From the Civil War through the 1950s, New York State led the nation in just about every category by which an economy can be measured. In the colonial and early national periods, New York was a leading wheat-growing state. When the wheat crop declined, dairying and lumbering became the state's mainstays. New York then emerged as the national leader in wholesaling, retailing, and manufacturing—and remained so well into the 1960s.
By 1973, however, the state was running neck and neck with California by most output measures, or had already been surpassed. The total labor force, the number of workers in manufacturing, and the number of factories all declined during the 1960s and 1970s. New York City's manufacturing base and its skilled laborers have been emigrating to the suburbs and to other states since World War II. Between 1969 and 1976, the city lost 600,000 jobs. With the departure of much of the middle class, the city's tax base shrank, a factor that contributed to the fiscal crisis of 1975, when a package of short-term aid from Congress, the state government, and the labor union pension funds saved the city from default.
The 1980s saw the state's fortunes on the rise. A shift in dependence from manufacturing to services, and particularly to finance, helped the state and New York City weather the 1981–82 recession. In 1983, the state's three largest industrial and commercial employers (excluding public utilities) were all banks based in New York City. From 1980 to 1990, the state's economy acquired approximately one million jobs, in contrast to 50,000 the previous decade. Financial services led the city's economic expansion, adding 100,000 jobs from 1980 to 1987. Long Island also experienced growth in the first half of the decade, benefiting from the defense build-up by the federal government in the early and mid-eighties.
New York's economy not only grew during the eighties but also underwent a restructuring. Manufacturing witnessed a decline in its share of total employment from 20% in 1980 to 14% in 1990. Apparel, industrial machinery and equipment, and primary metals accounted for 40% of the total loss of jobs. Industrial output, however, increased 10.1% between 1980 and 1987. Productivity gains produced both the rise in output and the decline in employment. Construction boomed from 1982–89, increasing its share of employment from 2.9% to 3.8%. The service sector, particularly business-related, health care, education and social services grew 52% in the decade, increasing services' share of employment from 24% in 1980 to 29% in 1990. Finance, insurance, and the real estate industry expanded 64%. The surge in financial services employment ended with the crash of the stock market in October of 1987, in which stock prices dropped 36% in two months. The crash prompted the layoff of 9,000 employees on Wall Street and a downsizing of the banking and securities industries. More than $1 trillion in financial transactions took place per day on the NYSE in 2000.
About 1 in 11 New York City residents received some form of public assistance (including Medicaid and Supplemental Security Income benefits) in 1994. The high number of people on welfare prompted the New York State government to turn the welfare program into a "workfare" program that put the able-bodied to work. By 1998, the welfare role call had been reduced by over 600,000 from 1995 numbers, a 35% decrease. Job growth rose steadily through the 1990s. Coming into the 21st century, the state economy was growing briskly, with annual growth rates of 8.3% in 1998, 3.5% in 1999, and 7.3%. Even in the national recession of 2001, and with the events of 9/11, the state economy posted 3.5% annual growth. Employment growth in the state lagged the nation as a whole during 2001 and 2002, but was close to the national average by the end of 2002. New York City's rate of job losses, however, continued to exceed the state and the nation. However, office vacancy rates in New York City in the fourth quarter 2002, at 8% for midtown, and 12% for downtown (where twin towers had been located), were well below the national average of 16.5%. The state's manufacturing sector, which had been contracting for decades, fell from 10.8% of gross state product in 1997 to 9.4% of the total in 2001. In 2002, the highest percentages of manufacturing job losses were in the cities of Buffalo, Rochester and Syracuse.
New York's gross state product in 2001 was $826.5 billion, 2nd only to California, to which financial services contributed $282.9 billion; general services, $190.2 billion; trade, $103.5 billion; government, $81.2 billion; manufacturing, $77.7 billion; transportation and public utilities, $59.3 billion, and construction, $17.4 billion. The public sector in 2001 constituted 9.8% of gross state product, tied with New Jersey for the 5th-lowest percent among the states where the average was 12%.