Regional Update (October-December 1998)
Regional Update (October-December 1998)
Florida Growth to Slow but Remain Strong
|Florida Growth to Slow
But Remain Strong
lorida had a good year in 1998, outpacing the United States in the growth rate of employment. To be both large (the fourth-largest state in the nation in terms of population) and rapidly growing, Florida has strong economic fundamentals. These fundamentals should remain strong during 1999. However, possible international problems may slow the state's economy in the coming year. Nevertheless, in 1999 Florida should remain a major source of strength in the Southeast and the nation. Growth in the state will be led by services, especially tourism.
Service Sector Remains Strong
The strongest single sector for Florida is the narrowly defined services sector that is, the traditional service sector less finance, utilities, and wholesale and retail trade. This subset of service industries, ranging from health care to entertainment, continued to post strong growth in 1998, with employment up by 6 percent, slightly slower than the growth rate in 1997.
During the past three years Florida has added over 300,000 employees to service industries' payrolls. Employment growth in the hotel and motel industry as well as in recreational services has been notable because of the expansion of theme parks and attractions. Business services have also experienced exceptional growth more than 11 percent in 1998 following 15 percent in 1997. In fact, during the last three years Florida has added more than 150,000 workers to business services payrolls. The largest of Florida's service categories, health services, which represents a quarter of the state's service industry jobs, posted moderate growth during 1998.
Slower economic activity nationwide in 1999 will likely put the brakes on the state's business services growth, but other categories such as hotel and motel services and recreational services will continue to add to payrolls because of expanded theme parks and new hotels, primarily in the Orlando area. Television and movie production is also expected to expand in 1999. Steady demand will sustain health care services, but a shortage of nurses will probably continue to plague the industry.
Tourism Continues to Boost State
Wildfires in early July temporarily set back the state's significant tourism industry. Smoke from the fires forced the closure of a major highway and the cancellation of a car race at Daytona Beach, resulting in an estimated economic loss of $300 million to the area. The race was rescheduled and run later in the year, so some of the loss was recouped. Although tourism declined somewhat from 1997's record-breaking levels, theme park and convention facility expansions are likely to keep a steady stream of visitors coming to the Sunshine State in 1999.
Disney officials say that the new $800 million Animal Kingdom attraction, which opened in 1998, will expand over the next seven years, attracting more visitors. Universal Studios is expected to open its new $1 billion theme park, Islands of Adventure, in 1999. By the end of 1999, central Florida will be home to nine full-size theme parks. Thousands of new jobs should be created over the next few years because of the expansions.
Although hotel/motel occupancy levels for Orlando were down in 1998, there were more than 2,200 rooms added to the market, and average daily rates increased notably. Disney's new cruise ship, the Magic, made its debut and is not only attracting tourists to Florida for cruises but is also attracting visitors to Disney's Orlando theme parks. Another Disney cruise ship, the Wonder, is scheduled to launch in 1999. Orlando-based theme parks are not alone in expansion plans. Busch Gardens in Tampa plans to construct a 1,000-room hotel and is expanding the park in hopes of becoming a destination resort.
Florida's convention business is also expected to increase substantially in the near future. A 2.4 million square foot trade expo, along with expansion of existing facilities in Orlando, will reportedly make the area the largest trade and convention center in the world, although traffic concerns may delay the project. The $3 billion expansion of Orlando International Airport is expected to help boost the attractiveness of the area for tourists and conventioneers.
Manufacturing Forecast Is Mixed
Florida's factory sector weakened slightly in 1998 following two previous years of unspectacular growth. Only about 7 percent of Florida's workers are employed in the state's factory sector. With about 490,000 people, though, manufacturing makes a crucial contribution to Florida's economy.
Over 60 percent of Florida's manufacturing employment is concentrated in durable goods industries. About one-fifth, or 63,000, of Florida's durable goods manufacturing workers are employed in electrical and electronic equipment industries.
These industries, as well as industrial machinery, posted little job growth from the third quarter of 1997 through the third quarter of 1998. Transportation equipment industries, which include aircraft engines and parts, guided missiles and boat manufacturing, grew by 5.3 percent. Some of this growth, but much less than in previous years, was related to defense contracts. Employment in the state's lumber and wood industries held steady.
In the nondurable category, employment in the state's paper and printing and publishing sectors declined.
Manufacturing in the state should slow somewhat in 1999. Weakness in foreign markets will probably dampen exports of electrical and electronic equipment and machinery and computer equipment, Florida's top factory exports in terms of dollar amount. Additionally, the continuing lack of skilled labor may restrain growth for some of the state's many high-tech companies.
Continued weakness in foreign markets and some drop-off in domestic residential construction are expected to slow lumber and wood industries, while the printing and publishing sector will benefit from steady demand as a result of Florida's expanding population.
Latin America's Performance
Exports are important to Florida's economy. In 1997, exports' share of gross state product reached nearly 9 percent and accounted for 1.2 percent of the state's growth.
While the pace of export growth slowed in 1998 to 5 percent from double-digit gains, imports advanced more than three times faster than exports. The state's international sales were still sustained by strong demand from Latin American countries for products such as food, textiles and apparel, and advance-manufactured products for intermediate and final consumption. The most noticeable impact of the Asian crisis on state exports so far has been a reduction in shipments of citrus fruits and chemical products to Japan and other Asian markets.
The most noticeable impact of the Asian crisis on state exports so far has been a reduction in shipments of citrus fruits and chemical products to Japan and other Asian markets. The severity of international economic weakness and its potential effect on the financial stability of Brazil, Florida's largest trade market, pose risks to the state's export outlook.
Construction Growth Modest
During 1997, single-family building permit growth slowed versus the previous year. The single-family home market improved during 1998, however, and permits issued during the third quarter grew by 15.4 percent over the third quarter of 1997, well above the national rate.
Permit growth was particularly strong in the Jacksonville, Orlando and Tampa areas. On a quarter-to-quarter basis, existing home sales have continued to improve since the fourth quarter of 1996. The pace of single-family construction in Florida should remain moderately strong in 1999, although some slowing is possible as new net job creation slows.
Florida's multifamily construction, which accounts for just over 50 percent of the Southeast's market in terms of permits, slowed somewhat during the second quarter of 1998 after experiencing strong year-over-year growth during the first quarter. But activity rebounded in the third quarter as the number of multifamily permits grew 10.5 percent, measured year over year, though this pace was well below the Southeast's rate of 18.1 percent. Orlando continued to be the strongest market in terms of both the number of permits and the rate of permit growth. In 1999, multifamily permits in Florida will likely moderate but remain at respectable levels, in line with population growth.
Citrus and Cane Are Key to Agricultural Performance
Oranges brought in over $1.1 billion in cash receipts to Florida in 1997. The medfly infestations that threatened citrus crops in 1998 had a negligible impact, and Florida's orange production of over 304 million boxes in 199798 was 3 percent higher than the previous record crop of 199697. The 199899 crop was stressed somewhat by the recent drought, however, and current maturity tests show that the oranges have considerably higher acids and lower juice than in 1997.
Although the number of acres of sugarcane harvested in Florida in 1998 increased 1.8 percent over 1997's acreage, to 448,000 acres, the yield per acre decreased by 2.4 percent to 36 tons. Total production fell 0.7 percent to over 16 million tons. If conditions remain favorable, total production should increase in 1999.