Regional Update (October-December 1997)
Regional Update (October-December 1997)
Florida Continues to Drive Southeast Economy
|Florida Continues to
lorida, the largest of the Sixth Federal Reserve District states, will continue to be a major force in the region, pushing the southeastern economy forward in the coming year though probably at a slower pace than in 1997. Traditionally driven by services, most notably those associated with tourism and retirees, Florida is also picking up strength from increased trade with Latin America and an in-migration of business service jobs from other states. In the coming year, strength will persist in tourism and business services as well as commercial construction in support of both of these industries.
Services to Remain Strong
With over 35 percent of the state's total nonfarm employment, the service sector is a key component of Florida's economy. Dominated by tourist-related employment, the state's service sector also relies disproportionately on health care as well as miscellaneous office support jobs. Service employment grew by 5.3 percent in the state from the third quarter of 1996 through the third quarter of 1997. This increase in overall employment is strong when compared to the rate of a bit more than 3 percent growth for the state and just about 2 percent growth for both the District and the nation.
Hotel and motel service employment increased by a significant amount as a result of new facilities. Amusement and recreation service jobs added 49,000 employees to payrolls an increase of 9.5 percent from the third quarter of 1996 through the third quarter of 1997. Health services, Florida's largest single service subcategory, also posted employment gains but not on the same scale as amusement or business services.
In keeping with an economywide trend, Florida's business services will continue to expand in 1998, particularly those aimed at increasing labor productivity. Restructuring in the state's health care services industry is expected to slow, while increasing demand will provide more opportunities for providers.
Tourism Set to Continue Growth
Hotel and motel service employment is expected to continue to surge in 1998 due in part to Walt Disney World's adding 9,000 rooms over the next few years to accommodate an expected increase in patrons. Other hoteliers in central Florida are also expanding and will have more rooms available in 1998 to take advantage of the growing number of tourists coming to the area.
Florida's tourism sector finished the summer season on a strong note with high hotel and motel occupancy rates and historically high attendance figures for most attractions. Florida topped California and Hawaii to rank as America's number one spot for summer vacations, according to the Travel Industry Association and the American Automobile Association.
Walt Disney World's 25th anniversary celebration in 1997 brought many additional visitors to the theme park. New attractions at the park as well as at Universal Studios and Sea World are expected to further boost visits to the state in 1998. Universal Studios announced plans for a second major theme park in the area costing about $2.6 billion. Next year, Walt Disney World plans to open a fourth theme park, Animal Kingdom. The expansion of the Kennedy Space Center visitor's center, along with theme park expansions, signals continued strong growth for area tourism.
A $1 billion expansion of Orlando International Airport will allow the facility to keep pace with surging airline passenger growth into central Florida. The project will include new terminals and refinements of current structures. At the peak of this expansion, contractors expect to employ approximately 9,800 people.
In Miami, hotel and resort renovations are paying off with increased traffic that should continue in 1998. Cruise ship voyage demand is up with an unusually high level of bookings and deposits for 1998 to go with substantially increased capacity.
Manufacturing to Feature Moderate Growth
Florida's manufacturing sector, although accounting for only 7.7 percent of the state's total nonfarm employment, is important to the state because of the specialization of its key sectors. Total factory employment has changed little recently, increasing by only 0.3 percent from the third quarter of 1996 through the third quarter of 1997.
Most of the state's factory employment is concentrated in the durable goods sector. Electrical and electronic equipment, industrial machinery, and transportation equipment, which is centered around NASA, registered little growth in employment levels over the year. The lumber and wood segment posted job gains of 2.9 percent in response to residential and commercial building. Of the nondurables, the state's large printing and publishing industry reported moderate job gains of 1.4 percent.
The new year will bring some expansion in durables industries. Orders are increasing for aerospace firms and telecommunications equipment producers. As a result, employment in the electronics and transportation equipment sectors is poised for growth in 1998. Employment in the state's defense industry apparently has begun to stabilize following years of downsizing. Lockheed Martin's Orlando missiles unit has received a large contract from the U.S. Army, and the unit will also gain jobs from a defense electronics plant closing on the West Coast. NASA will provide a solid employment base for Florida's Space Coast as government funding appears stable.
Motorola will spend $40 million expanding its facility in Plantation, adding more than 250 new jobs to produce digital two-way radios. The expansion is one of the largest in Broward County this year. The lumber and wood industry will probably suffer if residential construction slows in the new year, but the printing and publishing business will continue its moderate growth path to serve the state's growing population.
Trade Remains Strong
Trade provides significant employment in the Florida economy. The top exporting industries are industrial machinery and computers, electrical and electronic equipment, transportation equipment, chemical and fertilizers, and scientific instruments. These industries accounted for about 70 percent of the state's overseas shipments in 1996.
Construction to Remain Healthy
The single-family home market remained historically healthy during 1997 even though the pace of construction has slowed over the last year. Single-family permit growth rates statewide turned slightly negative in late 1996 and remained so in 1997. Existing home sales in the state followed the same trend. Among metropolitan areas only Orlando, Sarasota and Tampa were on pace to exceed last year's permits because of the rapid job growth in these areas. Multifamily construction growth, much of which took place in south Florida, was strong in 1997. Growth should be more moderate in the coming year, down from the very rapid growth of the middle part of this decade but supported by fundamentally good job growth.
Through the end of August 1997 nonresidential construction in Florida was on track to surpass both 1995 and 1996 construction levels in terms of square feet. Nonresidential construction activity has been strongest in the Miami and Tampa/St. Petersburg areas.
The office market throughout the state remains in good shape, with no serious buildup of vacancies. Jacksonville is the notable exception as its vacancy rate began to rise in the second quarter in both the suburbs and the downtown markets. The tightest office market remains Orlando as vacancy rates edged down even further in 1997. Retail construction has been concentrated in Orlando's tourism industry. Construction is scheduled to begin on a new regional mall in Orlando in late 1997 that will encompass 1.2 million square feet of retail space.
Industrial construction markets in Florida remain strong overall with Orlando and Miami leading the pack. Industrial growth is expected to remain strong in the coming year as vacancy rates are low and general job growth continues to expand. Overall, nonresidential construction will maintain a healthy pace in the coming year.
Agriculture Forecast Indicates Moderate Growth
Oranges represent Florida's number one crop, with over $1.1 billion in cash receipts in 1995. The Medfly infestation that hit the Tampa area in late May 1997 had little impact on the citrus crop, and most federal quarantine restrictions were lifted in October. Florida's orange production of over 226 million boxes in 1996-97 was 11 percent higher than the 203 million box level in 1995-96. The present forecast for the 1997-98 season is 254 million boxes.
In 1997 the number of acres of sugarcane harvested was approximately the same as in 1996 at 438,000 acres. The yield increased by 2.7 percent to 34 tons per acre. Total production also rose 2.7 percent to over 14 million tons. If conditions remain favorable, production should increase in 1998.