LIA Monthly Economic Report · 2017. 3. 8. · education and health services (+4.0 percent),...
Transcript of LIA Monthly Economic Report · 2017. 3. 8. · education and health services (+4.0 percent),...
Prepared by Dr. John A. Rizzo, LIA Chief Economist
Economic news for the national economy remains favorable overall. Consumer
confidence and spending were strong and the business sector showed improvement.
Home sales were solid as well, but available supply remains quite thin. Limited
home supply restricts consumer choice and threatens demand going forward.
The Long Island economy looks solid as well. Real estate sales have picked up. And
the manufacturing sector has shown continued strength in recent months.
LIA Monthly Economic Report A Research Report for Directors and Members of the Long Island Association, Inc.
March, 2017
This publication is made possible through the support of:
The National Economy
The labor market has continued to perform well. There were just 244,000
jobless claims during the week of February 18. Moreover, the four-week
moving average for jobless claims was the lowest since July of 1973. Some
227,000 jobs were added in January, which exceeded expectations. While the
unemployment rate ticked up slightly to 4.8 percent, this reflected more
persons entering the labor market in search of work. Somewhat surprisingly
given the strength in the jobs numbers, wages increased by only 0.1 percent in
January.
Consumer sentiment remains strong, and this is reflected in consumer
spending. Retail sales rose at a strong pace of 0.4 percent in January, well in
excess of expectations. And continued strength in the stock market bodes well
for consumer confidence and sending going forward.
In the business sector, both manufacturing and non-manufacturing indices show solid performance as well.
Existing home sales rose strongly in January, increasing by 3.3 percent compared to December. But home
prices were stagnant and the supply of homes on the market remains very thin, with just a 3.6 months’ worth of
supply of homes. A six-month supply is generally considered to indicate a balance between supply and
demand.
The Long Island Economy Labor Market
While overall private sector jobs increased by 1.5 percent year-over-year in
December, there were wide variations by industry. Some industries, such as
education and health services (+4.0
percent), transportation, warehousing, and
utilities (+4.9 percent) and leisure and
hospitality (+3.3 percent) grew relatively
rapidly. Other sectors, such as manufacturing (-1.7 percent),
information (-4.5 percent), and financial activities (-1.4 percent)
experienced declines. Employment in the government sector was flat
overall.
January data on jobs and the unemployment rate will not be released
until March and will be reported on in next month’s newsletter.
The labor market has
continued to perform
well. There were just
244,000 jobless claims
during the week of
February 18. Moreover,
the four-week moving
average for jobless
claims was the lowest
since July of 1973.
While overall private sector jobs
increased by 1.5 percent year-
over-year in December, there
were wide variations by industry.
Some industries, such as
education and health services
(+4.0 percent), transportation,
warehousing and, utilities (+4.9
percent) and leisure and
hospitality (+3.3 percent) grew
relatively rapidly.
Business Conditions
The Empire State Manufacturing Index points to continued strength in the manufacturing sector. The Index
attained a reading of 18.7 in February, far in excess of expectations calling for 7.5. Values above zero indicate
expansion. This was the best result for the index in more than two years. The chart below confirms the recent
strength of this index. A number of components of the index, including shipments, new orders, and prices, were
quite strong.
With small business comprising nearly 90 percent of business establishments on Long Island, the outlook for
small business is a key indicator for Log Island’s economy. And here the results are also quite favorable. The
National Federation of Independent Business’ Small Business Optimism Index rose to 105.9 in January—its
highest level since December 2004.
Consumer Sector
Consumer spending as evidenced by sales tax collection data remained in positive
territory. Year-over-year sales tax collections grew by 3.17 percent in Nassau
County and by 1.74 percent in Suffolk. Given the increase in Internet sales over
time, these year-over-year sales tax revenue comparisons may understate actual
consumer spending, because proportionately fewer purchases incur local sales taxes
in later years. Adjusting for this change, estimated year-over-year spending may
have risen by even more—4.13 percent in Nassau County and 2.70 percent in
Suffolk. Internet sales trends, and the methodology used to adjust for increasing Internet sales over time, are
discussed in the Focus section of the February, 2016 newsletter.
The Real Estate Market
Private Homes January showed solid gains in sales prices. Median list prices grew by 7.3 percent
in Nassau County, from $442,500 to $475,000. Prices rose by 7.4 percent in
Suffolk County, from $315,000 to $338,250. As the chart below indicates, the
price gain in Suffolk County was the largest in a number of months.
Median List Prices: Nassau County
All Property Types
Month Current Year
Prior Year
% Change
Jan-2017 $475,000 $442,500 7.3
Dec-2016 $470,000 $435,000 8.0
Nov-2016 $460,000 $430,000 7.0
Oct-2016 $470,000 $430,000 9.3
Sep-2016 $465,000 $440,000 5.7
Aug-2016 $485,000 $468,500 3.5
Jul-2016 $479,000 $455,000 5.3
Jun-2016 $478,000 $440,000 8.6
May-2016 $450,000 $435,000 3.4
inApr-2016
$440,000 $431,500 2.0
Mar-2016 $430,000 $415,000 3.6
Feb-2016 $440,000 $408,500 7.7
Source: MLSLI.com
Median List Prices: Suffolk County
All Property Types
Month Current Year
Prior Year
% Change
Jan-2017 $338,250 $315,000 7.4
Dec-2016 $335,000 $325,000 3.1
Nov-2016 $335,000 $330,000 1.5
Oct-2016 $339,000 $330,000 2.7
Sep-2016 $349,990 $332,000 5.4
Aug-2016 $352,000 $345,000 2.0
Jul-2016 $345,000 $338,000 2.1
Jun-2016 $340,000 $340,000 0.0
May-2016 $339,950 $328,999 3.3
Apr-2016 $312,000 $315,000 -1.0
Mar-2016 $308,600 $305,000 1.2
Feb-2016 $314,500 $318,000 -1.1
Home sales also improved, growing by 4.9 percent in Nassau County, from 882 to 925 units. Sales growth was
even larger in Suffolk County, increasing by 9.5 percent, from 975 units to 1,068 units.
Sold Property Counts Nassau County
All Property Types
Month Current Year
Prior Year
% Change
Jan-2017 925 882 4.9
Dec-2016 1,105 1,097 0.7
Nov-2016 1,038 918 13.1
Oct-2016 1,113 1,174 -5.2
Sep-2016 1,248 1,228 1.6
Aug-2016 1,510 1,426 5.9
Jul-2016 1,261 1,301 -3.1
Jun-2016 1,285 1,047 22.7
May-2016 901 850 6.0
Apr-2016 837 730 14.7
Mar-2016 967 747 29.5
Feb-2016 852 692 23.1
Source: MLSLI.com
Sold Property Counts Suffolk County
All Property Types
Month Current Year
Prior Year
% Change
Jan-2017 1,068 975 9.5
Dec-2016 1,433 1,344 6.6
Nov-2016 1,395 1,166 19.6
Oct-2016 1,335 1,321 1.1
Sep-2016 1,439 1,294 11.2
Aug-2016 1,807 1,470 22.9
Jul-2016 1,542 1,469 5.0
Jun-2016 1,587 1,218 30.3
May-2016 1,156 977 18.3
Apr-2016 1,039 898 15.7
Mar-2016 1,001 857 16.8
Feb-2016 980 747 31.2
Source: MLSLI.com
Source: MLSLI.com
Commercial Real Estate: Retail Space
The Long Island retail market consists of 24.1 million square feet in six geographic concentrations ranging in
size from the 7.8 million square foot Brookhaven/East Suffolk submarket to the North Hempstead submarket,
which accounts for 1.9 million square feet. Over the nine-year period beginning with Q1 2007, the
Brookhaven/East Suffolk submarket had the largest growth in new inventory-- 316,000 square feet. This
amounts to 44.6% of all new competitive stock added to the market.
For neighborhood shopping centers, the median asking rent as of January 2017 was $30.00 per square foot for
non-anchor stores and $21.06 per square foot for anchor stores. Asking rents ranged widely, from $15.62 to
$60.17 per square foot for non-anchor stores and from $12.67 to $37.26 per square foot for anchor stores.
For larger community shopping centers, the median asking rent was $30.15 per square foot for non-anchor
stores and $20.30 for anchor stores. These asking rents also varied widely, from $15.00 to $53.00 per square
foot for non-anchor stores and from $12.00 to $41.00 per square foot for anchor stores.
Vacancy rates are the tenth lowest among metropolitan areas in the nation and the second lowest in the
Northeast Census Region, trailing only Fairfield County, Connecticut. The median vacancy rate for
neighborhood shopping centers as of January 2017, was 4.5 percent (mean vacancy rate 6.9 percent; range 0.0
to 50.2 percent). The median vacancy rate for community shopping centers was 2.6 percent (mean vacancy rate
6.3 percent; range 0.0 to 31.7 percent).
As the charts below indicate, vacancy rates for retail space have been low on Long island compared to the
Northeast and the United States overall for a number of years.
Vacancy Rate Comparisons: Neighborhood Shopping Centers
Long Island
Northeast
United States
Vacancy Rates
Quarterly
Annualized
4Q16 3Q16 YTD Avg 1 Year 3 Year 5 Year
6.9% 6.5% 6.4% 6.5% 6.4% 6.5%
9.5% 9.7% 9.6% 9.6% 9.3% 9.4%
10.4% 10.5% 10.6% 10.6% 10.9% 11.2%
Period Ending: 12/31/16 09/30/16 12/31/16 12/31/16 12/31/16 12/31/16
Source: Reis Reports
Vacancy Rate Comparisons: Community Shopping Centers
Long Island
Northeast
United States
Vacancy Rates
Quarterly Annualized
4Q16 3Q16 YTD Avg 1 Year 3 Year 5 Year
6.3% 6.3% 6.1% 6.1% 5.4% 5.2%
9.3% 9.3% 9.1% 9.1% 8.9% 8.8%
9.4% 9.4% 9.3% 9.3% 9.4% 9.5%
Period Ending: 12/31/16 09/30/16 12/31/16 12/31/16 12/31/16 12/31/16
Source: Reis Reports
Long Island’s Economic Outlook
Current economic conditions look favorable for Long Island. Continued strength in the labor market and an
uptick in business activity are positive signs for the near term. But with the new administration a number of
policy changes and initiatives are being discussed and implemented at a rapid pace. The potential implications
of these changes for the Long Island economy are examined in the Focus section of this report.
FOCUS ON… How will the Trump Administration Impact Long
Island’s Economy?
By any measure, the first month of the Trump Administration has been an eventful one, with policy proclamations
and initiatives proceeding at a frenetic pace. The political wisdom of these developments has been the subject of
considerable debate. But what are the economic implications and in particular, the likely effects for Long Island’s
economy?
Several initiatives pose threats to economic growth. Proposed increases in tariffs threaten Long lsland’s exports.
For example, Long Island exported almost $300 million in goods and services to Mexico in 2015. If tariffs are
raised on imports, this could invite a retaliation by Mexico, which would raise the cost of exports to Mexico. Tough
trade talk also appears to have weakened the peso vis-à-vis the dollar, posing further threats to Long Island’s
exports.
The Trump Administration is committed to restricting immigration and increasing deportations. Since immigrants
are important for Long Island’s agricultural and hospitality and tourism industries, this would also exert a drag on
Long Island’s economy.
Given the importance of the health care sector on Long lsland, restrictions to or an outright repeal of the Affordable
Care Act could have a strong negative effect. However, such changes seem unlikely, at least for the foreseeable
future, given strong political opposition both at the grass roots level and within Congress.
On a more positive note, promises to decrease regulations, cut business taxes, and promote infrastructure spending
would have a potentially strong stimulative effect on the economy. While these initiatives have yet to emerge, the
stock market clearly anticipates that they are in the offing, given its strong performance in recent months.
Long Island’s economy is strong and diversified, and seems able to withstand the many policy changes being
discussed and implemented. But it is undeniable that these changes have instilled an air of uncertainty. And this
casts a pall on both the business and investment communities. Business tends to respond to uncertainty by slowing
down activity. Uncertainty tends to increase volatility in the stock market. Though recent economic performance
has been strong, protracted uncertainty could certainly threaten the economy on Long Island and elsewhere. But
while we are in the midst of a turbulent policy environment, the strength of this policy hurricane seems
unsustainable. This too shall pass.