Is Miami’s Unemployment Due to Real Estate?

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Earlier this week I was at a cocktail party and ran into a competitor.  I’ve known her for years and we’ve always been friendly.  Let’s call her Mary because we need to protect the guilty.  Mary was making the argument that Miami’s current unemployment was negligible and mostly due to the decrease in construction.  She believed that the lost jobs were construction and that the strength of Latin America would be Miami’s shining light of recovery.  She believed that positive office space absorption was imminent with companies poised for growth in the very near future.  As she made her case before a Chamber of Commerce leader and the owner of a large office building, I thought “Malarkey”.  Actually I was thinking of a stronger word, but I want to keep this blog PG.  Since the cocktail party was sponsored by a company affiliated with hers and I really didn’t have a dog in this fight, I didn’t call her out and continued to enjoy my glass of wine.

Then I read the Miami Herald the next day and my blood began a slow boil.  The Herald had an article in the business section that Miami-Dade’s jobless rate had climbed to 12.7% in August.  We now have 162,400 people looking for work in Miami.    Last year in August, unemployment was 10.9% and back in the good old days of boom (August 2007), we were at a mere 4.1% unemployment.  So, is Mary really sure that the 162,400 folks that are looking for work are all construction-related?  There is no way. 

 

 I took a look at Moody’s Analytics report on Miami for July 2010 to see where Miami’s unemployment is hitting us.  The report was interesting.  Yes, construction has seen a 9.3% drop in employment in the past year.  But other segments that have suffered significant losses included Information (-10.3%), Manufacturing (-7.0), Financial Activities (-6.6).  Education and Health Services grew by 2.5% over the past year and unfortunately Government grew by 1.8%.  This report is great because on the next page, they had a breakdown of each sector as it relates to the total employment of Miami.

 

This leads me to theorize that although, as Mary argued, Latin America will always have an impact on Miami; other factors will be key and potentially even more important.  One factor is that the European debt crisis could undermine Miami’s international banks.  We are one of the largest international banking centers in the world and lately Spanish banks have been snapping up local banks left and right.  Europe’s troubles could also potentially hurt our tourism since many of our tourists are international.  Foreclosures and bankruptcies have been increasing this year and we have to hit the bottom of our housing crisis before our recovery solidifies. 

 At the end of the day, Mary has part of it right.  Latin America is key to keeping Miami floating, however, we need more than that to fix our mess.  Unemployment is not all construction-related.  Everybody is hurting.  Retail has cut back on inventories and personnel.  Law firms have had significant layoffs.  International companies are closing or downsizing their Latin American office that is located here in Miami in order to weather the recession storm.

Before the office buildings can fill up, productivity needs to increase and profits need to be consistent before the added expenses of more employees.  Our top employers are Publix, two hospital systems, two higher education facilities, American Airlines and a telemarketing/call center.  What does Miami need to do to attract and keep new businesses?  I welcome your thoughts.

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