2024 Long Island Economic Survey

2024

LONG ISLAND ECONOMIC SURVEY

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 was conducted to SPONSORED BY:

provide 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 located in Garden City with additional centers in New York City, the Hudson Valley, and Hauppauge.

Citrin Cooperman is one of the nation’s largest professional services firms, providing clients with access to top-tier professionals who strive to understand a company’s differentiators and goals, specializing in going beyond the core compliance functions to provide valuable insights on key business decisions.

This year, the survey was made possible with participation of close to 120 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 2023 and how they plan to address them in 2024.

Key takeaways include: • There is growing optimism regarding the economy on Long Island • Taxes, retention of young talent, and inflation are major concerns for most businesses • Long Island businesses seem less hesitant to explore the benefits of artificial intelligence (AI) compared to rest of the country • Supply chain issues, though not as extreme as years past, continue to linger • Compensation and other human resource issues remain a high concern • Confidence in government’s role continues to deteriorate, however 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.

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2024 LONG ISLAND ECONOMIC SURVEY

Methods and Demographics 118 Long Island businesses participated in this survey. Nearly half (49%) of the participants identified themselves as either presidents or chief executive officers. The others identified themselves as executive directors (13%), owners (9%), chief financial officers (5%), or as having another role, such as vice president, chief of staff, partner, or senior manager (25%).

PRIMARY PLACE OF BUSINESS

NUMBER OF YEARS IN BUSINESS

The survey identified that most of the

Over 70% of the participants have been in

respondents were from Suffolk County:

operation for more than 20 years.

58% Suffolk County

57% for more than 30 years

8% Nassau County

16% for 21-30 years

28% Nassau and Suffolk

9% in business for 11-20 years

6% Other

6% for 5-10 years Under 13% for less than 5 years

INDUSTRY

TYPE OF BUSINESS

A wide range of industries were represented, with professional services (26%) having the most representation.

Other: Waste management, B2B services, arts, business coach, HVAC services, marketing, energy sector, not-for-profit.

MWBE Businesses on the Rise

ANNUAL REVENUE

The percentage of participants indicating that

The majority of the respondents were small

they are a New York State certified minority

businesses with revenue of under $100M.

and/or women-owned business (MWBE) increased from 7% last year to 13% this year.

74% less than $50M

This is a promising sign, given that New York

15% between $50M and $200M

State has the highest MWBE utilization rate in

7% between $200M and $500M

the country.

1% between $500M and $1B 3% over $1B

NUMBER OF EMPLOYEES ON LONG ISLAND Over 60% of respondents have fewer than 50 employees while 11% have greater than 500.

Business Climate Assessment CURRENT VIEWS OF THE LONG ISLAND ECONOMY

OUTLOOK OF LI ECONOMY

Businesses in 2023 mostly avoided setbacks or obstacles to growth that were feared. While many are still expecting a downturn in the near future, this year’s results reflect more optimism, with 52% of participants expecting growth as opposed to 41% last year.

Economic Insight: This sentiment is consistent with the national trend in the Index of Consumer Confidence. The index is at 69.7 as of December 2023, considerably lower than 99.3 four years ago. The index for the Northeast also is much lower than three years ago.

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2024 LONG ISLAND ECONOMIC SURVEY

Other: Unsure, businesses outlook varies week to week

Putting it into Perspective GDP growth in both Nassau and Suffolk counties exceeded the national figure for 2021-2022 but was far short of the much stronger growth for New York State. For the 2017-2022 period, growth in Nassau and Suffolk was far slower than that in both the state and the country.

GROSS DOMESTIC PRODUCT GROWTH

2021-2022*

2017-2022

USA

1.5%

1.7%

NYS

8.2%

4.7%

Nassau

2.4%

0.0%

Suffolk

3.1%

0.6%

Sources: Census.gov Bureau of Economic Analysis Regional Economic Accounts Bureau of Economic Analysis Regional Data

*Reported numbers are annualized.

2024 LONG ISLAND ECONOMIC SURVEY

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ACTUAL REVENUE IN FISCAL 2023 COMPARED TO PROJECTIONS FOR 2023

ACTUAL NET PROFITS COMPARED TO PROJECTIONS IN 2023

When asked how companies fared relating to

• Most respondents (53%) reported meeting or

meeting their fiscal projections for 2023 compared

exceeding profitability projections down from

to actual revenue:

65% the previous year

• 25% exceeded their projections 45% met projections 30% fell short

• A significant percentage (37%) reported that profits were below projections. Ten percent of survey respondent reported “not applicable.”

INFLATION AND MISSING PROJECTED PROFITS

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2024 LONG ISLAND ECONOMIC SURVEY

Most survey participants who did not achieve their projected 2023 profit margins reported global supply chain issues as a reason. Pricing increases to offset supply chain costs remained consistent even with the minimized effect in 2023. Cost increases due to inflation, however, remain the top cause from last year. Passing off these increased costs to the consumer has also become a delicate struggle for many businesses.

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: rising taxes, attraction and retention of young professionals and families, and inflation.

These top issues increased dramatically when compared to last year’s survey results.

TOP 3 ISSUES FACING LI EOCONOMY ACCORDING TO RESPONDENTS Taxes (property, income, etc.)

Retention of young professionals/ young families due to cost of living

Inflation 0%

10%

20%

30%

40%

50%

60%

70%

Respondents could select up to three.

Economic Insight: Americans expect prices to rise by about 4.5%, which is about 50% higher than in 2021.

Optimism about labor market conditions remains low, though it is higher than last year, rising from 71 to 78 from February to December 2023.

Sources: Survey of Consumers Expected Change in Prices Survey of Consumers Expected Change in Unemployment

2024 LONG ISLAND ECONOMIC SURVEY

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PROJECTED REVENUE AND NET PROFITS FOR 2024 Survey participants were more optimistic about projected revenue and net profits for 2024. Below are the percentages of firms who believe their projected revenue and profits for 2024 will either grow, remain the same or decrease:

Projected Revenue Projected Net Profit

GROW

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STAY RELATIVELY CONSISTENT WITH 2023

DECREASE

2024 LONG ISLAND ECONOMIC SURVEY

NOT APPLICABLE

Emergence of Artificial Intelligence (AI) The emergence of artificial intelligence (AI) has been a transformative and rapidly evolving development for businesses in 2023. It has the potential to transform various aspects of business operations, leading to increased efficiency, better decision-making, and improved customer experiences. With the labor challenges companies are facing, AI is seen to be an alternative to not take away jobs, rather allow companies to redeploy resources for more meaningful, challenging tasks.

CONCERN FOR HOW AI WILL IMPACT THEIR BUSINESS

AI EFFECTS ON BUSINESS IN 2024

When asked how concerned they are about AI

Heading into 2024, survey respondents had

and its effect on their business, only 11% stated

differing views on how AI could impact their

that they are concerned, while 89% said they are

business:

somewhat to not at all concerned.

• 59% believe it will positively impact their business 7% believe it could negatively impact business 33% say there will be no effect, negative or positive

WILLINGNESS TO INVEST IN AI IN 2024 Thirty-three percent of survey respondents have stated that they have made at least a modest investment in AI to improve business efficiency. Thirty-five percent have not yet invested but are planning to in the future, while 32% are not inclined to invest in AI.

Looking Beyond Long Island Respondents do not seem overly concerned about the effects of artificial intelligence on their businesses and many have not yet invested in AI. This is inconsistent with data about how organizations, both large and small, are adopting AI. For example, the IBM Global AI Adoption Index 2022 found that 77% of companies were using or exploring the use of AI. In addition, a 2023 survey by the Small Business and Entrepreneurship Council reported that most small business owners have adopted AI tools in the past two years and 83% of small business owners plan to invest in AI in the next 12 months.

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2024 LONG ISLAND ECONOMIC SURVEY

Human Resources TOP HUMAN RESOURCES CONCERNS FOR 2024 The labor crisis looks like it will continue in 2024, with significant worker shortages still affecting all industries and geographies. Similar to last year, survey participants identified hiring (23%) and compensation and benefits (22%) as the top human resources concerns for 2024 with exception of concerns related to workforce productivity, which increased from 9% last year to 19% this year.

Other top human resource (HR) concerns: Political issues in the workplace, mental health, affordable

O th er

C o an mp d en be s W ne ati or fit on kf s or ce pr od uc tiv ity M an a w gin or g kf a or hy ce br id D iv an ers d ity in , cl eq us u io ity n ,

Re ta in in g

H iri ng

housing

INCREASING CONCERNS FOR WORKPLACE PRODUCTIVITY Fifty-six percent of the responding organizations reported a change in workforce productivity over the last year. When asked about the nature of the change and its possible cause, many participants expressed concern about remnants of decreased productivity from COVID, as well as concerns that remote work inhibits productivity and decreases overall work ethic for some employees. Some also mentioned that labor shortages and the high cost of living on Long Island have exacerbated this problem.

2024 LONG ISLAND ECONOMIC SURVEY

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EXPECTATIONS FOR PAYROLL COSTS IN 2024 More than half of all respondents anticipate increased payroll costs in 2024. The average increase reported was 8.8%.

• 50% expect payroll costs to increase 47% expect payroll costs to be similar to 2023 3% expect payroll costs to decrease

REASONS FOR INCREASED 2024 PAYROLL COSTS Survey participants expecting costs to increase cited this is due to:

Other: State minimum wage, union costs

Economic Insight payroll costs: A salary budget planning survey by WTW, a leading global advisory, broking and solutions company, found that U.S. employers are planning for salary increases in 2024. Inflation and concerns over a tight labor market are the main drivers of salary increases.

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2024 LONG ISLAND ECONOMIC SURVEY

PLANS TO MANAGE CONTINUED INCREASES IN MEDICAL PREMIUMS Interestingly, and despite national trends, 20% of respondents reported that their medical premiums did not increase. Organizations reported the following regarding how they are handling increasing medical premiums:

INCREASED HEADCOUNT FOR 2024

OUTLOOK OF LABOR MARKET IN 2024

Nearly half of all respondents plan to increase

Seventy-eight percent of survey respondents

their organization’s headcount in 2024, which

agree that recruiting employees continues to be

is similar to the results from last year. However,

a challenge for LI employers, while only 21% have

there is a slight downward trend of 3% in

asserted that they have had no issue in retaining or

those planning to increase headcount on Long

recruiting employees.

Island and a slight upward trend of 4% in those planning to increase headcount outside of Long Island.

2024 LONG ISLAND ECONOMIC SURVEY

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REPORTING TO THE OFFICE IN 2024

WAYS TO RETAIN EMPLOYEES IN 2024

When asked if they are requiring employees to return

To deal with the issue of retaining employees in the

to the office in 2024, respondents responded:

new year, employers will:

Other: Those who responded with unlimited PTO.

Economic Outlook PLANS FOR EXPANSION IN 2024 The majority of survey respondents indicated plans to expand their business in 2024.

Even more businesses are planning to expand within the next five years.

Compared to last year (90%) businesses do not plan to make capital improvements in 2024 (56%)

MOST IMPORTANT ELEMENTS FOR GROWTH IN 2024 The need for a stable workforce, leveraging technology, and concerns about inflation are the most prominent issues affecting growth. Survey participants identified the following as the key elements affecting business growth in 2024: Economic Insight: According to a national index on business conditions, while 35% of Long Islanders are more pessimistic than optimistic about business conditions, it compares favorably to 60% just 18 months ago.

Source: Survey of Consumers Expected Business Conditions

Note: Respondents could choose up to two responses.

2024 LONG ISLAND ECONOMIC SURVEY

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Government Support and Resources

PERFORMANCE EXPECTATIONS OF 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?

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

Sentiment toward government continues to deteriorate.

Unfavorable sentiment toward the government presently exceeds favorable sentiment by 29% according to the Survey of Consumers Opinions about Government Economic Policy.

State

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Federal

2024 LONG ISLAND ECONOMIC SURVEY

MOST IMPORTANT POLITICAL ISSUES FACING LONG ISLAND TODAY Long Island employers have found that partisan policy making with influences on the business environment and immigration are the two most important issues facing Long Island:

Climate change Immigration Diversity and inclusion Energy dependence (e.g., cost of fossil fuels, exploration of green energy alternatives) Partisan policy making with influences the business environment Public safety Note: Respondents could choose up to two responses.

BIGGEST GOVERNMENT SPENDING NEEDS TO FACILITATE GROWTH Survey respondents believe that the key areas the

DOES LONG ISLAND HAVE THE RESOURCES TO SUPPORT YOUR GROWTH STRATEGY

government needs to invest more in to facilitate

Fifty-eight percent of respondents believe that

growth on Long Island are grants/incentive

Long Island has the resources to support business

programs (33%) and subsidized housing (20%).

growth.

2024 LONG ISLAND ECONOMIC SURVEY

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