Sales tax receipts rise, signaling boost for retail

The flow of good and bad local economic news continued Thursday, with word that both counties saw a rise in sales tax receipts - an important sign of retail spending - while the Federal Reserve Bank of New York gave reason to pause, noting that almost 40 percent of Long Island nonprime mortgages are in some kind of trouble.

The contrasting announcements illustrated what local experts have said about the Island - that despite talk of a national economic recovery, any optimism ought to be tempered here.

What looks like a national recovery may be illusory, first of all. Economists warn that the country could be in a "double-dip" recession, where the economy appears to improve briefly before slowing again. Second, even if there is a national recovery in the works, it'll come later to Long Island, which has always lagged behind national economic trends, economists said.

Even nationally, there are some mixed economic signals:

Retail sales increased 1.6 percent in March, the biggest gain in four months, according to figures from the Commerce Department, and manufacturers are increasing inventory again.

Economists surveyed by Bloomberg News expect nonfarm payrolls, released Friday, to rise by 175,000 in April - but that won't be enough to lower the unemployment rate from 9.7 percent.

The housing market nationally is still in the doldrums.

"Coming out of recession doesn't mean a return to pink-cheeked health," said Irwin Kellner of Port Washington, chief economist for Marketwatch.com.

Long Island's economy is more susceptible to certain factors than the rest of the nation, he said. "Long Island is basically a small-business economy," he said. "They tend to be the creators of jobs." But small businesses are also more vulnerable to lack of credit, tax increases and rising health care costs, he added. Long Island also depends on a healthy Wall Street, and the debate over financial regulatory reform has the markets' future up in the air, Kellner noted.

Those uncertainties help explain why recovery here will lag behind a national recovery, especially when many new jobs are part-time and lack benefits and security. That affects people's willingness to spend, he said.

Kellner said sales tax collections continue to rise in Nassau and Suffolk counties, but that might simply be because of inflation, with recent increases in food and gas prices, Kellner said. According to auto club AAA, the Long Island average for a gallon of unleaded regular gas was $3.137 as of Wednesday, well above the national average of $2.919.

Long Island has shed jobs for 20 straight months since the recession began here in June 2008. But since the beginning of the year, the job loss rate has slowed. In February, the Island lost 10,000 jobs, compared with 10,400 in January. In April 2009 it lost 44,000.

Since subprime lending imploded in 2007, median closing prices on Long Island have fallen and foreclosure cases have risen - but home values aren't dropping as quickly. In February, Long Island's median closing price was $354,300, down 1.6 percent from a year ago, said the Multiple Listing Service of Long Island, which also covers Queens. Two years ago the figure was $415,000.

But 2010 first-quarter sales have provided a housing bright spot. Appraisal firm Miller Samuel reported last month that North Fork and Hamptons sales increased 142 percent from a year ago, while the rest of the Island saw a 33 percent jump in sales.

There are several reasons for the uncertainty of the Island's economic prospects, according to economists. Most significant is that the Long Island economy can't help but be influenced by the national economy, which has only just started to recover.

Kellner and others said that, while the Long Island economy may have hit bottom, it still could spend quite a bit of time - more than a year, some say - scraping along the bottom before improving.

"It'll dribble along, like a basketball," a series of small improvements and setbacks, said Thomas Conoscenti, a private economist in Nesconset.

Pearl Kamer, the economist for the Long Island Association, a business organization based in Melville, wasn't willing to say the national recession is over.

"What we need are full-time jobs, and we're not getting it," she said. "We still have a long way to go to replace the 8.4 million jobs that we lost."

That could take until the end of the decade, she said, noting that the average period of unemployment is now 31 months, the longest since 1948, when such records were first kept.

Locally, Kamer said significant job loss has ended, but the employment landscape is discouraging. The jobs that disappeared were mostly in manufacturing, construction and professions - all high-paying - while new jobs are likely to be in retail and hospitality industries, which tend to be low-paying.

Meanwhile, she said there were 117,100 jobless Long Islanders in March, the most since July 1992. And with the defense industry no longer the dominant feature of Long Island's economy, the area doesn't have a major product or service to export, said Conoscenti.

He said the changing job market could hold the region back. If people are underemployed and can't afford to spend, it could be 2012 or later before the economy truly surges forward, he said.

There are some reasons to be hopeful, however, Kamer said. The Island's collection of universities and research laboratories will help as the economy shifts toward high-tech and green energy industries.

"We have the institutions to generate these kinds of industries," she said, although that's a long-term evolution.

"In the short term, living standards are going to fall," she said. "People are going to work harder for less money."