The Tampa-St. Petersburg area economy is doing very well for now, but prepare for a change.
A recession nationally is likely coming in the next couple of years, said Abbey Omodunbi, assistant vice president and economist for The PNC Financial Services Group (NYSE: PNC).
That will bring a slowdown in consumer spending. People with plenty of discretionary income now who are visiting Tampa-St. Pete in record numbers won’t be as likely to travel, Omodunbi said, cutting into the strong leisure and hospitality industries locally that have benefitted from the national boom.
Construction, another mainstay of the local economy, also likely will slow, he said.
What can you do to prepare?
“People need to make sure their debt levels are very low, so don’t overspend on credit cards. People need to make sure they are not missing car loan or mortgage payments. They need to make sure they are making smart fiscal decisions right now,” he said.
Omodunbi, who focuses on Florida’s economy, stopped in at the St. Pete Catalyst office last week to talk about what’s ahead, as well as the current economic situation.
He pointed out the current expansion has been going on for about 10 years and if it continues through July, it will be the longest expansion on record.
“Florida’s economy is very synchronized with the national economy. The leisure and hospitality industries are very large here, so whenever the national economy is doing well, it reflects positively on Florida’s economy,” he said.
Unemployment nationally is at 3.6 percent, a historically low level. It was even lower in Tampa-St. Pete in March, according to the Bureau of Labor Statistics.
“In a city like Tampa, there’s been job growth at both low-end and high-end jobs. Finance jobs, middle-range jobs like construction and health care, and also low-end jobs like leisure and hospitality are experiencing job growth. It’s been very well distributed in Tampa,” Omodunbi said.
Wage growth statewide and in Tampa has been stronger than the national average for most of last year, he said. In part, that’s because there are more open jobs than potential workers, and workers can pick and choose what they want to do.
Here are a few other economic factors that are in the mix.
Gas prices. “There have been a few supply disruptions in refineries that have been refinery issues, which has decreased the supply of crude oil and which has also affected the increase in prices. But over time prices more likely will stabilize.”
Stock market. “The stock market has been doing very well since the beginning of the expansion. There was a downturn last year, especially in December. Christmas was brutal for the stock market, but the stock market is back up this year. The S&P is up about 17 percent this year … A correction isn’t necessarily a bad thing. It’s actually healthy. It means we’ve experienced outsized gains over time, and just having a little bit of a cutback is sometimes a healthy thing for the economy.”
Banks and lending. “The Fed has said they’re not going to change interest rates for the rest of this year. Typically at this point in an expansion, the Fed fund rate is much higher than it is. Now it’s between 2.25 and 2.5 percent. It means that lending costs are going to be stable for small businesses this year. That’s a good thing for businesses.”
Trade and tariffs. “Many businesses are more reluctant to invest due to trade tensions. They are taking a wait and see approach, to wait for these headwinds to clear up before making new investments.” Florida has been less impacted than energy and steel producing states, he said.
The Tax Cuts and Jobs Act, approved in December 2017: “The initial impacts were very positive for the economy. It was positive for consumers, for businesses. We also are expecting impacts from increasing discretionary spending caps, if that’s passed by Congress. But what we will see going forward is these impacts will weaken over time. Which is another reason why this recession is going to come up in a couple of years. The impact from the tax cuts are weakening over time and there won’t be that much stimulation to the economy.”