New York City has already benefited from the artificial intelligence boom through Wall Street profits, venture capital, private equity and tax revenue, according to Comptroller Mark Levine, who says the city now needs to prepare for a possible AI bubble burst that could weaken financial markets, displace white-collar workers and blow a multibillion-dollar hole in the city budget.

The warning comes in a new report, published Thursday, from the comptroller’s office that lays out five possible scenarios for how AI could affect NYC’s economy over the next several years.

At a briefing with reporters on Wednesday, Levine said New York’s exposure to AI is not limited to tech startups or Silicon Valley hype. He pointed to the city’s venture capital firms, private equity firms and private credit markets, saying they are helping finance the AI buildout, including data centers.

“We have gotten the upside of this boom, and it has yielded significant tax revenue for us,” Levine said. He added that Wall Street’s strong performance helped drive city tax revenues, but that the city needs to consider what happens if the AI bubble bursts.

AI bust is not a given, but Levine says there is cause for concern

The new report does not predict disaster. Its baseline scenario assumes AI will gradually boost productivity with limited disruption, while the city continues adding jobs and tax revenues grow steadily.

But the comptroller’s office assigns a combined 50% probability to three negative scenarios: one in which the AI investment boom fizzles and markets retreat, another in which faster adoption replaces jobs, and a more severe “AI Shockwave” scenario in which the labor market cannot absorb rapid displacement.

Levine said New Yorkers are worried about what AI will mean “for their jobs” and “for their kids,” adding that it feels like “we have a freight train coming down the tracks.”
Photo by Lloyd Mitchell

The report’s main recommendation for preparing for that risk is a bigger rainy day fund.

Levine wants the city to build its Revenue Stabilization Fund (rainy day fund) to 16% of annual tax revenues, with a 10% floor. His office says the Revenue Stabilization Fund and the Retiree Health Benefit Trust are projected to hold a combined $7.2 billion at the end of fiscal year 2026, or about 8.5% of tax revenues.

That is well below the $13.5 billion target the comptroller’s office says would be needed based on projected fiscal year 2026 tax revenues.

Levine argues that level is not arbitrary. The 16% target reflects NYC’s experience in past downturns, when cumulative revenue losses fell roughly 16% below trend before recovering.

The report’s worst modeled outcome, “AI Shockwave,” is given only a 5% probability. But it carries the largest local damage.

In that scenario, the city would have 259,000 fewer private-sector jobs than expected at the deepest point in early 2029. Office-using industries would end 2030 with 145,000 fewer jobs than the baseline, and city tax revenues would trail the baseline by roughly $14 billion through fiscal year 2030.

The comptroller’s office puts the cumulative revenue hit at $14.4 billion for that scenario.

Even the less severe negative scenarios would be costly. Under the “AI Falls Flat” scenario, the investment boom disappoints, a market selloff follows and the city’s private sector loses 52,500 jobs over the year.

At the deepest point, the city would have about 135,000 fewer private-sector jobs than the baseline, with tax revenues falling $8.8 billion below baseline from fiscal year 2027 through fiscal year 2030.

Under the “Job Replacement” scenario, faster AI adoption replaces routine cognitive work. By 2030, the city would have roughly 94,000 to 96,000 fewer private-sector jobs than expected, depending on the report table or slide summary, and tax revenues would run about $5.5 billion below baseline through fiscal year 2030.

AI already impacting NYC labor market?

The report also points to signs that AI may already be affecting the labor market, though the comptroller’s office stops short of saying it has proved a causal link.

One pattern is what economists call a “low-hire, low-fire” economy. The report says job creation has been weak while layoffs remain low, breaking with a long-running historical pattern in which hiring slows and layoffs rise together during downturns.

The comptroller’s office says one possible explanation is that employers, especially in knowledge industries, are not ready to conduct large layoffs but are holding back on new hiring as AI tools improve.

Recent college graduates may be feeling that shift most directly. The report says that during the 12 months ending in March 2026, young adults with college degrees in the city had a slightly higher unemployment rate than young adults without college degrees — 7.3% compared with 7.1%.

At Wednesday’s briefing, Levine said unemployment among college-educated New Yorkers in their 20s is one of the warning signs his office will watch.
Photo by Lloyd Mitchell

Levine’s report lands amid a broader debate over how much money the city should save while revenues remain strong.

In a recent rainy-day fund proposal, Levine called for formal rules requiring regular deposits into the fund when revenues grow and for stricter rules on withdrawals. The proposal would require deposits when the fund is below its 16% target, including 20% of total tax revenue growth above 3% and 40% of non-property tax revenue growth above its six-year trailing average.

At the AI briefing, Levine argued that those reserve rules should now be understood as part of the city’s preparation for technological disruption.

“We are trending down on reserves as we’re headed into three to five years of enormous uncertainty,” he said. He said the city should create a formula for the rainy day fund and add AI disruption to the list of conditions for tapping it, which he said would likely require state legislation.

Building reserves would require tradeoffs. Asked how the city could add to reserves in the current fiscal climate, Levine said he was “very careful not to describe our current fiscal situation as a crisis,” because revenues are growing.

But he pointed to structural budget pressures, including CityFHEPS housing vouchers, special education Carter cases and school spending amid declining enrollment, as areas where the city could slow the growth of expenses.

The report also does not say AI will necessarily hurt New York. One scenario, “Productivity Boon,” projects stronger growth, higher wages and $8 billion more tax revenue than baseline through fiscal year 2030.

And New York has spent years positioning itself to capture AI’s upside. A January 2025 report from the city’s Economic Development Corporation described New York as a major hub for applied AI, citing more than 2,000 AI startups, 35 AI unicorns, 1,200 active investors and more than 40,000 AI-ready workers in the metro area.

The city’s pension funds have also benefited from the boom, Levine said. Asked whether the funds are insulated from AI-related risks, he said the system is diversified but has exposure to major firms and private equity tied to data centers and other AI investments.

“We, by the way, have gotten a lot of upside in front of AI so far,” Levine said. “We indirectly own with indirect stakes in all the major firms.”

For Levine, the takeaway is not that AI will definitely crash the city economy. It is that the city should not wait to find out.

“We’ve never seen anything like this,” he said when asked why this reserve push should be different from past calls to save more money. “I’m giving you a three-to-five-year timeline here. We are in uncharted territory.”