other fields other than finance and insurance. But it is a problem in the sense that it's a city with the highest state and local taxes in the US. It has a relatively generous municipal spending model. And this has all been based on the idea of squeezing the financial sector a little bit harder than the financial sector is squeezed in other parts of the country to generate revenue. This definancialization, New York losing its lock on America's financial industry, which is doing very well, losing its lock on these high-paying jobs and seeing some of the really ultra-rich souring on the city is bad news for New York.

3:36And it's also putting the likely new mayor, cheery left-winger Zoram Amdani, on a bit of a crash course with New York's financial sector. As we stand on the precipice of taking this city back from corrupt politicians and the billionaires that fund them, let our words ring out so loud tonight that Andrew Cuomo can hear them in his$8 ,000 a month apartment. Mamdani is hoping to really supercharge the city's tax spending model to soak the very rich and city businesses a little more to pay for the new social programs that he's keen to implement. So the city's financial preeminence being predicated on the presence of all of these ultra-rich, these high-flying financial city boy types, they're just tired of being squeezed?

4:24Is that what's going on? Well, there's a few different things going on. Taxes in New York faced by businesses are relatively high. When you combine the state's corporate tax, the city's own corporate tax rate, which is stacked on top of that, and the tax that businesses pay for the operation of the New York transport network, the highest rates are above 18%. That's very, very high by American standards. And firms can cut costs by relocating operations to lower cost states. That's also something that's appealing to a lot of American graduates because the cost of living in New York is extraordinary.

5:00The rental costs are extremely high. Things like car insurance, things like childcare are some of the highest in the country. But it's not just the cost of living and the tax side of things, the availability of talent has changed quite a bit and it's become a lot easier for firms to hire lots of white collar educated workers elsewhere in the country. New York still has the greatest concentration of educated workers in the US, but a number of Americans with degrees has risen more rapidly elsewhere, especially in a number of the cities that banks and other financial firms are looking to hire in now.

5:35So where is exactly the question. Where are the financial hotshots from New York going or where else in the country are they simply staying put? So since the beginning of 2020, the US financial sector generally has created about 229 ,000 jobs. It's been rude health for the sector. Markets are booming. But only 18 ,000 of those, fewer than one in 12, has been in New York State, which is not great for a state that's pretty closely associated with the financial industry. That puts New York behind Texas, behind Florida, behind North Carolina and Georgia. Texas is a very big state, but some of those not really closely associated with finance.

6:15We've seen really big increases in Miami, in Dallas, in places like Salt Lake City. There are certainly plenty of reasons to go. As we mentioned, the cost of living is extraordinary. The rents are twice the level of America's largest 50 cities. So for a lot of employees, they're just not moving to New York in the same way that they might have done in the past. And this is across the board from the well-educated white-collar types who are a bit rich, but also the really silly rich too? Yes, the really silly rich are a big component here. And there's something slightly different going on there. Some of it's an overlap and some of it's distinct.

6:52So among the group of New Yorkers with really, really extraordinary incomes, The group making$10 million in income or more per year. About a tenth of those, according to decent estimates by Goldman Sachs, left the state between 2018 and 2023. Obviously, you could squeeze a lot of money out of that group of people with slightly higher taxes on very high incomes. At the same time, most of the city's recent employment growth has been concentrated in much, much less well-paid sectors than finance, especially health and social care. These are not well-paid jobs. Wage growth has not accelerated in New York in the same way it has in the rest of the country.

7:34So real wages in the US in general up about 3 % since the beginning of the pandemic. They've actually dropped by almost 10 % in New York City. So this is a problem for the government, which wants money to spend on various forms of welfare, on education programs. And New York spends pretty generously on these things. The state spent almost$10 ,000 per person,$9 ,761 on those two categories, welfare and education in 2022, 72 % more than they did in Texas, 130 % more than they did in Florida. So this sort of state level generosity is quite difficult to sustain in the new circumstances. So as you say, the departure of these ultra rich and the pretty rich and the fairly rich is bad for the city's governing model.

8:21These were the people to be soaked, to be squeezed. What's the city doing about it? It must know that that's a problem. We don't want to sound too apocalyptic here. New York is still standing. It's still the center of much of this sort of employment. There is one real bright spot, which is the tech industry. New York has very clearly become a second city for tech employment. After San Francisco, you've seen companies like OpenAI and Anthropik opening offices in the city over the last couple of years. There was a big story a few years ago about the city government's blundering attempt to bring a new headquarters for Amazon to Queens.

8:58Amazon has actually been quietly expanding in the city for quite a while anyway. It opened an office hosting 2 ,000 employees in Midtown. This year, at least another office space nearby, taking over space actually once occupied by HSBC. So forming this symbolic handover from finance to tech. The problem is just a numbers one. The tech sector really can't pick up the slack completely from the financial sector. There is so much finance in New York that those losses are not quite offset by growth in the tech sector. And also the tech sector faces the same constraints, especially when it comes to extraordinary costs of housing, of childcare for employees.

9:39Those put pressure on tech workers just like they do on finance workers. And they give the very, very rich, those with the highest incomes, they give them an incentive to move as well. Now, we mentioned only passingly Mr. Mamdani, whose election campaign as New York mayor is sort of centered on all of these social programs that will need more funding, even as the funding for them seems to be disappearing. Yes, as it happens, that is the topic of Checks and Balance this week, our US politics podcast, where I joined some of our colleagues to talk about it. So fear not, if you are interested in hearing about that, there are options for you.

10:16I've been spoiled by the podcast department this week in being allowed to appear on lots of different things. Well, I will look forward to that for now. Mike, thanks very much for your time. Thank you for having me.

10:44Across the centuries, across cultures, across civilizations, alcohol has been the enduring facilitator. Whether we're celebrating, commiserating, grieving or gorging, we've come together to drink. Or at least we have until now. At the moment, lots of analysts are declaring that it's the tobacco moment for the alcohol industry. Avantika Chilcotti is a global business correspondent. If you look at some of the big spirits groups like Diageo or Pernod Ricard, you can see that they're actually less highly valued now than a big tobacco company like British American Tobacco, something like that. But when I really looked into the numbers and I've looked around me at pubs and things in London, you get the sense that the alcohol industry really isn't doing that badly.

11:33Avantika, we've known for a really long time that booze isn't great for our health. So why is the industry having a tobacco moment now? So in the last couple of years, you've had a couple of important policymakers coming out and warning about the health effects of booze. So last year, the World Health Organization grouped alcohol together with things like fossil fuels and super processed foods, saying that it is one of the leading causes of non-communicable diseases in Europe. Then earlier this year, you had the Surgeon General in America warning about the cancer risks of alcohol. There's just this general sense of doubling down on substances that might be bad for you.

12:15And you see that affecting consumers. So there's lots of surveys looking at who drinks, how often do they drink, do they think it's bad for them. And in America, in the latest surveys by Gallup, you see a smaller share of the population saying that they've drunk lately. and more and more people saying even that occasional drinking is bad for you. So this is essentially a health crisis? Yeah, and there's more to it because there's also an economic backdrop that is unhelpful for alcohol sales. So at a time when lots of people are worried about inflation and a weak job market, you're not going to be going out drinking, splashing out on booze.

12:51At the same time, you've got this trade war going on. And remember, if you are an American drinker, You may well drink wine from Europe. You might drink beer from the UK. And the tariffs are raising the cost of all those drinks. At the moment, the drinks groups are absorbing those costs. Diageo said, I think that this year, the tariffs will add$200 million to their costs. Remy Quantro said something similar. I think the beer industry is doing better than spirits, but the economic backdrop is not helpful for anyone. But you said the alcohol industry is actually doing pretty well. Well, this is the thing that I started looking into the data about, because start with the fact that a lot of these trends against alcohol are completely focused on Western markets.

13:35And I used to live in Asia and you see Indian drinkers or Indonesian drinkers. A lot of people are just developing a taste for alcohol, especially young people and women. And you see volumes of consumption of alcohol in emerging markets still rising. These are big countries with lots of people and middle class that has money to spend. Even within the West, you know, one of the big tropes is that, oh, Gen Z doesn't drink very much, young people are not drinking. If you look at the latest surveys, young people are drinking more than they were a year ago. And I spoke to a few alcohol bosses about this, and they were saying young people are doing everything about five years later than their parents did, be it getting married, getting a job, getting drunk, because COVID meant that you were stuck at home, you weren't exactly going to the pub, and also meant that it's quite hard to get a job.

14:21And those young people are now beginning to spend money on alcohol again. And the final thing I noticed was, if you look at the volumes data, it is totally true that, especially in the US, volume consumption is going down. But if you look at how much people spend on alcohol, that's actually still ticking up, even if you account for the rising price of booze. And what that is, is that people are spending money on what they drink. You might drink less, but you might splash out on a craft beer or a pre-mixed cocktail or some fancy natural wine. And so it's not necessarily bad news for the industry if people are drinking less, but drinking better stuff.

14:58Avantika, you've already referred to the rise in non-alcoholic drinks. Are those made by the same companies? Are they actually now getting hold of those more abstemious drinkers too? Yeah, this is a great point. There's money to be made off teetotalers as well. And what you've seen is that alcohol companies are going into non-alcoholic drinks, which is incredibly helpful for their profit. So specifically beer, I'd say much ahead of wine and spirits. Beer companies have invested a huge amount in making tasty, no and low alcohol beer. That means a lot of research and development. Previously, they used to make beer and then extract the alcohol, which can ruin the taste.

15:34Now they have all these fancy ways of making beer where it's just made without alcohol. And I'm not a beer drinker, but people say it tastes pretty good. And they've also spent money in marketing this stuff. So if you look at rugby, you look at Premier League football teams, beer companies are actually putting their zero alcohol products ahead to sponsor these competitions. And the thing I noticed is that these products are actually priced exactly as highly as alcoholic beer. And so sure, maybe at first it was more expensive to make an alcohol-free beer. But if you go to the pub and you're paying almost£7 for that beer, the company is not paying alcohol taxes on that beer.

16:15There's actually quite a high margin to be made. So really, I think the drinks industry should maybe stop complaining about lots of people going teetotal. Avantika, great to talk to you. Thank you. Thanks for having me, Rosie.

16:49It's about 10pm in East London, and I'm just leaving the concert of Sky Is Your God, the Chinese rapper known to his Chinese fans as Lan Lao. Corbyn Duncan is our global correspondent. There were big lines around the block. We went through security to get into the venue, and fans were very excited. They were eagerly chanting the artist's name, waiting for him to come on. But what was unusual about this is the artist himself, Sky is Your God. He is China's most famous rapper and is unlike any that have come before him. Corbin, now I'm feeling embarrassed. I've never heard of Sky is Your God. Who is he?

17:29Sky is really interesting. So he's 27 years old. His real name is Chen Xu Kai and he is fast becoming a global star. He's from Guangdong, which is a province in China with quite a reputation. It's on the coast, it's right near Hong Kong, and it's known for its get-rich-quick attitude. It also has a history of gambling, gangs, and prostitution, and that underbelly really features in Sky's music. His songs represent something both recognizable and exotic at the same time. He samples from Memphis rap and also Cantonese opera, and you can hear that really clearly in one of his most popular songs, Blueprint Supreme by Sky is Your God.

18:15Sky's lyrics draw inspiration from China's boom times in the late 90s and early 2000s. He's singing in front of a picture of a vintage Mercedes, expensive watches, super yachts and rolling dice. One of the songs that really drives home Sky's emphasis on money and wealth is stacks from all sides. And I actually heard it when I went to his concert. And the main line in that, which the crowd was chanting in unison, is, come money, come.

18:52His worship of wealth and excess, perhaps surprisingly, has found a really strong audience among young people in China today. But also, he's finding fans outside of China, Sky's swagger seems to transcend culture and language. When I arrived at the venue in East London to see him perform, before the show I met not only native Chinese speakers, but also people from the Netherlands, Latvia and Yorkshire. I don't really understand the words as much. I'm not trying to learn, but I just like the way it sounds like the rhythm. I'm not like a rap connoisseur or anything. I just like the way it sounds.

19:36I've been trying to learn some of his lyrics. I know what they mean. I've watched some of the English translations. The numbers tell the story of Sky's success, really. On Spotify, he has 4.6 million monthly listeners, well more than any other Chinese artist. And on YouTube music, he very briefly surpassed Eminem, Kanye and Drake. How's he found such a following abroad? He has a really big audience both inside China and outside China. The way that I think that Sky's music has hopped outside of China is mainly through short form video platforms like TikTok. His songs are easy to remix, really fun to listen to.

20:12And it means that the audiences often look past the fact that they don't understand what the lyrics are saying because it's just great to listen to. That's fascinating. So what's China's rap scene like at home then? Yeah, it's come a long way. So Chinese rap in the early 2000s when it was just burgeoning and still up and coming was very much copycat of American culture. And so you saw a lot of the same themes, but now it's clear that it's becoming much more localized. And so it's talking to issues that take place inside China, but also sampling from traditional Chinese elements. For young people in China today who are slogging it out in a really difficult jobs market, the economy is not growing as fast as it once did.

20:50Many of them reminisce about when things were just getting better. Sky raps about singing karaoke in a big mansion, having expensive fish in his koi pond. And I think it really shows that he has both of these audiences, people who find in his lyrics something that is probably lost in China today, but also for overseas audiences, it's just fun music. Great, great tunes. Corbyn, great to talk to you. Thank you so much. Thanks so much, Rosie.

21:51Transcription by CastingWords Thank you.