Businesses need confidence, coordination to boost growth
“Are we in a recession?”
A prominent banker asked me that question last week. It got my attention, because it hadn’t been on my radar.
The reply is that locally we aren’t in recession and aren’t likely to be, barring major global or national changes. National, state and local economies are still expanding.
On the other hand, Miami-Dade faces a confidence gap – and timidity acts like an anchor on growth.
Further, we have at hand in Miami-Dade a remedy for slow growth – outreach to other states and nations for direct investment, which now arrives for multiple reasons and can be markedly increased through strategic, coordinated work, raising our economy by our own efforts.
As for now, the Washington Economics Group in Coral Gables, a respected consulting firm, reported Friday that Florida is well above the national average in employment and population growth and led all populous states in earnings growth last year at 6.2%. Personal income in the state rose 4.9%, well above the 3.6% national average.
On the other hand, while the state as a whole is booming, South Florida seems to be growing far more slowly.
The report shows that while the key indicator of taxable sales throughout Florida grew 5.2% last year, the three South Florida metro areas all were below state average, with West Palm Beach growing 3.3%, Fort Lauderdale 2.9% and Miami lowest at 2.5% – less than half Florida’s average growth.
Employment gains showed the same disturbing trend. The state grew jobs by 3% last year, but Fort Lauderdale grew only 2.5%, West Palm Beach 2.2% and Miami was lowest at 1.9%. Yes, unemployment has tumbled, but we haven’t added many jobs.
Other economic factors seem to be working against rapid South Florida growth, based on a Friday report from the US Bureau of Labor Statistics. While US consumer prices fell 0.3% in March, easing burdens on households, and those national prices fell 2.4% over the prior 12 months, prices in South Florida in February – the most recent local figure – soared 4% from February 2016.
Another Friday report from the Bureau of Labor Statistics showed real hourly earnings for US employees rose 0.5% from February to March, heavily weighted by the dip in the Consumer Price Index together with a 0.2% rise in hourly earnings. Those figures have yet to be reported by region.
Another vital indicator of both economic health and business confidence is construction starts. As we reported two weeks ago, the value of South Florida starts fell 20% in February from February 2016. Fewer dollars spent on construction that begins now means far fewer construction jobs ahead.
That 20% cumulative construction drop masks two distinct streams. Residential starts fell 43% in February and for the first two months of the year 40%, while nonresidential starts rose 31% in February and 49% for the first two months.
Those figures indicate the end of another condo boom cycle but a shift of building toward other industries. Commercial construction could well produce more jobs per million dollars spent than would condo growth. Time will tell.
The pivotal factor might be business confidence. Will business leaders hunt opportunities or continue hoarding money in a cost-cutting wave that is already self-fulfilling the prophecy of tighter economic days?
Optimism breeds marketing and sales efforts that, smartly targeted, expand growth. Timidity and concern lead to cuts focused on marketing and sales that slow growth through inaction. In Miami, corporate belts have been tightened even during growth. If you spend less expecting a slowdown, you get one.
Granted, there’s much to be unsure of, globally, nationally and locally. War and peace, Brexit, rapid presidential flip-flops, China’s aims, Russian intentions, Latin America’s regimes, sea levels, Zika – the list is endless.
But uncertainty is a constant. New technology simply puts more of it in our face every day and then hypes it. Yet businesses can grow in the worst of times – and these times, while turbulent, are mostly good rather than bad.
So, where did our confidence go?
Many business folks here have scaled back efforts for global business, though we have long relied on the rest of the globe and our global brand gives us a huge advantage.
Globally, businesses and the wealthy are cognizant of the uncertainties but know that they have to reach out or shift resources elsewhere for multiple reasons, including those very uncertainties.
Where better than Miami, where they can base a US headquarters? We reported two weeks ago that a Spanish producer of surfaces for architecture and design is bringing its US headquarters to Coral Gables this summer, creating more than 85 jobs. They aren’t going to be the only one.
We can also reach out nationally. Any business that can be based here should be looking, if only to avoid the taxes of the Northeast, Illinois or California. The saving can be 10% to 15% just by escaping state and local income taxes.
Business moves should be for business. But it’s hard to beat the human reasons to live in Miami: weather, nature, culture, a global population, entertainment, sports and far more.
Luring businesses here seems so easy. Of course it’s not, but advantages for investment here are many.
Add now a new reason: Miami-Dade is opening huge opportunities to develop infrastructure in public-private partnerships that can be highly profitable while making Miami more livable. Start with six legs of transit, add a courthouse downtown – the list will grow. County hall is busy hanging out an “open for business” sign.
But to make sure the business community fires on all cylinders at once, we need to coordinate recruitment that brings investment. That means that when we target a region or nation, we send a united mission of business and government agencies rather than each group going on its own, which dilutes impact and confuses foreign partners.
Much of this challenge is going to fall to Michael Finney, who’s heading from running economic development for hard-hit rust belt Michigan to what should be an easier sell as CEO of our Beacon Council. With questions being asked about our economic health, he’ll have to hit the ground running – if only to quell doubts and help restore confidence that we shouldn’t lack.
Miami has economic growth. But it needs more united effort and a strong dose of self-confidence to maximize the advantages that already are ours.