Two people are dead and at least nine are injured after a laid-off clothing designer killed his former manager before being shot dead by police in front of New York’s Empire State Building.

Officials say a workplace dispute escalated into a shootout in one of the most crowded areas of Manhattan. The shooting led to panic in the tourist-heavy streets around the Empire State Building, with fears that another mass shooting was under way.

However, it became clear that the incident was not a random attack when police revealed that the victim had been targeted.

Police identified the suspect as Jeffrey Johnson, 58, who had been laid off recently after six years for Hazen Imports, a business in the area.

New York police commissioner Raymond Kelly said during a press conference that Johnson was laid off as part of a downsizing at the firm. Kelly described the gunman as a “disgruntled former employee” who came back to confront his former manager, a 41-year-old man who has not been named.

“He shot and killed the former co-worker, striking him three times,” Kelly said.

After shooting his manager, the gunman began walking towards the Empire State Building. A construction worker followed him and managed to alert two police officers on patrol at the building.

Johnson pulled his gun – a .45 caliber handgun – from a black bag he was carrying, and fired on the officers.

“The [police] tape clearly shows that the gunman had the gun out and was trying to kill the officers,” New York Mayor Michael Bloomberg said.

Video posted on YouTube shows a huge crowd gathered at the scene shortly after the shooting.