Firms operating in the service sector in New York, northern New Jersey, and southwestern Connecticut are looking for improvement as 2021 moves along.

That’s according to a monthly survey of business leaders that the Federal Reserve Bank of New York released on Jan. 16. 

The index for future business activity rose 17 points to 21.6, “its highest level in several months,” and the future business- climate index rose to 16.7, “signaling that firms expect conditions to improve over the next six months,” the New York Fed said. 

Employment levels, wages, and prices are all expected to increase, while capital spending is expected to be flat.

Survey responses were collected between Jan. 4 and Jan. 11.

The monthly snapshot indicated that activity in the region’s service sector declined at an “accelerated pace.” 

The survey’s headline business-activity index fell 5 points to -31.8. The business-climate index fell 3 points to -63.3, indicating that the vast majority of firms continued to view the business climate as “worse than normal.” 

Employment levels declined at a faster clip than the prior month, though wage increases picked up. Both input prices and selling prices increased at a faster pace than in December. Capital spending fell for a 10th straight month. 

Conditions remain weak

Business activity in the region’s service sector declined for an 11th consecutive month. After falling 11 points in each of the prior two months, the headline business-activity index fell another 5 points to -31.8, its lowest reading in seven months.

The survey also found 19 percent of respondents reported that conditions improved over the month, while 51 percent said that conditions worsened. The business-climate index fell 3 points to -63.3, with just over three-quarters of respondents viewing the business climate as “worse than normal.”

Employment continues to shrink

The employment index moved down 6 points to -17.6, indicating that employment levels “fell at a faster pace” than the previous month. However, wages increased at a faster pace, with the wages index rising 9 points to 19.9, its highest level since the onset of the COVID-19 pandemic, the New York Fed said. 

Price increases picked up. The prices-paid index rose 6 points to 38.9, and the prices-received index increased 8 points to 7.4, the “first sign of any significant selling price increases” since the pandemic began. 

The capital-spending index continued to increase but remained negative at -14.2, suggesting ongoing declines in capital spending, though fewer respondents reported such declines compared to previous months, the New York Fed said.

The business-leaders survey is sent on the first business day of each month to the same pool of about 150 business executives, usually the president or CEO, in the region’s service sector. In a typical month, about 100 responses are received by around the 10th of the month when the survey closes.