Economic Forecast 2005: Ready to Burst?

January 24, 2005 -

Expect trade and hospitality businesses to lift South Florida economy if real estate goes pop

Miami Daily Business Review
By: Mike Seemuth

Trade, tourism and real estate development have been powerful drivers of the South Florida economy for decades, but not always at the same time. During the first months and years after the Sept. 11 attacks in 2001, for example, trade and tourism sagged while development surged. Last year, a quartet of hurricanes also took a shot at the local economy.

But throughout the post-Sept. 11 recession and beyond, construction and real estate development kept the local economy humming.

As interest rates rise, the condo market gets flooded with new construction and housing starts weaken, talk of a real estate bubble is intensifying.

And if it does burst, which pillar of the economy will be there to prop up the local business community?

Construction and other lines of development-related work are expected to grow at a slower rate in 2005 while trade, tourism and other economic sectors accelerate.

“We’re likely to see a relatively modest year of growth in construction,” said Antonio Villamil, chief executive of consulting firm Washington Economics Group in Coral Gables. “We are most likely to see much of the growth taking place in other areas.”

A good portion has come from the flock of construction cranes dotting the local landscape. South Florida employment grew by 41,700 jobs in the 12-month period that ended in November 2004 and construction work accounted for 4,900 of the new jobs, or about a tenth of the total, according to the state government’s Florida Research and Economic Database.

Leisure and hospitality employment in the three counties grew by 6,500 jobs to 234,100 in the 12 months ended November 2004, a 2.9 percent increase, and the momentum may well carry over into this year.

“The visitor industry will do well,” Villamil said, especially international tourism, lifted by overall economic improvement in Latin America and the decline of the U.S. dollar against the euro, which has a Florida vacation easier for Europeans to afford.

Better-paying jobs in international trade also are likely to multiply at a rapid rate in 2005. Greater freight volume at Miami International Airport is one barometer pointing to a resurgent trade-related business. “The warehouses in the Doral area will start to hum again,” Villamil predicted.

“Latin American economies generally are performing well,” Villamil said, citing as examples Central America, Argentina, Colombia, Chile and Venezuela. “Economic growth in these and other countries have made Latin Americans more willing and able to import from the United States,” he said.