Posted on Tuesday, March 15, 2011
South Florida's population growth has resumed following a recession-induced interruption, but the rate of household formation may lag for awhile.
Weak job growth may be hindering growth in the number of new households, which has consequences for a wide range of South Florida businesses, from real estate title specialists and mortgage lenders to home-builders, household furnishings dealers and sellers of home improvement products.
The number of households in South Florida totaled 2.11 million in 2009, compared with 1.9 million in 2000, an increase of 10.8 percent, or an average of 1.2 percent annually. The growth rate might have been faster if population growth had continued uninterrupted. Census data show that the combined populations of Miami-Dade, Broward and Palm Beach counties dipped from 5.466 million in 2006 to 5.465 million in 2007 before rising to 5.501 million in 2008 and 5.547 million in 2009.
Deerfield Beach real estate consultant Jack McCabe suspects that household formation is increasing in South Florida but at a reduced, post-recession rate. "If I were guessing, I would say that it's down," McCabe said, because "population and job growth are the two big drivers for that," and neither suggests a robust rate of household formation.
"We've seen lots of young adults who have lost their jobs and moved back in with mom and dad," he said, while others have stopped living alone and started to share living expenses with one or more roommates to make ends meet.
Delayed divorce also may be contributing to a sluggish household formation rate. Figures compiled by the state government show that 78,752 marriages were dissolved in Florida in 2009, fewer than in any of the nine preceding years.
"The divorce rate is actually down," McCabe said, and it suggests that some unhappy married couples who continue to live together "can't afford to get divorced because they can't afford to pay two rents, or two mortgage payments. ... Or they can't sell the house and split up what equity they may have left."
Industry leader sees gradual retail improvement
Rick McAllister, chief executive officer of the Florida Retail Federation, said he expects consumer spending at retail stores to increase gradually this year.
"My members think that 2011 is going to be more of 2010: a consistent, continued improvement," McAllister said in a telephone interview. "Nothing dramatic but just chipping away."
A solid advance in retail sales late last year during the holiday shopping season could be a leading indicator of business conditions this year.
Gross retail sales increased in Miami-Dade, Broward and Palm Beach counties by 7.3 percent to $18.1 billion in December from $16.9 billion in December 2009, preliminary estimates by the state Department of Revenue show.
"When does the consumer get confident enough to start spending money? It looks like, slowly but surely, that's what they're doing," McAllister said. That, in turn, should encourage more retailers to expand and create jobs.
Retail trade is part of a broader sector of the South Florida economy classified as trade, transportation and utilities, which employed 516,800 area workers in December, 1.7 percent more than in December 2009. But retailers large and small remain cautious about hiring more workers. "Even those very successful retailers that are growth companies have sort of sat back and taken a deep breath while the economy has recovered a little bit," McAllister said.
Stagnant demand for leased store pace underscores the pressures that retailers are feeling. Marcus & Millichap has forecast that retail store vacancy rates in all three counties will fall only moderately this year: from 7.6 percent in Miami-Dade last year to 7.2 percent this year, from 11.3 percent in Broward to 11.2 percent, and from 10.8 percent in Palm Beach to 10.7 percent.
Slack demand for newly built space is slowing the decline in retail vacancy rates.
Marcus & Millichap reported that retail store construction in Palm Beach County "has practically ceased."
In Broward, builders will deliver 200,000 square feet of newly built retail space, down from 440,000 square feet last year. The firm also predicted that Miami-Dade will get 300,000 square feet of newly constructed retail space this year, a marginal increase "representing a 0.4 percent expansion of the retail stock."
Signs may point to bad employment news
Job growth in business and professional services is eroding, a sign that recent gains in total employment might prove unsustainable in the months ahead.
Business and professional services comprise a diverse sector of the economy that includes temporary employment agencies, advertising agencies, law firms and consulting companies. Many analysts expect these service providers to set the hiring pace as the economy recovers from recession. For example, credit rating agency Fitch said Monday in a report on Broward County that while "job growth has been slow to return to the area ... the expectation is for employment growth to take hold by the end of 2011, led by professional and business services."
Job creation in business and professional services was a leading indicator of a slight upturn in total employment last year. In May, South Florida employment in business and professional services was greater than in May 2009, the first year-over-year increase since June 2007. By September, total employment in Miami-Dade, Broward and Palm Beach counties had turned positive on a year-over-year basis for the first time since November 2007.
Seasonally unadjusted data from the federal Bureau of Labor Statistics show that the total number of non-farm jobs in South Florida rose 0.1 percent in September, 0.1 percent in October, 0.2 percent in November and 0.2 percent in December, compared to the same months in 2009.
But area job growth in business and professional services slowed steadily from 2.6 percent in September to 1.5 percent in October, 0.7 percent in November and 0.3 percent in December.
"I'm not panicking at this point with what you're seeing, but in the next several months, if job creation doesn't increase in that [business and professional services] sector, that could be a real disturbing development," said University of Central Florida economist Sean Snaith. "We are forecasting that it's going to lead job growth, not just in South Florida but in the state."
Snaith said he expects the recent slowdown in business and professional services to prove temporary.
and give way to stronger growth later this year: "The first half of the year, it's still going to be touch and go. ... But I think once we get to the second half of the year, it'll be clear that there are jobs being created."
By Mike Seemuth, DAILY BUSINESS REVIEW