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.