What's in store for area's economy in 2009?


A “for lease” sign rests between the two properties of former Gainesville restaurants Bennigan’s Grill & Tavern and On the Border on Archer Road.

DOUG FINGER/STAFF PHOTOGRAPHER
Published: Sunday, January 11, 2009 at 6:01 a.m.
Last Modified: Saturday, January 10, 2009 at 8:12 p.m.

Now that the economic woes of 2008 are behind us, experts say the Gainesville area can look forward to more job losses, more business closures, a deepening recession and likely further cuts at the University of Florida — the area’s largest employer — in 2009.

On the bright side — or at least not as grim — the local economy will likely not be as bad as the state and national economies because of a more stable employment base, continued new business openings and a housing market poised to rebound more quickly because of a growing population, lower foreclosure rates and a smaller inventory of new homes for sale.

Business leaders also are looking with hope toward Washington for bailout measures to work their way down to the local level, and for the new administration to generate spending money from an economic stimulus package, jobs from “shovel ready” infrastructure projects and health care reform that could strengthen an already large and stable medical employment sector.

The Gainesville metro area — consisting of Alachua and Gilchrist counties — lost 600 jobs between November 2007 and November 2008, according to the latest numbers available from the Florida Agency for Workforce Innovation.

The bad news for job seekers is that unemployment rates historically peak after recessions end, according to Angela Pate, executive director of FloridaWorks, the regional employment services agency.

“The quest for jobs that we’re seeing now is not as bad as it’s going to get in the next year, two years,” she said.

The Gainesville gross metro product — the value of all goods and services produced and the main measure used to determine recessions — is forecast to go down until the first quarter of 2010, while jobs are forecast to go down until the third quarter of 2010, according to the University of Central Florida Institute for Economic Competitiveness. The Florida recession is forecast to last three months longer, ending in the second quarter of 2010.

“What’ll be critical for us is to see what the new year brings in terms of the special session and what if any cuts that may mean to Santa Fe College, the University of Florida and the like,” said Brent Christensen, president and CEO of the Gainesville Area Chamber of Commerce.

UF’s budget was cut 6 percent — $47 million — heading into the current school year. That included 138 jobs cut on top of 290 unfilled vacancies, and a 1,000-student enrollment cut – the first of a four-year, 4,000-student cut.

State lawmakers are in special session to trim the state budget again with both chambers proposing $1 billion in cuts, including 4 percent to universities and community colleges, and next school year is expected to be worse.

This school year’s earlier cuts were already expected to create an additional ripple effect loss to the economy of $77 million and 678 more jobs, according to a study by Alan Hodges, associate extension scientist with UF’s Food & Resource Economics Department.

Pate said state government is the largest employer throughout Florida, so declining sales and property taxes are hitting the entire state particularly hard. Unlike many states, however, Florida does not have an income tax, so it will climb out of the recession faster as job losses continue to hurt other states’ governments, she said.

On the other hand, Florida has been harder hit by the housing downturn.

Construction lost 600 jobs locally in the past year and Pate anticipates further declines in local jobs related to the real estate industry, such as construction, appraisers, closing companies and other professions.

New home building permits hit a 30-year low in 2008, according to Adam Bolton, executive vice president of home builder Robinshore Inc. and 2009 president of the Builders Association of North Central Florida.

“A lot of people have lost jobs. Businesses are struggling to stay in business and keep the employees that they have,” he said.

The same problems will continue in 2009, he said, but Gainesville has some things working in its favor. For one, he pointed out that academics and medicine — the two largest employment bases — are some of the most resilient sectors.

Gainesville also hasn’t seen the level of distressed or foreclosed homes that other areas have.

“It’s going to be tough, but we’ll get through,” Bolton said.

Pate said Gainesville has not faced the massive layoffs that big corporations in big cities have had.

The area economy is more a victim of consumer confidence than an actual significant loss of jobs or wealth, according to Grant Thrall, UF business geography professor.

Nationwide, pessimism and declining home equity cause people to pull back on spending, he said.

“That is going to affect our willingness to go out to a restaurant, buy a new article of clothing or to buy a new car, even though our income has not changed from one year to the next,” Thrall said. “Many jobs are lost because that dollar doesn’t turn over.”

Thrall, who consults businesses about locations, said the pullback in spending is like an ebbing tide. Businesses on main traffic routes will continue to do well while those on the outskirts will suffer.

Even chain stores that do well locally could close if their companies have financial problems, he said. As an example, he said many big-box chains locate their stores too close together and draw from overlapping areas, in effect cannibalizing themselves.

More restaurants that were marginally profitable during the good times will likely close this year as diners spend less while costs of labor and supplies increase, according to Stan Given, local franchisee for several restaurants including Moe’s Southwest Grill and a former regional executive for Kentucky Fried Chicken and Taco Bell.

The problems could be with location, operations or just a bad concept, he said.

This area has too many restaurants, Given said.

“It’s going to clear out some of the dead wood, and the restaurants that will remain will be stronger,” he said.

Quick service and fast-casual restaurants are doing well as diners trade down from casual dinner and higher-end restaurants, Given said.

Independent restaurants that don’t have the buying power of a chain can do well, but have to be more creative, he said.

Christensen said he doesn’t think Gainesville is oversaturated with stores. If it were, the chamber wouldn’t be witnessing nearly weekly store openings, including those for large retailers Kohl’s and Coldwater Creek, Christensen said. Lowe’s, meanwhile, is scheduled to open a store this year in Alachua.

Thrall said Gainesville has several gaps, including a shortage of higher-end products, although a lack of investor confidence could delay many new openings to fill those gaps in the near future.

In the meantime, Christensen said efforts continue to build relationships with companies so Gainesville is at the top of the list when they do decide to expand or relocate.

Likewise, Pate said job seekers should use the recession to increase their training and skills to make themselves more competitive.

“Spend time getting the extra degree, getting the extra certifications so when the economy is back up you’re at the top of the list,” Pate said.

This school year's earlier cuts were already expected to create an additional ripple effect loss to the economy of $77 million and 678 more jobs, according to a study by Alan Hodges, associate extension scientist with UF's Food & Resource Economics Department.

Pate said state government is the largest employer throughout Florida, so declining sales and property taxes are hitting the entire state particularly hard. Unlike many states, however, Florida does not have an income tax, so it will climb out of the recession faster as job losses continue to hurt other states' governments, she said.

On the other hand, Florida has been harder hit by the housing downturn.

Construction lost 600 jobs locally in the past year and Pate anticipates further declines in local jobs related to the real estate industry, such as construction, appraisers, closing companies and other professions.

New home building permits hit a 30-year low in 2008, according to Adam Bolton, executive vice president of home builder Robinshore Inc. and 2009 president of the Builders Association of North Central Florida.

"A lot of people have lost jobs. Businesses are struggling to stay in business and keep the employees that they have," he said.

The same problems will continue in 2009, he said, but Gainesville has some things working in its favor. For one, he pointed out that academics and medicine - the two largest employment bases - are some of the most resilient sectors.

Gainesville also hasn't seen the level of distressed or foreclosed homes that other areas have.

"It's going to be tough, but we'll get through," Bolton said.

Pate said Gainesville has not faced the massive layoffs that big corporations in big cities have had.

The area economy is more a victim of consumer confidence than an actual significant loss of jobs or wealth, according to Grant Thrall, UF business geography professor.

Nationwide, pessimism and declining home equity cause people to pull back on spending, he said.

"That is going to affect our willingness to go out to a restaurant, buy a new article of clothing or to buy a new car, even though our income has not changed from one year to the next," Thrall said. "Many jobs are lost because that dollar doesn't turn over."

Thrall, who consults businesses about locations, said the pullback in spending is like an ebbing tide. Businesses on main traffic routes will continue to do well while those on the outskirts will suffer.

Even chain stores that do well locally could close if their companies have financial problems, he said. As an example, he said many big-box chains locate their stores too close together and draw from overlapping areas, in effect cannibalizing themselves.

More restaurants that were marginally profitable during the good times will likely close this year as diners spend less while costs of labor and supplies increase, according to Stan Given, local franchisee for several restaurants including Moe's Southwest Grill and a former regional executive for Kentucky Fried Chicken and Taco Bell.

The problems could be with location, operations or just a bad concept, he said.

This area has too many restaurants, Given said.

"It's going to clear out some of the dead wood, and the restaurants that will remain will be stronger," he said.

Quick service and fast-casual restaurants are doing well as diners trade down from casual dinner and higher-end restaurants, Given said.

Independent restaurants that don't have the buying power of a chain can do well, but have to be more creative, he said.

Christensen said he doesn't think Gainesville is "over-stored" as evidence by nearly weekly openings the chamber attends, including those for large retailers Kohl's and Coldwater Creek, while Lowe's is scheduled to open a store this year in Alachua.

"Hopefully, there will be enough good to offset any bad that we might see," he said.

Thrall said Gainesville has several gaps, including a shortage of higher-end products, although a lack of investor confidence could delay many new openings to fill those gaps in the near future.

In the meantime, Christensen said efforts continue to build relationships with companies so Gainesville is at the top of the list when they do decide to expand or relocate.

Likewise, Pate said job seekers should use the recession to increase their training and skills to make themselves more competitive.

"Spend time getting the extra degree, getting the extra certifications so when the economy is back up you're at the top of the list," Pate said.

Reader comments posted to this article may be published in our print edition. All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

Comments are currently unavailable on this article

▲ Return to Top