Update 3: Fired worker shoots ex-colleague

A gunman wearing a business suit and carrying a briefcase shot a former colleague dead outside New York's Empire State Building today before being killed by police.

Nine bystanders were hit by gunfire in the confrontation, but police said all were expected to survive.

The shooting set off chaos around one of the world's best-known landmarks at the height of the summer travel season and just after the morning rush hour. Police on their regular anti-terrorism duties in the tourist shopping area rushed to the scene.

"People were yelling 'Get down! Get down!'" said Marc Engel, who was on a bus in the area when he heard the shots. "It took about 15 seconds, a lot of 'pop, pop, pop, pop,' one shot after the other."

Engel saw the wounded scattered along the sidewalk, including one person "dripping enough blood to leave a stream".

Mayor Michael Bloomberg said some victims may have been hit by police bullets as officers confronted the gunman.

"This was a terrible tragedy," Bloomberg told a press conference. "We are not immune to the national problem of gun violence."

Bloomberg has spoken out in recent weeks for gun control after mass shootings at a Sikh temple in Wisconsin and a theatre in Colorado, but many politicians have hesitated to approach the sensitive issue, especially in a national election year.

Police identified the gunman as Jeffrey Johnson, 58, a former designer of women's accessories who was laid off last year. They had little details yet about his background, including any criminal record.

Police Commissioner Ray Kelly said Johnson fired at former colleague Steven Ercolino three times at close range on the pavement. The two had traded accusations of harassment when Johnson worked at Hazan Import Corp.

Little was immediately known about Ercolino. A man who answered the phone at his home said he was too distraught to talk.

"He was a good son, that's all I can say, said the man, who didn't give his name.

Johnson walked away after shooting Ercolino, but a construction worker who saw the encounter followed him and alerted police, officials said.

Construction worker Chris Ogden told the Daily News tabloid he was working on a scaffold above the scene when he saw someone in a suit and carrying a briefcase start shooting.

"He shot the guy in the head," Ogden told the newspaper. "The guy went down. He took a second shot when he was down."

Ogden said the gunman casually walked away. "We were screaming from the top, 'It's the guy in the grey suit!'" Ogden said.

Surveillance video footage showed Johnson reaching into a bag, pulling out a .45-calibre pistol and pointing it at officers, Kelly said. The officers started firing, killing him, Kelly said.

Kelly at first said Johnson fired on officers, but police later said they were trying to determine whether Johnson fired. The two officers fired a total of 14 rounds, Kelly said.

"These officers ... had absolutely no choice," Kelly said. "This individual took a gun out very close to them and perhaps fired at them."

Kelly said authorities believe police may be responsible for some of the nine injuries because of the limited capacity of Johnson's weapon. The semi-automatic was equipped to fire at least eight rounds, and at least one round was left in the clip, police said. Another loaded magazine was in his briefcase.

Rebecca Fox, who also works in the area, said she saw a woman shot in the foot and a man dead on the ground.

"I was scared and shocked and literally shaking," she said.

Police scoured the scene for bullets as the immediate scene remained closed off.

The Empire State Building anchors one of the city's busiest areas. The website for the building says about four million people visit the tower's observatory decks each year.