Current Economic Analysis

The Long Island Economy

Long Island’s economic indicators remain consistent with an economy that is struggling to emerge from recession rather than with an economy on the road to economic recovery.  On-going job losses have been broadly-based by industry.  Housing prices and housing sales are down and consumer spending was flat for most of last year.

The Labor Market

Long Island lost jobs year-over-year for the eighth consecutive month in December.  A total of 9,900 payroll jobs were lost, including 6,800 private-sector jobs and 3,100 government jobs.  Private-sector job losses were concentrated in private education and in the leisure and hospitality sector, which includes hotels and restaurants.  Government losses occurred primarily in local government education.  It is worrisome that Long Island’s job losses continue to be among the worst in New York State.  Whereas Long Island lost 9,900 jobs, there were gains of 36,600 jobs in neighboring New York City, 3,000 in the Westchester-Rockland suburbs and almost 13,000 in upstate Rochester.

Rochester’s surprising economic rebound comes at a time when Eastman Kodak, its mainstay for the past 130 years, is in deep trouble.  The company’s employment has plummeted from 62,000 in the 1980s to less than 7,000 today.  However, Rochester did not succumb to Rust Belt decay.  It expanded its employment base from 414,400 jobs in 1980 to 503,200 in 2010, largely by building on the skilled workforce created by Eastman Kodak.  In the past two decades, Rochester has developed a more diversified and more knowledge-based economy centered around the University of Rochester, the Rochester Institute of Technology and several local medical complexes.  Since Eastman Kodak’s decline was relatively gradual, there was time for its workforce to develop new skills in areas such as medical technology, photonics, imaging and optics.  Many former Kodak employees started their own businesses, which eventually grew and hired workers.  The former Kodak property was repositioned as the Eastman Business Park.  Half the Park’s 6,200 employees still work for Kodak and half work for the 35 other companies located there.  Many of these companies were initially spun off from Kodak. 

The Housing Market

Long Island’s housing market remains far from recovery.  Home prices and home sales declined throughout last year.  The 2011 median price of newly-sold Nassau homes was $398,650, down 2.5% from the 2010 median price of $408,896.  This decline was identical to the national home price decline of 2.5%.  The comparable Suffolk County median price was $307,725 in 2011, a 4.9% decline from the 2010 median of $323,583.  An estimated 8,772 Nassau homes were sold in 2011, 5.7% fewer than in 2010.  Some 9,369 Suffolk homes were sold in 2011, 7.7% fewer than in 2010. Despite record low interest rates, buyers remain on the sidelines either because they expect home prices to fall further or because they cannot qualify for a mortgage under today’s more stringent lending standards.

Although home prices have been flat to declining for the past year, anecdotal evidence suggests that the regional housing market may be nearing a bottom.  Realtors report an uptick in contracts to buy homes priced at less than $500,000.  Many of the purchasers are first time homebuyers.  It appears that historically low mortgage interest rates may finally be triggering a housing market recovery that starts from the bottom up. 

The Consumer Sector

Long Island consumers returned to the malls in December despite ongoing local job losses.  December sales tax revenues accruing to Nassau County increased 8.7% year-over-year while Suffolk County registered a December sales tax increase of 5.8% year-over-year.  As a result of these gains, fourth quarter sales tax revenues posted the strongest year-over-year gain of any quarter during 2011.  Declining consumer price inflation provided support for consumer spending during the fourth quarter of 2011.  The consumer inflation rate in the New York Metropolitan Region fell from a peak of 3.8% in September to 2.7% in December, largely due to falling commodity prices.

Long Island’s Office Market

According to CB Richard Ellis, Long Island’s office market, with over 40 million square feet of rentable space, had a fourth-quarter vacancy rate of 15.5%.   The vacancy rate was lowest in central Nassau, 13.7%, and highest in Western Suffolk, 17.7%.  Positive net absorption of space in Suffolk was offset by negative net absorption in Nassau.  However, overall net absorption in the Nassau-Suffolk region was a positive 9,444 square feet.  The CBRE report suggests a relatively positive outlook for Long Island’s office market in 2012 because Long Island businesses are expected to become more confident in committing to office space as the national economic recovery proceeds.

Data from the Census Bureau’s 2010 American Community Survey draw a portrait of Long Island’s foreign born population.  The key findings are as follows:

• Nassau contained more than 286,000 foreign-born residents in 2010 of whom 58% were naturalized U.S. citizens; Suffolk contained almost 214,000 foreign-born residents of whom 49% were naturalized citizens.
  
  
• More than 70% of Long Island’s foreign-born residents entered the country prior to the year 2000 and more than half came from Latin America.

Long Island’s Economic Outlook

The Long Island economy is still struggling to emerge from the recent recession.  Ongoing job losses, falling home prices and only slightly more consumer spending are more consistent with a recessionary environment than with an economic recovery.  However, a gradually improving U.S. economy coupled with local efforts to rebuild the Long Island economy around the technical innovations emerging from its premier research institutions should result in faster economic progress, possibly as early as this year.