Saturday, April 21, 2018
Business

Can Florida's economic recovery continue? 5 things to watch

Hard-hit Florida has closed the economic gap on the nation in recent months.

The question now: Can the state continue its slow but steady improvement, or will it get caught in the downward pull of the dismal national job numbers released Friday?

Florida's unemployment rate has fallen from its 11.4 percent peak to 8.7 percent, closing to within half a percentage point of the 8.2 percent U.S. rate. The state is no longer among the worst five states for unemployment, where it was mired for much of the recession's aftermath.

Like the nation as a whole, Florida's job creation record has been ragged. Last month, the state lost 2,700 jobs, though it's still up a net 52,600 jobs compared to a year ago.

Nonetheless, Mekael Teshome, an economist with PNC Financial Services Group, is among those confident that Florida's economic recovery remains on track and will continue to outperform the country this year in creating jobs.

Among his reasons for optimism: Foreign investment is still flowing into the state and the housing market is starting to recover. "The drop here was so sharp relative to the nation that the bounceback should be stronger," Teshome said.

Here are five things to watch to see if Florida keeps its recovery intact and avoids succumbing to another economic slump.

Hitting the gas

Lower gas prices are key, especially in an economy where tourism is a linchpin.

The lower prices put more money in the pockets of consumers to buy goods and provide greater savings for employers and manufacturers.

In Tampa Bay, unleaded gas prices are averaging $3.36, according to AAA's Daily Fuel Gauge Report. That's down from $3.72 a month ago. It's still high, but far removed from the $4 to $5 range feared not that long ago.

Job seekers may have to be patient, however, to benefit from lower prices at the pump.

"There's a lagging impact," said Scott Brown, chief economist with Raymond James Financial. "We're now feeling the impact from the recent peak, and it will be a couple months before we see the impact of lower gas prices."

A growing issue

For better or worse, Florida's economy is still largely driven by how much and how fast the state grows. It's a matter of attracting retirees, families and investors in second homes to Florida, lured by the persistently low interest rates.

Increasingly, the numbers are playing out in Florida's favor, said Mark Vitner, senior economist with Wells Fargo Securities.

"Net migration is picking up," he said, "and one of the reasons Florida is doing better is homes here are selling at a greater discount. More people are realizing Florida is a compelling bargain. It's clear to me housing has bottomed."

Lately, Tampa Bay builders are starting to build again as if they will come. New housing starts in the region rose 26.8 percent in the first quarter, according to Tampa's Metrostudy, a national company that tracks the construction industry.

"We're definitely coming out of the housing funk," said southwest Florida homebuilder Pat Neal. "We'll sell close to 500 homes this year and will be a bigger company than we were in 2005" before the housing bust.

The buoy from Brazil

International tourists and investors, particularly those from Brazil, have played an oversized role in propping up Florida tourism and housing.

Propelled by their economic success, Brazilians have recently emerged as Florida's fastest-growing group of overseas visitors and by far the biggest spenders. Brazilians spent $1.4 billion in Florida last year, nearly twice the level of their counterparts from the United Kingdom.

"A big risk to the outlook is if the Brazilian economy slows down more than we expect," said Teshome of PNC Financial.

Any slowdown in South America or Europe, however, shouldn't have an immediate impact on Florida tourism, said Pinellas County tourism chief D.T. Minich. "Most of the summer bookings (from Europe) were done in late winter or early spring," he said. "So they'll be coming no matter what the Euro does."

Of course, close to home, there's the added tourism boost from the Republican National Convention coming to Tampa Bay in August.

The hidden labor pool

There are 804,000 Floridians officially counted by the state as unemployed.

But that's only the above-water portion of the state's employment problem. It doesn't including those working part-time unable to find full-time work. And it doesn't include those who have temporarily given up looking for work either.

Last month, Florida's labor pool — the number of people either working or looking for a job — dwindled by 28,000. Some retired permanently; some went on disability or shifted their family from a two-income to a one-income household for the foreseeable future.

But Florida's economic future hinges in no small part on how many of them are discouraged job seekers sitting on the sidelines and ready to re-enter an improved labor market. When they do come back, that drives up competition and drives up the unemployment rate once more.

A temporary solution

Many companies hire temps before committing to full-time hires. That's why the temporary staffing industry is often viewed as a harbinger for future hiring.

If so, it has been a rather inconsistent year so far, says Jeremy Dixon, vice president of A1 Temps in Brandon, a division of Nesco Resources.

After a strong start to 2012, A1 clients pulled back for about a month and a half with business falling up to 10 percent, he said. Some shifted part-timers to permanent positions, but many just wound down short-term, contractual projects.

The last couple weeks, Dixon has seen another uptick in demand. But employers are extremely picky on whom they hire and what they're willing to pay.

"They're looking for unicorns that have this skill and this skill and this skill and want to work for $10 an hour," Dixon said. "I'm not sure you're going to get all that. And if you do . . . you'll lose them. If you want to invest money in training them, understand that you'll lose them (when the economy improves) because they know they're worth more than that."

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