United States / Analyst Insights
Divergent Industry Trends in New York and California

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by Marisa Lifschutz, Lead Industry Analyst
Mar 26 2019

An industry’s performance at the state level is defined not only by current macroeconomic trends and national industry conditions but also state-specific demand determinants. These deviating state-level factors can lead an industry to perform differently across varying states.

For example, California and New York are two states that display many similarities on the surface. Both states are centrally positioned on the opposing coasts of the United States and rank among the top three states by contribution to national GDP. Furthermore, both New York and California are characterized by strong state economies that exhibit dominance in certain sectors, such as banking and finance in New York and science and technology in California.

However, despite these similarities, several state-specific factors in California and New York support a divergence in performance for the same industries across both states. Three examples of such industries are highlighted below.

Apartment Rental

The Apartment Rental industry (IBISWorld report 53111) includes operators engaged in the rental or leasing of residential buildings and dwellings. At the national level, industry performance is determined by a confluence of factors including housing market status; economic conditions; demographic shifts and the trend toward urbanization.

However, at the state level, industry performance is further dictated by trends in local home prices and the state unemployment rate. In 2019, revenue for the Apartment Rental industry in New York (NY53111) is expected to rise 1.5% to total $27.0 billion, supported by a sharp uptick in home prices in New York and slow growth in state unemployment. Among all states, New York has the highest share of residents living in apartments, with high home prices in the state supporting the cost-effectiveness of apartment rentals. Conversely, revenue for the Apartment Rental industry in California (CA53111) is expected to contract in 2019, declining 0.1% to $32.9 billion. While home prices in California are anticipated to also rise in 2019, a sharp uptick in the state unemployment rate is expected to impede the industry’s expansion.

Supermarkets and Grocery Stores

At the national level, the Supermarkets and Grocery Stores industry (44511) comprises the largest food retail channel in the United States, with industry establishments primarily retailing general lines of food products. Performance for this industry benefits from strong macroeconomic conditions and household income growth, as well as industry-specific factors like the agricultural price and healthy eating indices. At the state level, however, industry performance is further determined by state population trends and proximity to local farmers and suppliers. In 2019, the Supermarkets and Grocery Stores industry in New York (NY44511) is expected to grow 1.0% to $40.4 billion, supported by rising per capita disposable income in the state and an expanding adult population. Divergently, the Supermarkets and Grocery Stores industry in California (CA44511) is anticipated to stagnate in 2019, remaining at $82.4 billion. While national economic conditions are expected to remain positive in 2019, decelerated disposable income growth in California and a slowed expansion of the state’s adult population will ultimately hinder industry performance.

Law Firms

The Law Firms industry in the US (54111) is comprised of the offices of legal practitioners that provide expertise on either a range of areas or specific areas of law. To this end, industry participants range from sole practitioners to full-service legal firms mostly serving corporate clients. At the national level, industry demand is determined by several components that compose the general economic and business environment. For example, US industry performance is supported by favorable growth in corporate profit and the number of businesses; an uptick in the national crime rate; and any widespread changes in regulatory environments. The Law Firms industry in California (CA54111), however, is further dependent on state GDP growth, as companies are more likely to engage in high-cost litigation when GDP is high. Furthermore, strong GDP growth encourages IPOs, mergers and acquisitions and capital-raising activity, all of which require law firms’ services. In 2019, the Law Firms industry in California is anticipated to rise 2.8% to $54.4 billion, supported by a rising number of businesses in the state and a strong uptick in California GDP growth. Conversely, revenue for the Law Firms industry in New York (NY54111) is expected to expand just 0.7% in 2019 to total $64.3 billion. While a growing number of businesses in New York will support the industry’s uptick, slower GDP growth in the state, relative to California, will result in a slower industry expansion.


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