Professional Business Services Lead Florida Economic Rebound
Written by Lou Ortiz on May 24, 2012
By Lou Ortiz
The state’s economy is showing signs of life and growing at "the speed of a tortoise," with professional and business services expected to grow 4.4% over the next four years while construction is projected to make a comeback, starting with a 3.6% increase in 2014, according to projections by the University of Central Florida in Orlando.
The Institute for Economic Competitiveness calculated Florida’s unemployment rate at 9.4% in April, but when discouraged workers who have dropped out of the job market are accounted for — along with those who are underemployed — the rate jumps to 17.6%.
"When the discouraged workers become encouraged to re-enter the job-hunt, this will put upward pressure on the unemployment rate," the report said.
Still, the institute’s report said that "Florida’s economic recovery began in 2010, and the first year of real Gross State Product growth was a tepid 1.4%," totaling $747.7 billion. Projections are that the gross state product will climb to 2.6 in 2013; that will increase to 3.4% in both 2014 and 2015, reaching $912 billion in 2015 and eventually topping $1 trillion in 2017.
"Florida’s economic future remains bright and economic growth will accelerate in the future," the report said.
The institute expects a bounce-back in construction with 3.6% growth in 2013, before it kicks into high gear with a 13.2% increase in 2014 and a 15.5% hike in 2015. For the Miami-Dade and Broward County region, the report projects 4.2% growth next year, increasing to 13.7% in 2014 and 16.0 in 2015. But that growth comes after six years of steady declines, averaging more than 12% a year.
The projections for both the state and Miami-Broward regions are based on housing starts.
The report projects that overall housing starts in the state will total 84,000 units in 2013, up from 58,300 the previous year; 126,300 in 2014; and 162,100 in 2015.
For Miami and Broward, housing starts are expected to increase 3,741 to 17,312 in 2013; 8,124 to 25,436 in 2014; and 8,290 to 33,726 in 2015.
The "Siamese twins" of economic growth, construction and housing starts are tied to the reduction of housing inventories in the state. In March 2011, there were 172,555 single-family properties available. But that number had declined by 32% to 117,031 in February this year.
Condominium inventories have also fallen from more than 100,000 between 2008 and 2010, to 62,079 in February, the report said.
"The long-suffering construction sector still has another year of job losses before it finally joins in the labor market’s recovery," the report said. "Job growth will return to the construction sector in the first-quarter of 2013; this will be the caboose as far as the private sector jobs train is concerned."
In addition, the institute reports that with more disposable income, pent-up demand, and a sense of job security among more Floridians, average yearly retail sales would grow 4.7% from 2013 through 2015.
The institute projects an increase in personal income from $697 billion in 2009 to a post-recession high of $783 billion this year to $901 billion in 2015.
"As the economy continues to recover, consumers’ pent-up demand for automobiles and light trucks continues to be released," said the report, which partly attributed the rise in consumer spending to higher gasoline prices.
Nonetheless, the report said, "In 2015, registrations will reach 1.41 million, representing an increase of over 711,000 registrations from 2009" but still far less than 1.44 million in 2005.
As baby boomers continue to retire, the institute expects the Sunshine State’s population to climb an average of 1.4% over the next four years, from the current 19.3 million to 20.9 million in 2015.
The institute is also projecting average yearly gains in retail and wholesale trade, transportation and utilities of 3.5%; manufacturing, 2.2%; and education and health services, 1.8%.
But education "will likely constrain employment levels" as "schools face significant revenue constraints due to the housing sector’s ongoing malaise and its impact on property tax-based revenue, the report said.
The director of the institute, Sean M. Snaith, said a number of minefields dot the economic landscape.
"There is a lot of uncertainty nationally and Florida as well," said Dr. Snaith, a Ph.D. in the College of Business and Administration. "The big thing is what is going to happen with healthcare reform. That’s a black cloud hovering over the business community.
"Another issue is what is happening in Europe," he said. "This is a crisis that continues to play itself out and affects our financial markets and trade. If the euro collapses the US economy would go back into recession."
But other apples could turn the economy sour. "The national debt continues to mount, and we’re facing a number of decisions," Dr. Snaith said. "At the end of 2012 and early 2013, there could be potential shocks to the economy."
Miami-Dade County Chief Economist Robert D. Cruz said the European market accounts for about 25% of US exports. He said the US economy could also be harmed if China and India, which help support the global economy, fail to succeed in balancing economic growth with rising inflation.
"This is a particularly difficult environment for making economic predictions through 2015 because there are several factors that can significantly impact the national and local economy," Dr. Cruz said.
"In this type of economic environment, it is especially important to have strategies to protect your business," he said, "or take advantage of potential opportunities, under different economic scenarios."
Dr. Cruz added that other potential shocks to the economy include the expiration next year of the Bush-era tax cuts, and the end of the 2% reduction in payroll taxes.To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.