2023 Long Island Economic Survey

LONG ISLAND ECONOMIC SURVEY 2023

Summing Up Our Findings

Citrin Cooperman and Adelphi University worked together to conduct the Long Island Economic Survey sponsored by the HIA-LI. This survey is conducted to provide current and relevant data on the Long Island economy to help inform smart business decisions. Adelphi University is a highly awarded, nationally ranked, and widely connected doctoral research university with two locations in Long Island and one in Manhattan.

This year, the survey was made possible with participation of over 200 Long Island businesses who provided their perspectives on various economic and political issues.

The survey results highlight key economic issues that Long Island businesses faced in 2022 and how they plan to address them in 2023.

Key takeaways include:

While confidence in government’s role could be greater, Long Island continues to be perceived as a good place to do business

We hope you find this survey helpful for the business you are managing now and what you plan to achieve in the future.

Methods and Demographics

Over two hundred Long Island businesses participated in this survey. Nearly half (46%) of the respondents identified themselves as either presidents or chief executive officers. The rest identified themselves as either executive directors (16%), owners (10%), chief financial officers, (8%) or as having another role (20%).

PRIMARY PLACE OF BUSINESS

The survey identified that most of the respondents were from Suffolk County:

Suffolk County 52%

Nassau County 10%

Nassau and Suffolk 32%

Other 6%

LONGEVITY

Over 75% of the participants have been in operation for more than 20 years.

61% for more than 30 years

15% for 21-30 years

15% in business for 11-20 years

6% for 5-10 years

Under 2% for less than 5 years

BUSINESS FORM

Most respondents were private, for-profit corporations.

Private, for-profit 64%

Private, not-for-profit 15%

Publicly traded 8%

Private, for-profit, unincorporated 8%

Government 5%

ANNUAL REVENUE

The majority of the respondents were small businesses with revenue of under $100M.

57% less than $20M

31% between $20M and $100M

8% between $100M and $500M

1% between $500M and $1B

3% over $1B

Opportunity for Growth

Only 7% of participants were New York State certified Minority- and Women-Owned business enterprises (MWBE). There is ample opportunity for more representation of MWBE businesses in Long Island.

INDUSTRY Suffolk County 52% Nassau County 10%

Business Climate Assessment

CURRENT VIEWS OF THE LONG ISLAND ECONOMY

Following what many consider a strong rebound in 2021 from 2020, 2022 posed several challenges for the American economy, with many businesses experiencing setbacks or obstacles to growth. As a potential downturn looms, it is clear that many businesses are uncertain about when they can expect economic growth.

About 40% of the respondents described the Long Island economy as currently growing. However, about 60% of the respondents described it as currently stagnant or already in decline.

Economic Insight: This sentiment is consistent with the national trend in the index of consumer confidence , which has been declining sharply. The index is down to 59.7 from 99.3 in 2019, and there has been a similar drop in the Northeast.

PUTTING IT INTO PERSPECTIVE

During the COVID-19 pandemic period of 2020 to 2021, the average growth of Nassau county gross domestic product (GDP) outperformed that of Suffolk county, New York State, and the entire country. However, historically, the long-term average GDP growth of both Nassau and Suffolk counties has been lagging.

Gross Domestic Product Growth

WHAT’S HAPPENING WITH THE LONG ISLAND ECONOMY TODAY?

The results of the participants surveyed on Long Island are in line with the greater economy: inflation, rising taxes, and an unstable labor market are continued concerns.

Economic Insight: Americans expect prices to rise by almost 5% next year, nearly double what they expected just three years ago.

Optimism about labor market conditions is lower than a year ago, with the index of expected unemployment dropping from 112 to 71 in the past year.

Source: Bureau of Economic Analysis

INFLATION AND MISSING PROJECTED PROFITS

Most survey participants who did not achieve their projected 2022 profit margins identified inflation as the primary cause.

Reasons for Not Meeting Profit Margin Projections

65%

31% OF RESPONDENTS REPORTED MEETING OR EXCEEDING PROFITABILITY PROJECTIONS

REPORTED THAT PROFITS WERE BELOW PROJECTIONS AND FIVE PERCENT OF SURVEY RESPONDENT REPORTED “NOT APPLICABLE”

Historical Inflation

From 2018 through the pandemic period to 2022, the average U.S. annual rate of inflation increased fourfold from approximately 2% per year to close to 8%.

ATTITUDE TOWARDS INFLATION

When asked how concerned they were about inflation and its effect on their business, most survey participants were very concerned about inflation.

62% are very concerned about inflation

31% are somewhat concerned about inflation

7% are slightly concerned about inflation

RESPONDING TO INFLATION

Most survey participants indicated that they have taken action in their business to address inflation.

55% have taken action

45% have not taken action

ACTIONS TAKEN TO ADDRESS INFLATION

Respondents who have taken action have done the following to address inflation:

 Analysis and Programming

 Found appropriate funding to cover increases

 Made sure our employees have enough money to keep up with inflation

 Adjusted labor rates

 Not replacing workers

PROJECTED REVENUE AND NET PROFITS FOR 2023

Survey participants were more optimistic about projected revenue and net profits for 2023.

 Raised prices

 Increased cost of labor

 Reducing unnecessary costs

 Reduction in labor

No capital investments

 Automation

 Increased delivery rates

Supply Chain Issues

The supply chain continued to encounter challenges through 2022. Geopolitical instability, impacts of climate change, climbing interest rates, and inflation significantly impacted the supply chain and continue to present challenges to most businesses.

Most of the survey participants were affected by disruptions in the global supply chain.

65% were affected

35% were not affected

The majority of respondents expect supply chain issues to persist for another six months to two years.

as many respondents projected net profits to grow, but not at the same rate as revenue growth.”

Economic Insight: According to the New York Federal Reserve , the Global Supply Chain Pressure Index fell from 3.59 to 1.18 over the course of the past year. This index is based on data from several common metrics and indices. The drop suggests an expectation of significant reduction in supply chain disturbances.

Expected Continuation of Supply Chain Disruptions

Human Resources

TOP HUMAN RESOURCES CONCERNS FOR 2023

We are in the midst of one of the nation’s biggest labor crises on record, with significant worker shortages affecting all industries and geographies. Survey participants identified hiring (31%) and compensation and benefits (30%) as the top human resources concerns for 2023.

EXPECTATIONS FOR PAYROLL COSTS IN 2023

More than six out of 10 respondents anticipate increased payroll costs in 2023, while very few expect decreased costs.

63% expect payroll costs to increase

35% expect payroll costs to be similar to 2022

2% expect payroll costs to decrease

Economic Insight: A national study by the Society for Human Resource Management (SHRM) finds that offering competitive compensation will be increasingly difficult in 2023. Coupled with rising inflation expectations, concerns about rising payroll costs appear to be well founded.

REASONS FOR INCREASED 2023 PAYROLL COSTS

Survey participants expecting costs to increase cited the following factors:

“With only 17% of rising costs associated with growth, all other factors (approx. 83%) will eat into profits”

RECRUITING VS. RETAINING EMPLOYEES?

Businesses are now forced to re-evaluate employee benefits and pay to remain competitive in the current marketplace. Respondents believe that recruiting new employees is significantly more challenging than retaining employees.

64% report recruiting employees to be more challenging than retaining employees

14% report retaining existing employees to be more challenging than recruiting employees

22% report no problems recruiting or retaining employees

REMOTE WORK

A prevalent shift that continued to take root was the manner in which the workforce approached employment and where workers spent their workdays. Although a significant percentage of survey respondents (41%) require employees to work from the business’s office, most participants do not require this exclusively.

The result is in line with a national trend indicating that 59% of employees prefer hybrid work.

Industry Analysis: Industries in which at least 50% of organizations are requiring a return to onsite work are: healthcare, manufacturing and distribution, retail, architectural/ development/construction, and social services.

Economic Outlook

PLANS TO EXPAND BUSINESS IN 2023

The majority of survey respondents indicated plans to expand their business in 2023.

Note: While respondents could choose multiple responses, none did.

Industry Analysis: Although Nassau and Suffolk counties are growing slower than the country and state, still 38% of organizations see a potential for expansion on Long Island, with the majority being healthcare facilities and restaurants and hospitality a close second.

PLANS TO MAKE CAPITAL IMPROVEMENTS IN 2023

Investing in technological improvements and meeting the needs of competitive workforces are equally important for companies to remain competitive in 2023.

The majority of survey respondents indicated plans to invest in capital improvements in 2023 with technology being a key area.

Note: Respondents could choose more than one response.

MOST IMPORTANT ELEMENTS FOR GROWTH IN 2023

In general, the demand for all types of employees continues to exceed the supply of talent available to employers and this remains a top concern. Survey participants identified the following as the key elements for business growth in 2023:

2023 EMPLOYEE HEADCOUNT

The majority of survey respondents expects to increase the number of their employees in 2023 as follows.

Economic Insight: Long Island businesses reported to be relatively optimistic. A national index of business conditions finds that 29% more Americans believe the unemployment rate will rise over the next year compared to those who believe it will fall.

Note: Respondents could choose up to two responses.

Government Support and Resources

PERFORMANCE EXPECTATIONS OF THE GOVERNMENT

Most survey participants on Long Island expect more from the government.

What is your opinion on how the federal government and state and local governments are performing as related to business on Long Island?

LONG ISLAND’S RESOURCES TO SUPPORT GROWTH

Despite expecting more from both the federal, state, and local governments, survey participants overwhelmingly agreed that Long Island has the resources to support their growth strategy.

Economic Insight: The finding is consistent with the national dissatisfaction in government entities.

Since 2019, when 9% more of the population was favorable toward the government, the average American’s sentiment has deteriorated. Presently, unfavorable views of the government exceeds favorable ones by 26% according to the national index of opinions on government policy.

"Citrin Cooperman" is the brand under which Citrin Cooperman & Company, LLP, a licensed independent CPA firm, and Citrin Cooperman Advisors LLC serve clients’ business needs. The two firms operate as separate legal entities in an alternative practice structure. Citrin Cooperman is an independent member of Moore North America, which is itself a regional member of Moore Global Network Limited (MGNL).