From Haas Center for Business Research and Economic Development
University of West Florida

February 2002

Terrorist attacks, war won't affect Northwest Florida as strongly

by Dr. Rick Harper

Northwest Florida will suffer less economic harm than the rest of Florida and the nation from September's terrorist attacks and the ongoing conflict. Rising unemployment rates, weak retail sales and factory orders, combined with fading consumer confidence, point clearly toward several quarters of recession.

Closer to home, UWF and other educational institutions, from kindergarten on up, face particular challenges due to anticipated state budget shortfalls. However, key sectors of the regional economy are likely to remain strong.

Federal military spending will grow over the coming months. Even while the military's share of total employment has dropped over time in Northwest Florida, it remains the largest generator of jobs and income in Pensacola and Fort Walton Beach metro areas. The spending outlook here remains strong, with a double-digit increase in defense spending likely at the national level for the coming year.

Tourism will fare better in our region than in the rest of Florida. Northwest Florida had already wound up a good year in tourism before the September 11 attacks. Fall, winter and spring are important to the hospitality industry here, but our seasonal peak occurs when visitors drive in for summer vacations. Our downstate neighbors in the convention, theme park and cruise line destinations rely on a heavy volume of winter and spring visitors who fly in from across the nation and abroad. It is their soft sales that will hurt job growth, tax revenues and state budget appropriations.

Health care ranks second or third as an economic driver in most counties across Northwest Florida. Here, employment prospects will remain strong. Instead, the burden is likely to be on insurers as health care costs rise and on providers of indigent care, as insurance coverage drops with increased jobless rates.

Other sectors are more difficult to predict. Construction is a much more important sector in Northwest Florida than for the nation as a whole. Early reports from coastal developers across the region suggest that vacation home demand has not yet slowed substantially. This may be due to low returns in alternative investments - why not get out of the stock market and own a vacation or rental home in a safe and beautiful area with decent real estate appreciation rates? Multiple interest rate cuts may keep the residential real estate market healthy.