Thanks to a strong business climate, Florida should continue to outpace the national economy when it comes to real gross domestic product and job growth through 2020, according to the latest forecast from the UCF Institute for Economic Competitiveness. But maintaining a competitive advantage when it comes to luring companies to the Sunshine State will be key to that ongoing success, says University of Central Florida economist Sean Snaith.
“When the father of modern economics, Adam Smith, envisioned a perfect world of laissez faire economic theory, there wasn’t a need for economic-development agencies or economic incentives, much less Pitbull,” says Snaith, referencing the popular rapper at the center of Florida’s recent – and beleaguered – tourism promotion.
Paying Mr. Worldwide, aka Pitbull, $1 million to appear in a music video promoting the state’s beaches might have been a public relations fiasco for the state’s tourism agency, Snaith says, but that doesn’t mean the state should abandon all of its economic-development efforts.
“Today, the competition for business among states and regions is so high, the role of economic-development organizations should not be discounted,” he says.
Site Selection Magazine’s 2016 survey ranked Florida’s business climate 11th overall of the 50 states, but that strong ranking doesn’t preclude the need for promotion, said Snaith, who is the director for the Institute for Economic Competitiveness at the UCF College of Business. The magazine surveyed corporate real estate executives about what matters most to site selectors when choosing locations — incentives ranked No. 2 on the top 10 list behind workforce skills and ahead of state and local tax plans.
“While a single factor in and of itself would not guarantee a state success when it comes to business attraction — and there are other economic factors that matter—it is clear incentives matter, economic-development agencies matter and industry-promotion agencies matter,” Snaith said.
The latest Florida & Metro Forecast from the Institute for Economic Competitiveness shows Florida’s economy, as measured by Real Gross State Product, expanding at an average annual rate of 3.8 percent from 2017 to 2020. In addition, Real Gross State Product will expand by 3.2 percent this year. It will expand by 4.3 percent in 2018 before growth eases slightly to 4.2 percent in 2019 and then to 3.4 percent in 2020. Average growth during 2017-2020 is expected to be 0.7 percentage points faster than the Institute for Economic Competitiveness’s forecasted average for U.S. Real GDP growth over the same period.
Payroll job growth in the state is robust and continues to outpace national job growth. Year-over-year growth is forecasted to average 2.6 percent in 2017, 2.5 percent in 2018, 2.4 percent in 2019 and 2 percent in 2020. Average job growth from 2017-2020 period is expected to be 0.8 percentage points faster than the national economy.
The forecast shows labor force growth in Florida averaging 2 percent from 2017-2020. Consistent robust payroll job creation has strengthened Florida’s labor market, and the pace of Florida’s labor market recovery continues to exceed the recovery of the national job market.
This same labor-force growth makes the task of lowering the state’s unemployment rate more challenging, but Snaith says Florida’s labor market is up to the task. The unemployment rate should fall to 4.6 percent in 2017, 4.3 percent in 2018, and 4 percent in 2019, and then to 3.8 percent in 2020. Professional & Business Services (5.6 percent), Construction (5.1 percent), Financial (2.3 percent), Leisure & Hospitality (2 percent), Trade, Transportation & Utilities (2 percent) and Education & Health Services (1.6 percent) are expected to have the strongest average job growth during 2017-2020.
Snaith says housing starts will accelerate going forward, but not fast enough to completely ease the shortage of single-family housing in the short-run. Total starts likely will be 128,600 in 2017; 142,800 in 2018; 155,300 in 2019; and 170,500 in 2020. House-price appreciation should decelerate over this period as supply catches up with demand.
“The January 2017 single-family home report released by Florida Realtors portrays a market for existing housing that remains tight, fueling double-digit price appreciation,” says Snaith, noting that the median sales price for single-family homes increased $20,100 in January, year-over-year, and now stands at $220,000 while the town home/condominium market saw an increase in the median sales price of $10,000 to register at $161,000.
He projects real personal income growth to average 4.7 percent during 2017-2020, with 3.4 percent growth in 2017 and rising to 5.7 percent growth in 2019. The forecast shows Florida’s average growth will exceed the national rate by 1.2 percentage points over that four-year span.
In addition, retail sales will grow at an average pace of more than 5.1 percent during 2017-2020, boosted by a stronger national economy and continued strength in Florida’s labor market and rising household wealth.
For the full forecast, visit: https://www.dropbox.com/s/wx54f6r2jxkn6ew/UCF_FLMetro_Forecast-March2017.pdf?dl=0 [1]
Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses. Through these analyses, the institute provides valuable resources to the public and private sectors for informed decision-making.