- Sean Snaith – Director, UCF Institute for Economic Forecasting
- Erika Hodges – Director, Communications & Marketing, UCF College of Business
- Jessica Dourney – Assistant Director, Outreach & Engagement, UCF College of Business
- 1:48 – Paul Jarley introduces Sean Snaith
- 2:37 – What the Florida economy is going through
- 3:28 – Commentary from the “Mean Girls”
- 4:14 – Florida’s housing market
- 07:04 – Sean Snaith: “King of the Nerds”
- 11:09 – Growth by industry in Florida
- 15:06 – Job and population growth in the state
- 17:01 – Questions from the audience
- 21:30 – Paul Jarley’s final thoughts
Paul Jarley: Sean Snaith is central Florida’s favorite economic forecaster. Sean has been named one of the nation’s most accurate forecasters by Bloomberg News and as appeared on pretty much every media outlet from the Wall Street Journal to the BBC. But he has some very strange hobbies.
Sean Snaith: If you’ve heard me speak over the years, you know I have an affinity for SkyMall.
Paul Jarley: You remember SkyMall, It’s the defunct inflight shopping catalog that survives on the internet. Well, Sean, he might just be their biggest fan.
Sean Snaith: The Dean called it a fetish, I think, last year, which, that sounds a little dirty.
Paul Jarley: He’s also a bit of a diva who dreams of becoming a viral internet sensation?
Sean Snaith: So, everybody can’t be a social influencer though. I mean, I think that’s where they all want to be. I do too. Quite frankly, I’ve got 1300 on Twitter. I don’t know what I can offer to them, but.
Paul Jarley: And he hates being handled, especially by the college’s so called mean girls.
Sean Snaith: There’s a group of, largely women, in the college of business and there’ll be shaking you down for money here at the end of the event, but I like to refer to them collectively as the mean girls and they sort of followed me since middle school and they make fun of my clothing and my glasses and things like that.
Speaker 3: I don’t know if you’ve seen his PowerPoint slides, but we think they date back to the mid 1980s.
Paul Jarley: Is Sean Snaith really worth all this trouble? Are those forecasts right? Or do those mean girls have a point?
Speaker 4: That is so fetch.
Speaker 5: Gretchen, stop trying to make fetch happen. It’s not going to happen.
Paul Jarley: This issue is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF, I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show.
Paul Jarley: This podcast is a condensed version of a talk Sean gave at our recent Dean Speaker Series, where he provided his economic forecast for both the US and Florida economies. Since Sean had already weighed in on the US economy as part of our podcast on whether the 2020 recession is really a thing, we focused today’s show on his predictions for the Florida economy. We’re calling this the mean girl edition because I’ve given the team the opportunity to take you behind the scenes and play some of Sean’s comments into context. Listen in.
Sean Snaith: No, no wohoos. Nope. Well thank you for coming out. I see a lot of familiar faces, all members of the greater Orlando masochist club apparently. But welcome back and happy new year. I appreciate you getting up early to listen to my nonsense here for a little while. But we just released our Florida Metro forecast and I sort of recounted my youth, growing up, literally, physically, I was always kind of tall and in order to get tall you have to grow. Sometimes that occurred in big spurts and it caused me a great pain in my knees. Right? Like I would get these lumps and it just hurt because of the growth plates or whatever. I’m not a real doctor, but the condition is called Osgood Schlatter disease. So I think what Florida is going through right now is an economic version of Osgood Schlatter, growing pains. Our two achy knees are the housing market and our transportation infrastructure and they’re not unrelated.
Paul Jarley: We begin our mean girl commentary with Jess and Erika. They work with Sean on a regular basis and they’ve got some stories to tell about our favorite economist.
Jessica Dourney: His wardrobe is either, I woke up, I’m going to speak at a presentation dressed to the nines with a suit and tie, or it’s Birkenstocks on with socks, cargo shorts and an old tee shirt from North Dakota where he’s from. Or where he lived.
Erika Hodges: He likes a good crowd. To his credit he definitely, he draws a pretty good crowd on his own. But yeah, he is aware of how many people are in the room, and he asks about that often.
Jessica Dourney: Well, he’s also been called the silver fox before.
Paul Jarley: Jess and Erika are two of the original college of business mean girls. Back to the presentation.
Sean Snaith: So the housing market, things are going great in the sense that prices continue to rise at a pace more than twice overall inflation. You can see sales here above where they were at the height of the housing bubble. Median prices continue to rise. They’re higher than they were at the height of the housing bubble. So this is a pretty, pretty solid housing market. Sales continue to rise year over year. Prices, you can see, statewide up almost 4% year over year. Again, is this another housing bubble? I get this question and we’ve probably addressed it the past three years and I’m going to give you the same answer. No, it’s not a housing bubble this time around. I mean I know Florida, man you can’t put it past them to do it to themself again.
Sean Snaith: But a 3.6 months of inventory, and I don’t know if my colleagues in the real estate school would agree with me, but I think six to nine months depends when you talk to, of inventory, is a balanced housing market. So anything less than that, six months of inventory is what the realtors in the room would call a sellers market, to what the economics professors would call a shortage. In markets where there’s a shortage, what happens to price? Yeah, that’s right. You didn’t know there was a quiz there was. The bigger the shorters, the faster prices rise. So if you look around the state at different metropolitan areas, Tampa’s a good example, their inventories under three months, and they have some of the fastest price appreciation in the state. So there is a real shortage in the housing market.
Sean Snaith: The other thing that’s absent this time around that was there in 2004/05/06 that really fed the beast, if you will, is easy money. You cannot just walk in and get a mortgage the way you could in 2005 without a job, without assets, without anything. So in absence of that easy finance and in light of the fact that we do have a real shortage, the price appreciation that we’re observing to me is not something that’s alarming. It’s just a sign of an absence of supply.
Sean Snaith: Here in Orlando, it’s even worse. 2.6 months of inventory. Population growth remains very strong. Economic growth, job growth, all very strong in Orlando. It is one of the fastest growing job markets in the country, certainly in the fastest in the state of Florida. That continues to put upward pressure on prices. This low inventory. We have an influx of population. We saw from Puerto Rico, the wake of fiscal economic crisis compounded by Hurricane Maria, and now they had an earthquake. Geez, I don’t know how Puerto Rico got God mad, but some something’s not right. But I wouldn’t be surprised to see another influx, in the wake of this latest natural disaster.
Paul Jarley: Jess and Erika, there’s some of Sean’s toughest critics, but it’s all in good fun and they try not to hurt his overly sensitive feelings.
Jessica Dourney: When we had the AUBER conference, we went to Medieval Times and he was actually knighted and was known as the homecoming King of the Nerds. So the nickname has stuck, King of the Nerds!
Paul Jarley: Most economists, by the way, well they don’t really have feelings, but Sean, back to the presentation.
Sean Snaith: All this population into the area, it continues to put pressure on the housing market. So affordable housing is one of the major challenges that we face right now. It’s not unrelated to transportation. How did we get so far behind the curve? Well, builders in 2013/2014, and again in 2015/2016, sort of plateaued when it came to housing starts, and you could see that in the bars. There’s this kind of a flattening out for a year or so and then they picked up again. But during that entire time period, the demand for housing continued to grow robustly. From 2012 on, Florida was outpacing the national economy in terms of GDP growth, in terms of job growth, population growth. Of course in the state we’re back close to that a thousand new Floridians a day, and that all feeds demand for housing and those are the underpinnings of it. But supply just didn’t keep up.
Sean Snaith: So now we’re behind the curve, still playing catch up. Ultimately it’s when that supply gets to the market that’ll help alleviate, and dampen some of that price appreciation. Statewide, as I said, population growth is solid. I mean if you had a coin on one side it was population growth, the flip side of that coin would be economic growth. More people in a region means more economic activity it’s just by default.
Sean Snaith: This river of a thousand Floridians a day has three tributaries, right? You’ve got domestic migration to the state, whether it’s retirees moving down to the villages or Margaritaville or whatever, jimmy Buffett’s new retirement. That kind of makes me sad in a way, that Jimmy Buffett’s in the retirement village business, right? I don’t know. And migrants coming to the state for job opportunities, right? So we’ve got that domestic migration, we talked about migration from outside the US, whether it’s from Puerto Rico or for international locations. Florida continues to be a magnet for South and Central American migrants. Then lastly, birth rates exceed the death rate in Florida now. So we’re making Floridians faster than we’re losing them. So all that feeds into continued economic growth, really, for the foreseeable future.
Paul Jarley: You might be wondering how Sean has time to process all that economic data. Well. He’s got an army of students working for him.
Speaker 8: Hi, I’m a non-identified student researcher under Dr. Snaith at the Institute for Economic Forecasting.
Paul Jarley: Only one was willing to go on the microphone.
Speaker 8: Researching under Dr. Snaith has been a great experience. It’s quite sophisticated, really. The most important thing I’ve learned from Dr. Snaith is when in doubt, use the magic eight ball.
Paul Jarley: Magic eight ball or not. Sean’s economic forecasts seem to be pretty accurate. More on that later.
Sean Snaith: Unemployment in the state is even lower than it is nationally. You know the last time we got unemployment rates this low in Florida was at the height of the housing bubble, right? This unsustainable sort of crazy phenomenon that was going on, drove unemployment down to 3.3%, now there’s not really anything crazy and unsustainable. We just have a strong economy pretty much across the board and it is a driven the strength in the state’s labor market. State GDP continues to grow faster than what is the case for the United States and we’re forecasting that that will continue here in Florida. Payroll employment, solid growth. Florida’s not quite growing twice as fast in terms of jobs as the national economy, but it’s close to double the national rate of job growth.
Sean Snaith: So again, this is a really pan sector in the economy. This is not an unsustainable bubble as was the case of 2005 and six, this is just a really strong economy that we have. I’ll quickly go through some of the sectors here. The construction sector, that’s one of our fastest growing sectors, it’ll continue to be going forward. All you have to do is look out the windows to see evidence of it here in central Florida billions of dollars of infrastructure projects, billions of dollars of private investment projects I mean, it’s hard to find a major road anywhere in this area that doesn’t have some construction going on right now. So couple that with the housing market, and the construction sector remains quite strong. Professional business services. This is the fastest growing sector right now in Florida’s economy. Most of you probably fall into this particular sector, architects, accountants, white collar jobs, high skilled, high paid jobs, and they’re growing rapidly.
Sean Snaith: Leisure, hospitality. I mean tourism is just, it’s been pretty remarkable. It was the first sector to start to grow again after the great recession ended back in 2010. People during the financial crisis, the great recession, “Hey dad got laid off and his 401k fell 50%, what are you going to do now? I’m going to go to Disney World.” No you’re not, those trips get postponed in those situations. That kind of leisure spending is a low hanging fruit when households are tightening their belt.
Sean Snaith: But once the economy stabilized in 2010 and things started to turn around, the recession ended, the tourism picked back up and hiring in that sector took off. It’s remained robust really ever since. This is in the face of a lot of headwinds, right? We’ve had hurricanes, we’ve had Zika, we’ve had red tide. We’ve had all kinds of things that, that should have taken a little wind out of tourism sales. But that has not been the case, and this will continue to be a cornerstone to the state, and certainly our region’s economy.
Sean Snaith: Financial activities. We’re finally seeing in forecasting some job growth in this sector. I was on for a long time, the Dodd-Frank soapbox, kind of rant and raving about that. Now it’s just mostly the kids that are on my lawn that bothers me. But what we’re seeing and this administration is addressing the regulatory environment in a way that hasn’t been done for a really long time. So the first year of the administration we saw 22 deregulatory acts for every one regulatory. Year two that ratio was 13 to one, year three it looks like it’s about 20 to one, including addressing some of the issues with, with Dodd-Frank.
Sean Snaith: I mean a regulation that large and that complex always, always brings with an unintended consequences. So the impact, for example, on small community banks have this increase in compliance costs. I just don’t think was part of the thinking back when this law was put together. I mean, I think it was put together, I don’t want to point fingers, play politics with it. It was put together in a time of fear and uncertainty and we had gone through this horrible crisis that nobody wanted to see repeat. So at the time when you’re doing something out of fear and all that emotion, anything that contributed to this crisis, “We’re going to come up with a new Bureau and a new rule and a new regulation and we’re going to stop it.”
Sean Snaith: Next thing you’ve got a 2,600 page law, that still isn’t fully implemented by the way, signed into law in 2010. But now that’s being addressed, the financial sector, I think, is going to start to see some growth. Over the past 10 years, I believe, there’s only been three new banks in the entire State of Florida. That’s a problem in a market economy. You need new entrants into every sector to drive competition, to drive innovation. But I think regulation kind of choked some of that off.
Sean Snaith: So looking forward, over the next three years here, average job growth, you could see professional business services, construction, hospitality, health services, I think will continue to grow. I mean, we’ve got an aging population. As I said, you need a doctor for every body part when you get older. So the demand for health services is going to continue to grow in Florida. Paying for it, we still haven’t figured that out yet, but I thought the Affordable Care Act was a solution. But now we’re saying that’s not it. So I don’t know what the answer is exactly. But the demand is going to drive job growth in that sector going forward.
Sean Snaith: Looking across the 12 metros that we currently forecast, you could see that Orlando has very solid population growth. Lakeland is booming. I don’t know if you’ve been to Lakeland lately. I know, I know. It’s not all just Lego buildings. There’s actual big cranes and real buildings going up because Lakeland in position between Orlando and Tampa and they’re really going to benefit from the growth in those two Metro areas, and currently are. Job growth, you could see, well above what the state is producing we’re forecasting for Orlando. I mean this is a really good economy.
Sean Snaith: I don’t want to jinx it, but I mean it’s hard to find a flaw. I mean other than our achy knees of transportation and housing, the rest of the checkup, the bill of health is pretty, pretty good. I wish I could get the same from my physician. So looking here at our Florida County Metro area you could see growth even faster than what we’re forecasting for the state, much stronger and really across sectors. I think this is likely to continue. I think there’s enough momentum here in central Florida barring some sort of black swan event to carry us for several more years of pretty solid growth. With that I’ll happily take some questions or go back and sit in my office. Yes.
Speaker 9: So you listed leisure and hospitality as a growing sector. I don’t know if you read Orlando Says No, but they had a nice little segment series called Laborland, which kind of went into affordable housing and many who work at the parks and leisure can’t afford to stay in homes. You saw Universal Orlando pledge $100 million affordable housing, at the same time receiving some money from the county to build roads, which is probably not related to each other at all. But the question becomes, is affordable housing a significant block to the growth that you’re talking? Because if I can’t afford to live where I’m going to work, then I can’t work properly.
Sean Snaith: Right. I mean, I think it’s a bump in the road. I don’t think it’s necessarily a road block, but it is something that that needs to be addressed. Now Disney has announced a move into the $15 minimum wage, I think Universal’s done the same. I don’t necessarily believe they’re doing that out of the goodness of their theme park hearts. I think this is a strategic move to make sure they have the workforce in place to satisfy an increasingly larger customer demand.
Sean Snaith: But the transportation, I mean we have to, first of all, you need affordable housing. Typically to get affordable housing. Right? If you look around the country at major metros as they’ve grown, where do you live in DC if you want affordable housing? Georgetown? No, you go out to West Virginia. Well how do you get from West Virginia to your job at the Veterans Affairs Department? You take a train, you take the metro, you take something. So we’re piecing it together, right? We’ve got SunRail, we’ve got Brightline. I think public transportation in central Florida really needs to be addressed, and have a source of dedicated funding so we can get those people who might have to come in from Lakeland to Universal or Disney.
Sean Snaith: If you look at surveys of consumer expenditures for the lowest 50% of US households, the two largest components of spending are housing and transportation. So those two things can really, I think, improve the plight of folks in Laborland, as that story called it. Yes.
Speaker 10: Could you talk a little bit about the upcoming election?
Sean Snaith: Oh boy.
Speaker 10: Or is that next meeting?
Sean Snaith: I don’t know. What’s college is political science in? Maybe we should get those suckers. Yeah, I’ll talk about it. Sure. My speaking career here, it’s been about 20 years now, I started doing this-
Sean Snaith: I’m going to go out with a bang. You might want to videotape this and you could tweet it, and I’ll be fired before lunch.
Speaker 10: You know I’m not the only one that wanted to ask.
Sean Snaith: Yeah, of course. But no. So I mean, in my speaking career you never really know your audience. I mean, I kind of know some of you, but I mean you don’t, so you stay away from politics, you stay away from sex, you stay away from religion. Right? Some people are Democrats, there’s all kinds of perversions in the world. See actually, it depends where I’m speaking. I change the party, right? So when I’m in Kansas I say Democrats, when I’m in California, I say Republicans, it gets the same laugh.
Sean Snaith: No. My feeling on this, I think incumbency is a big benefit. I think that the economy is particularly strong and unless something really goes off the rails, I would be surprised if the president was not reelected. But who knows? I mean, I sure surely didn’t predict he was going to get elected the first time around. So we’ll see. I mean I think politics has really changed dramatically. It used to be right, it’s the economy stupid. That was it. I’m not so sure. But if it’s the economy then I think he’s in a pretty good place.
Speaker 11: Well, thank you Sean.
Sean Snaith: Yeah. Appreciate it.
Paul Jarley: The mean girls have a point. Sean is high maintenance, but in my world, like many others, notoriety has its privileges. Sean has been named one of the nation’s most accurate forecasters by Bloomberg News, and has appeared on pretty much every media outlet from the Wall Street Journal to the BBC. Who cares if it’s because of a magic eight ball? Whatever method he’s using, it appears to be… “fetch.”
Paul Jarley: Sean’s ego doesn’t need inflating, but let’s hope he’s right about the Florida economy in 2020. If so, the roaring ’20s will be off to a good start, and my May graduates, well they’ll have plenty of job offers. What do you think? Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach and Engagement here at the UCF College of Business, and thank you for listening. Until next time, charge on.