Take a Deep Breath

By Hannah Wallace November 30, 2007

After reading the 2008 forecasts in this issue, I can understand why economics is sometimes referred to as the dismal science. The predictions from most of our local industry experts for the coming year are grim, so I thought I’d try one more expert to see if there is any good news on the horizon. Per Berglund, the senior economist from worldwide economic forecaster Moody’, has a special focus on the Florida economy.

“Your particular area is one of the hardest hit,” he admits. “2008 is going to be a mediocre year, with very little hope for recovery, but [I guess this qualifies as good news] there’s not a major disaster out there.”

Here’s what Berglund sees ahead for us:

· Further price declines in residential housing. “Transaction volume didn’t stabilize because of the credit crunch,” he says. “Once the market bottoms out and the transaction volume of existing units stabilizes, it will take a year before you’ll see recovery. We’re hoping early next year [2009].”

· Unemployment in the construction industry will continue to climb and employment in the financial industries will grow much more slowly than before. Berglund, however, believes even our peak unemployment levels will remain lower than the national average.

· Retail spending has started to slow because people aren’t extracting equity from their homes. The hardest-hit sectors, according to Florida tax revenues, are construction-related products, durables and automobiles.

· However, “incomes are doing excellent,” he says, “as they are around the nation.” For that reason, other consumer products are holding up well.

· “Tourism is also holding up well although we’ll see some leveling off,” he says, “and the U.S. dollar is attracting international tourism.”

· The strongest sectors of our economy are education, healthcare, and leisure and hospitality. Professional business services will expand, but more slowly.

· Berglund does not believe Florida is in a recession or headed toward one. “We don’t see any part of Florida qualifying at this point.”

Anything else?

“I just have a sense that some people in Florida have gotten overly pessimistic,” he says. “You’re in a state that is always growing; you’re growing at 2 percent a year, twice the rate of the U.S. Your cost of living is still moderate compared to other areas of Florida and your fundamentals are stronger than that of Southeast Florida. People will come, and they will need housing.”

Maybe it’s not such a dismal science after all.

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