Over the past few weeks, Central Florida economist Hank Fishkind has explained a host of recent reports that paint an optimistic financial picture for the end of 2014.
As the year comes to a close, Fishkind considers the three-year economic outlook for this area, the state of Florida, and the United States.
Question: So what are we looking at for next year for the economy.
Fishkind: I really think this is liftoff for the U.S. economy. We have lower oil prices. We have strong job growth, rising wages, low inflation, low interest rates. All the fundamentals are there. High consumer confidence. Strong business confidence. We’re going to move into the 4 percent-plus range for 2015, which is wonderful. We haven’t had that for a good long time.
As the economy continues to grow in 2015, though, forces will begin to build up that will cause the inevitable slowdown. We know that the Federal Reserve is going to raise interest rates. And as the Federal Reserve raises interest rates, it will cause some slowing in interest-sensitive expenditures for things like cars and houses. But probably the tension between rising interest rates and a growing economy, the growing economy will win out in 2015. But as we get to 2016 and 2017, eventually those higher interest rates are going to erode the ability of people to spend.
The other piece is political. We are going to have a little bit of drama, again. At least the Congress passed a budget and the president signed it so we don’t have any government shutdown. But come March 15 we have to raise the debt ceiling again. That’s always a lightning rod and always causes drama in our somewhat dysfunctional Congress. And it causes real harm because of the uncertainly and the volatility. We’ll get past it and I don’t think we’ll have a disaster. But there is always some potential.
Q: So it sounds like we have a lot of give and take, a lot of balance that is trying to be struck. And it may work for some time and may not?
Fishkind: Right. That’s inevitable in economics. We tend to get booms and busts in the economy, growth and slowdowns. And it’s often caused both by policy, and by inadvertent events. So there is always a black swan event that can occur but that’s not how we make the forecast. We look at what the fundamentals are, which are very strong fro 2015 and 2016 but the forces are going to build up in 2016 and 2017 to cause the economy to slow down.
Q: When you say “slowdown” when we get to 2017, are you talking about another recession or not?
Fishkind: There’s certainly the risk of a recession. It’s a little to soon for anyone to know with any kind of certainty. But I think it’s important for all of our household-decision making, the decisions that businesses are making, to recognize that the next few years are going to be great. It’s going to be some of the best years we’ve seen since 2003, 2004 and 2005. They’re actually going to be better because we’re not going to have the speculative excesses I don’t think.
Q: Now locally, what’s the picture?
Fishkind: Locally, Orlando is one of the strongest economies in the United States, and certainly one of the strongest in Florida. We’ve had tremendous increases in job growth. And this time, as compared with 2003, 2004, and 2005, it’s much more sustainable. The growth in Orlando is being led by growth in tourism in particular, but also in health care and in defense and in technologies. Those are drivers, much more so than just a big boom in construction and housing.
Our trajectory is strong. We going to have an increase of 50,000 in population over the next few years and 40,000 jobs created so it’s tremendous. But even in Orlando, as interest rates rise and the national economy slows, especially towards the end of 2016 and into 2017, our growth is inevitably going to slow down. As sad as that is, it’s good for the Orlando economy because we have that diversification across a number of fields even if there is some overall slowing which is inevitable.
And then we get to Melbourne and Palm Bay. There’s still very slow growth there. It has been a difficult time to recover from the shuttle program. The replacements as we’ve discussed, while they’re very welcome with Orion and with SpaceX, it’s still very small compared to what was lost. So the economy, then, becomes much more dependent upon its defense industries, which are doing well, and retirement growth.
Hank Fishkind is a principal at Fishkind & Associates, in Orlando, Naples and Port St. Lucie.