Economic conditions in Florida and Manatee County expected to strengthen in 2013

jsalman@bradenton.comNovember 5, 2012 

MANATEE -- Florida's economy this year has yet to build the momentum predicted by even the most cynical forecasters.

But that hasn't stopped those same economists from predicting even bigger strides in 2013 -- led by a stabilizing home market, strengthening retail sales and payroll job growth.

While the national economy has sputtered and Europe grapples with its financial crisis, Florida's mending economy will surpass the broader recovery next year, according to the latest forecast from the Institute for Economic Competitiveness at the University of Central Florida.

The institute believes Real Gross State Product -- the primary indicator to gauge Florida's economic health -- will expand by 1.7 percent in 2013 and 3.9 percent by 2015.

"In 2012, we sort of muddled through the year, and the next couple months will be more of the same," UCF economist Sean Snaith said. "But as some of the unsettling issues from the election begin to lift, more of these things will turn."

Most of the subtle improvements so far have been fanned by the healing real estate industry, which is on

track for its best year since the historic crash.

Snaith expects housing to similarly drive the recovery next year and into 2014.

That will allow the labor market to also build momentum, especially in Manatee and Sarasota, where so many of the recession's job losses were tied to housing.

Even the plagued construction sector will begin to see job growth by the end of 2013, according to the UCF report.

Economic and population growth provide the foundation for the housing sector to grow -- feeding the demand and improving price points.

That has already began to reinvigorate the building industry and restore equity to Southwest Florida homeowners.

UCF predicts housing starts will continue to creep higher to close out the year and begin to accelerate further into 2013. Total starts will be just under 120,000 in 2014 and just more than 157,000 in 2015 -- the highest level since 2006, according to the forecast.

Those increases are expected to lift job growth in construction by 5 percent during the next three years.

"Job growth in construction will actually have the largest rate increases," Snaith said. "That's somewhat misleading because the industry was drastically curtailed by the housing crisis. But we're starting to see some steady growth and indicators moving up again."

Economists believe the presidential election will erase some lingering uncertainty still muddling the minds of employers -- many of which have been on the verge of hiring or expanding operations.

Decisions still loom on the federal deficits, the fate of the Bush tax cuts, and reductions in military spending slated to take effect in the new year -- all of which can become a drag on the economy.

But overall, payroll job growth year-over-year is expected to grow from 0.9 percent in 2012 to 2.5 percent in 2015.

The biggest jobs will come in construction, followed by professional and business services at 4.6 percent; trade, transportation and utilities at 3.2 percent; education and health services at 2 percent; and information at 1.6 percent, according to forecasters.

The size of the labor force remains the linchpin to predicting the future path for the unemployment rate in Florida.

The timing and extent to which discouraged workers re-enter the labor force will be a key in determining the direction of the unemployment rate, Snaith said.

As of late, unemployment in Florida has improved even despite a growing labor force.

The strengthening labor market and restored home values both will work to build personal income by 4.7 percent next year and another 5.3 percent in 2014.

"Areas like the housing sector continue to improve, but we still have a ways to go in this recovery," said Gary Jackson, director of the Regional Economic Research Institute and economics professor at Florida Gulf Coast University.

Another key component to Florida's recovery next year, Jackson said, will be the housing markets in states such as Michigan, Ohio and Minnesota.

Poor property values have stalled plans for thousands of retirement hopefuls who are waiting for conditions to improve before they can sell a property and move down.

Consumer confidence also is climbing, which should clear the way for retail sales to grow at an average pace of 4.1 percent during 2012-2015 after growing in 2011 at the fastest rate since 2005, according to UCF.

But Jackson cautions that the recovery process will continue to be slow even as the situation begins to look more optimistic.

"It's been a long recovery -- a lot longer than people initially thought," Jackson said. "We're going to see positive growth, but not nearly where we would like to be in the long run."

Many businesses remain wary about expansion. Others just can't afford to yet.

As long as the Federal Reserve keeps interest rates at record lows, banks are going to remain hesitant to write loans the that drive expansion if they barely outperform inflation, said Paul Mason, an economics professor at the University of North Florida in Jacksonville.

"I don't see the growth next year being very large -- quite frankly, pending the results of Tuesday's election," he said. "The economy needs some kind of spark for business to invest. That's not out there, and it won't be as long as the Fed keeps its rates so low."

Josh Salman, Herald business writer, can be reached at 941-745-7095. Follow him on Twitter @JoshSalman.

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