Employers will continue adding jobs, but will still face familiar headwinds.
An airline merger will bring more international visitors and cargo through Miami. But those trade gains may be offset by the falling price of gold.
In nearly every sector, South Florida’s economic outlook for the new year is a mixed bag of cautious optimism.
Analysts point to a relatively strong finish to 2013 as a sign that positive momentum will continue into 2014. But temper expectations, they warn, that this year will restore the region to pre-2007 prosperity.
The impressive rebound in South Florida’s housing market during 2013 silenced most skeptics.
The arrival of 2014 will reveal just how much staying power there is in the housing recovery.
Virtually everyone who tracks the region’s housing market doubts that home prices in Miami-Dade and Broward counties will jump as much as they did in the past year. Instead of double-digit, year-over-year price spikes, market watchers expect single-digit price increases in the new year.
“There are some headwinds in the housing sector we’re going to be dealing with in 2014,” said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. “Prices will rise again, but the pace will diminish.”
The reasons are many.
The big price gains for homes and condominiums in South Florida over the past two years have pushed many investors to the sidelines as bargains got scarce. That leaves the housing market more dependent on the actual end-users.
“It’s going to be a test of Florida’s ability to transition from Blackstone,” Snaith said, referring to the giant investment firm that has snapped up thousands of homes for rental, “to Mr. and Mrs. Black.”
Major national policy issues also are conspiring to slow the housing market — including in South Florida.
New banking regulations stemming from the Dodd-Frank law are likely to crimp the availability of mortgages. The Federal Reserve’s tapering of its bond-buying program will spur higher interest rates, making home purchases less affordable. And the implementation of the Affordable Care Act will trigger more uncertainty, Snaith said.
At the same time, South Florida home buyers will likely have a bigger selection of homes and condos to choose from, which could curtail the bidding wars that recently became common amid tight inventory.
Still, those looking for a bubble to burst in Florida’s housing market may have a long wait.
Experts say the lending situation is completely different than it was before the last bubble burst in South Florida. Many properties sold for cash, and even those with mortgages typically involved higher levels of equity from better qualified borrowers.
“The financing situation is what is preventing this from becoming a bubble,” Snaith said. “We don’t have that easy sugar high that was in place” during the last boom.
Miami could use a new hiring trend in the new year.
While 2013 continued the recovery that began in 2010, the pace lagged for much of the year. As of November, the most recent month with data available, Miami-Dade employers added 10,400 jobs in 2013, compared with 15,000 for Broward’s smaller economy to the north.
The fall labor reports did bring more encouraging numbers — job growth spiked in Miami-Dade to an annualized rate of 5 percent, the highest since April 2012, according to the federal Bureau of Labor Statistics. If those gains aren’t given back in the coming months, 2014 could be the year that finally moves the recovery into an expansion, closing South Florida’s 60,000-job gap from its pre-recession peak of 1.9 million payroll slots (hit in August 2007).
“I have a more positive outlook than a month or two ago — mainly because of signs of more rational economic policies coming out of Washington,” said Robert Cruz, Miami-Dade’s official economist. “If we get relatively good local payroll numbers for December, I think we’ll have enough confidence to expect a meaningful acceleration of job growth in 2014.”
Still, the housing crash looms large in South Florida’s recovery in the employment sector. While sales of existing homes have revved up and prices are on the way up, new-home construction still hasn’t bounced back enough to move the hiring needle in Miami-Dade.
The University of Central Florida predicts 2 percent job growth for South Florida in 2014. That’s a respectable figure, given that the university projects that South Florida will end up posting a 2013 job-growth rate of just 1.5 percent.
Moody’s handicaps Miami-Dade as an underperformer for its 2014 hiring list, with job growth forecast at 1.8 percent increase in payroll slots. That’s below the regional forecast of 2.2 percent and the national forecast of 2 percent, not to mention the 2.4 percent job growth that Moody’s predicts for Broward’s payrolls.
“Miami had a more substantial debt overhang, and household de-leveraging will prevent it from growing as fast as the nation,” said Chris Lafakis, a Moody’s economist who follows South Florida. Translation: Underwater mortgages are still holding back spending.
And government employment remains the biggest anchor to employment, with Miami-Dade’s public sector down about 5,000 positions from just a year ago.
Small businesses, too, added jobs in 2013, but not enough to restore 2007-level hiring, according to the nonpartisan National Federation of Independent Business. The federation’s most recent optimism index showed that small-business owners reported increased concern about the cost and availability of insurance for employees.
“There is also a hint that employers are getting an inkling of what Obamacare might mean for labor costs,” federation chief economist Bill Dunkelberg said of the survey. “This will be a major source of angst and uncertainty in 2014.”
Victoria Villalba, president of Doral-based staffing firm Victoria & Associates, said she isn’t expecting anything but modest growth in the new year. She saw her sales grow by about 4 percent in 2013 but had expected a stronger performance when the year began.
“We’re seeing recovery in all sectors,” she said. “But it’s just been slow.”
Tourism jobs continued to climb in South Florida in 2013, as they have steadily since 2009.
The Greater Miami Convention & Visitors Bureau reported 110,500 jobs in hotels, restaurants and other positions that service the tourism industry, up 3.5 percent from 2012.
And tourism dollars kept rolling in. Hotel rates ticked up in 2013 and should keep doing so in the new year, according to Scott Berman, head of the U.S. Hospitality and Leisure group at PricewaterhouseCoopers in Miami.
The average daily hotel rate in Miami-Dade was $174.05 in October, the most recent month for which data is available, according to Smith Travel Research. That represents a 7.9 percent year-over-year increase. Occupancy rates also grew in the same period, reaching 77.8 percent.
“When you exceed 70 percent occupancy, basic economics tells us that you can increase pricing due to high demand,” Berman said. “The expectation is that occupancy rates will remain strong, and consumers can expect to pay more for hotel accommodations in greater Miami.”
While Miami Beach hotels fetch the highest room rates in the area, Berman said he is keeping an eye on new hotel openings downtown, in Brickell and near Miami International Airport. He credited the airport for making Miami more accessible to international travelers.
“By opening new flight routes, particularly in Latin America, that is very helpful to the lodging industry,” Berman said.
He noted that the American Airlines-US Airways merger could add routes between Miami and Asia that would bring business travelers and tourists with deep pockets.
“That’s really a robust region, and if we want to talk about segments that spend money, the Chinese are near the top,” Berman said.
“All of this considered, our view is that the market will continue to grow.”
The newly approved AA-US Airways deal, which will create the world’s largest airline, also should expand Miami’s appeal as a cargo hub. The merger is expected to increase shipments between Miami and Amsterdam, Athens, Tel Aviv, Venice and other cities.
But Ken Roberts, whose Coral Gables-based WorldCiy compiles and analyzes trade data, warned that potential trade boosts from the airline merger could be offset by falling gold values and other factors.
“The days of easy trade gains appear to be, at least for the short- to medium-term, over,” he said. “Not only have we got enough ‘stuff,’ but now we are buying tablets and smartphones instead of computers. They are less expensive and they are lighter, which have an impact on import-export trade numbers.”
Roberts said South Florida’s economy will need time to recover from the burst of the “gold bubble.” The region benefited when investors “flocked to gold as a security blanket” during the economic downturn, he said.
“Gold’s value skyrocketed, and everyone, from companies selling mining equipment …to mine owners in Mexico and Colombia … to logistics companies shipping gold as quickly as they could, profited,” Roberts said.
Much of that cargo went through Miami International Airport, which became the nation’s leading import destination for gold; the precious metal was South Florida’s top import and export in 2012, Roberts said.
“That will not be the case in 2013,” he continued. “South Florida’s trade is paying the price for [the gold bubble] now, and will continue to pay for it in 2014.”
The housing crash and hiring crisis used to be the main culprits behind Florida’s deep dives in consumer confidence. But in recent years, Washington has largely been to blame.
October’s government shutdown sent confidence plunging in the Sunshine State, with the University of Florida’s confidence index dropping faster than at any time since April 2011 (when the United States was approaching that year’s debt-ceiling crisis).
But Chris McCarty, the economist behind the university’s confidence survey, sees a less worrisome year ahead when it comes to the nation’s capital.
“There’s less drama in Washington,”’ McCarty said. “It looks like Washington will be less of a confidence driver here in Florida.”
The bipartisan budget agreement reached in December seems to have removed from the political table another government shutdown. And while the latest debt-ceiling limit is again on the fiscal horizon, Washington watchers sound less resigned to the inevitability of another brinkmanship moment that rattles markets and consumers alike.
Still, McCarty sees housing losing its ability to inspire in 2014. Residential prices soared in 2013 — up 15 percent in 12 months in the Case-Shiller’s October report for South Florida that was released on Tuesday. Most analysts predict at best a leveling out of those prices next year, with a normal market unable to sustain that kind of velocity.
If the momentum slows, the pace is bound to serve as a reality check for homeowners who may have been caught up in 2013’s real-estate frenzy.
“Those who are expecting their home values to get back up to where they were in 2006 or 2007 before they sell,” McCarty said, “they’re going to be waiting a while.”
Source: Miami Herald