Long Island’s economy will grow 1.5 percent to 2.2 percent next year, driven mostly by consumer spending, local economists projected.
The region’s economy grew at about 2 percent in 2016, they said, when it was constrained by nearly full employment, which means there aren’t enough workers to fill all the job openings, as well as financial pressures on local governments.
“Consumer spending was pretty solid in 2016, up 2.4 percent on average,” said John A. Rizzo, chief economist at the Long Island Association, the region’s largest business group, and a Stony Brook University professor of economics. “It will be important next year as well.”
With consumers confident about their financial future and recent gains in the stock market, “there will be a greater willingness to spend,” Rizzo said, adding that he expects the local economy to grow 2 percent to 2.2 percent in 2017.
The large number of low-wage jobs added at retail and service businesses, while higher-wage jobs were lost at factories, will also affect the local economy, said Richard Vogel, an economist and dean of Farmingdale State College’s business school.
“This means you will see a change in the mix of consumer spending toward necessities,” he said.
Vogel predicted the Island’s economy would grow 1.5 percent to 1.6 percent in 2017.
Inflation, which has hovered around 1 percent for the past year, “will probably have a little bit of an uptick” to near 2 percent in 2017, he said. Signs pointing to a slight boost in inflation include rising energy prices, a tightening U.S. labor market, and discussion of tax and spending policies at the federal level that will result in rising deficits, Vogel said.
— James T. Madore
Long Island’s job market will remain strong in 2017, but the low unemployment rate here, 4.0 percent in November, isn’t expected to trend much lower, said Rizzo.
The bigger story next year, he said, will be wage growth.
“As Long Island is approaching what are considered to be full employment levels, we can expect upward pressure on wages to intensify,” he said.
President-elect Donald Trump’s pledge to boost infrastructure spending and to cut taxes after he takes office next month could increase employment growth here and nationwide, said Gad Levanon, the chief economist for North America at The Conference Board, a Manhattan business-research group.
But he said uncertainties about Trump’s plans, such as how big the investments in rebuilding the country’s roads and bridges will be, remain. — Carrie Mason-Draffen
Long Island will see a wave of new retailers, including more “fast fashion” stores that quickly bring current fashion to market at low prices, said Faith Hope Consolo, chairwoman of the Manhattan-based real estate firm Douglas Elliman’s Retail Group.
The Island will also see more e-retailers opening brick and mortar stores, ranging from pop-ups to permanent locations, she said.
Online shopping will continue to be a dominant force on the Island, said Marshal Cohen, senior retail analyst with Port Washington-based NPD Group. The use of smart home services, such as voice-activated assistants like Amazon’s Alexa and Google Home, will expand.
Retailers will also use data and technology to anticipate items that consumers will need or want to replenish. Retailers “will know the last time you bought a pair of jeans was seven months ago and you are overdue for a new pair,” Cohen said.
Paying at the register with a chip credit card will also become faster, he said. — Aisha Al-Muslim
Employment in Long Island’s health care industry climbed 4.4 percent in November from a year earlier to 222,600, and it is expected to rise further in 2017 as the growing elderly population needs care and large health systems diversify and expand services.
Northwell Health, the largest private employer in New York State, will grow its outpatient services. One method is to find more joint ventures in ambulatory services, said Terry Lynam, a spokesman at the New Hyde Park-based health system.
Cancer services and cardiac care are big sources for growth. Northwell opened the Imbert Cancer Center in Bay Shore, while Memorial Sloan Kettering Cancer Center expanded its Commack clinic by 38,000 square feet this year.
Brookhaven Memorial just opened Knapp Cardiac Care Center, while Southampton Hospital plans to start construction on a cancer center that it said would generate $3.2 million in additional revenue. Southampton Hospital said it would hire 20 to 25 additional employees there. — David Reich-Hale
Long Island’s defense industry sees encouraging signs from the incoming Trump administration.
Increased military spending is expected with a Republican president and Congress. Jamie Moore, who leads the Manufacturing Consortium of Long Island, said that questions revolve around whether spending will be focused on spare parts and assemblies — a strength of Long Island — or research and development.
Doug McCrosson, chief executive of CPI Aerostructures Inc., an Edgewood maker of structural components for military and civilian aircraft, said that after years of declines, military spending stabilized in 2016.
“The feeling was in 2016 . . . [we] finally hit bottom,” he said.
Even with a “tug of war between readiness and modernization,” he said, a rising tide of military spending will help Long Island defense contractors large and small. — Ken Schachter
RESIDENTIAL REAL ESTATE
Long Island’s young adults are finally starting to buy homes, and that’s likely to keep the housing market tight even as interest rates rise, real estate experts said.
Developers are scrambling to meet the demand for rentals and condominiums, said Mitchell Pally, chief executive of the Long Island Builders Institute trade group.
As home buyers get priced out of New York City, they gravitate to suburbs such as Long Island, said Dottie Herman, chief executive of Manhattan-based brokerage Douglas Elliman.
Mortgage rates have risen by 0.76 percentage points since Nov. 3, before Election Day, to an average 4.30 percent on Dec. 22, mortgage giant Freddie Mac reported.
But while rates are likely to keep ticking up, Herman said, “I don’t think it’s going to be enough to deter anyone from buying.” — Maura McDermott
Travel and leisure revenues on Long Island are likely to increase by about 3 percent in 2017, according to Kristen Jarnagin, president and CEO of Discover Long Island, a private nonprofit that is the region’s official tourism promotion agency.
Tourism here brought in about $676 million in local and state tax revenues in 2015, according to a report produced by Smith Travel Research, based in Hendersonville, Tennessee.
“The tourism industry is one of our top economic drivers. It generates $5.5 billion in annual spending and supports more than 100,000 local jobs,” Jarnagin said. Tourism draws 9.1 million visitors to the Island, she said.
Hotel occupancy on the Island will remain relatively flat in 2017, Jarnagin said, and the average daily room rental rate will increase by 3 percent.
“One of our main inhibitors to growth is the lack of supply for the level of demand we’re experiencing — both in hotels and types of hotels,” Jarnagin said.
Four hotels totaling more than 500 rooms will open on the Island in 2017. — Daysi Calavia-Robertson
Pharmaceutical companies will likely do more hiring as producers of vitamins expand into prescription drugs while others grow through acquisitions.
A&Z Pharmaceuticals Inc. in Hauppauge is converting a warehouse to production space to accommodate more orders for generic prescription drugs than it anticipated. The company is entering that market after years of selling dietary supplements.
A&Z comptroller Robert Tufariello said the project would result in adding 40 people to its workforce of about 100.
Nearby in Hauppauge, Evaric Pharmaceutical said it hopes to begin producing generic drugs for sale to U.S. government programs. Chief financial officer Vasu Sabbella said the company expects to hire more than 100 people. — James T. Madore
COMMERCIAL REAL ESTATE
Prices and rental rates of industrial sites on Long Island will likely rise as manufacturers and distributors in the outer boroughs of New York City get squeezed by growing residential development.
Overall industrial vacancy rates dropped to 3.2 percent in the third quarter this year from 4.2 percent in the same period last year, according to data from brokerage Newmark Grubb Knight Frank. Average sale prices were $100 per square foot in the third quarter, up from $85 a square foot a year earlier.
“We’re seeing additional pressure on the industrial availability on Long Island,” said Ellen Rudin, senior managing director of the Long Island office of brokerage CBRE. “So much of the industrial [property] in the boroughs is being converted and developed” for residential use, and some businesses move to Nassau and Suffolk counties.
Office rental rates, currently $30.14 per square foot, and vacancies, now at 14.7 percent, should remain steady next year, said David Pennetta, managing broker with Cushman & Wakefield. — Victor Ocasio
A friendlier regulatory environment under Trump, and a moderate rise in interest rates, which would make lending more lucrative, could boost banks on Long Island next year, local bank executives said.
Smaller banks are optimistic that burdensome federal regulations will be relaxed, which would add to the bottom line.
Douglas C. Manditch, chairman and chief executive of Islandia-based Empire National Bank, said his bank spends around 12 percent of its revenue on compliance, which will be about $2.2 million in 2016.
Michael N. Vittorio, president and chief executive of Glen Head-based First National Bank of Long Island, said the bank is spending between $7 million and $10 million on compliance. It has reported net income of $23.1 million for the first nine months of 2016. — David Reich-Hale