Introduction to Economic Research Initiative The United States is in the midst of an economic recession. According to the U.S Labor Department, more than two million jobs were lost between January and March of this year. Florida is one of the states expected to lose the greatest proportion of jobs along with Michigan, Hawaii, and Ohio (Hegenbaugh and Hansen, 2009). However, rather than dwelling on the present dire circumstances, one should focus on finding long terms strategies to bring back prosperity and new investment to our area. The path to economic recovery starts with understanding how to measure our area’s strengths and supporting the industry sectors that are vital to the local economy. The purpose of the Economic Research Initiative is to help assess prospects for economic recovery by analyzing the business sectors that comprise Orange County’s economic structure. This project would bring the local focus that is often missing from other economic publications currently available. It aims to provide sound data that could be used to supplement other economic and land use projects in the County. Finally, the project should help to generate a healthy discussion about the County’s economy and the best approaches to spur economic growth. One way in which it would look at the local economy is by using community indicators. These are points that, when combined, generate a picture of what is happening in a local system (APA, 2004). Indicators can assist in measuring the interaction between economic, environmental, and social factors that represent the whole community. System or descriptive indicators are used to provide the most relevant information to policy makers by summarizing individual characteristics of the community. Examples of some frequently used economic indicators are the “bedroom tax” charged on hotel rooms, theme park attendance, and building permits. Some of the indicators currently used to measure Florida’s economic activity may not completely work for Orange County, because the state and county economies differ somewhat. Therefore, to help better measure our economic vitality, it is important to create our own indicators focusing on Orange County’s areas of economic specialization. Orange County’s economic structure Most economists have described Florida’s economy as a “three legged stool”, meaning the state’s economic activity is mainly driven by three industries, each of them a leg of the stool. There are several variations of this “stool” model. The one that is mostly mentioned is the retiree-real estate- tourism variation. However, other sectors such as agriculture, construction, and the military, are also mentioned in other versions of the model. It could be argued that some of the legs will change depending on the Florida region that is being described. For example, industries catering to retirees make the bulk of economic activity on several parts of the southern coast, but as you move northward, other activities take precedence, such as the military and agriculture. Most recently, the state of Florida has been extensively criticized for relying on an economic model built on adding more homes and attracting more people. This model also supported a private economy comprised of firms whose only role was to help entitle land for new development, finance real estate deals, and sell the new homes. Now the model is said to be collapsing, as the influx of northerners that provided the steady increase in tax revenues has virtually evaporated. News headlines describing this dynamic as a “Ponzi Scheme”, “Paradise Lost”, and “the Sunset State” have pointed out the failures of this model. Is Orange County in the same situation as the rest of the state? Orange County is certainly weathering the

ECONOMIC OUTLOOK MAY 2009

An Introduction to the Economic Research Initiative and Orange County’s Economic Structure by Luis Nieves-Ruiz, AICP

Issue 1

impacts of the economic recession. However, most economists have noted that Central Florida appears to be more resilient than the rest of the state. While most coastal jurisdictions were feeling battered by the downturn in the construction industry as early as 2007, the local economy was still producing a decent number of jobs. This supports the argument that the local economic structure is somewhat different that the rest of the state. Exhibit 1 compares the location quotients for five economic sectors for Orange County, the Orlando MSA, and the State of Florida. Location quotients measure economic specialization by comparing the local economy (Orange County) with a reference economy (the United States). Basic industries, those most important for economic development, have a location quotient higher than 1. Industries are organized by economic sector according to the North American Industrial Classification System (NAICS).

Notice that there is a sharp difference in the location quotients. Orange County has more jobs in the Amusements, Gambling and Recreation (NAICS 721) and the Accommodation (NAICS 721) sectors when compared to the state and the region. These numbers show the important role that the “leisure” sector, which includes convention and theme park business, plays in Orange County’s economy. On the other hand, the state has a higher location quotient in the Specialty Trade Contractors (NAICS 238) and Crop Production sectors (NAICS 111), two of the aforementioned “legs of the stool”. At the same time, there is a negligible difference in the importance that the Administrative Support Services sector (NAICS 561) has in the three economies. A more thorough look at the local economy is provided in Exhibit 2. The table shows the top 25 industries by location quotient in Orange County. Our economy is heavily specialized in “travel and leisure” and its supporting industries. That is not surprising to anyone who has visited one of the area’s theme parks or attended a conference at the Orange County Convention Center. Overall, Amusement and Theme parks (NAICS 713110), Convention and Visitors Bureaus (NAICS 561591), and Other Travel Arrangement Services (NAICS 561599) had the highest location quotients. Other industries within Transportation and Warehousing (NAICS 48), Accommodation and Food Services (NAICS 72), and Administrative and Support Services (NAICS 56) also support the local tourism industry. The County also has a relative strength in non-tourism related industries, such as Floriculture (NAICS 111422), Other Non Residential Exterior Contractors (NAICS 238192), Telemarketing and Other Contract Centers (NAICS 561422), and Other Technical and Trade Schools (NAICS 611519). Another common way of examining employment concentration is by identifying the location of these businesses. In 2005, the year where data were more recently available, there were more than 39,000 firms in Orange County. Most of these firms tend to be small. Over 50 percent of all these businesses employ less

Exhibit 1: Comparison of Location Quotients for Selected Industry Groups

0

2

4

6

8

Florida 1.66 1.42 1.58 1.35 1.73

M SA 4.91 3.29 1.5 1.34 1.18

Orange 6.34 4.19 1.65 1.05 1.03

Amusements &

Recreat ion Accommodation

Administrat ive &

Support Serv.

Specialty Trade

Contract.Crop Prod.

Source: BLS Location Quotient Calculator, 2009

ECONOMIC OUTLOOK MAY 2009

than five people. However, firms with 200 or more employees are responsible for more than a third of all local jobs. Therefore, these large businesses play a very important role in Orange County’s economy.

To further study job concentration, the County was divided into six employment submarkets. The highest number of jobs and establishments are in the Central employment submarkets (Exhibit 3). Three important activity centers are located within this submarket: Downtown Orlando, the Maitland Center, and Orlando Central Park. These submarket is also home to the two largest employers in Orange County: Florida Hospital and Orlando Regional Healthcare. Besides health care providers, these submarket is also home to several government and corporate offices.

NAICS Sectors Industry Subsectors Location Quotient

2007 Employment

Agriculture, Forestry (11) Floriculture Production 4.5 1,278

Construction (21)

Other Nonresidential Exterior Contr. 8.0 1,465

Other Building Exterior Contractors 5.5 1,608

New Housing Operative Builders 4.5 1,108

Manufacturing (31-33) Commercial & Service Industry Mach. 4.4 2,604

Fertilizer, Mixing only, Manufacturing 7.7 338

Wholesale Trade (42) Fish/seafood Merchant Wholesalers 3.8 476

Retail Trade (44) Luggage/leather Goods Stores 5.0 419

Transportation & Warehousing (48)

Charter Bus 6.4 1,100

Other Airport Operations 5.3 1,906

Line-haul Railroads 4.0 9

Real Estate and Rental Leasing (53) Other Machinery Rental & Leasing 4.1 1,050

Prof., Scientific & Technical Serv.(54)

Human Resources Consulting Services 4.6 1,798

Drafting Serv. 3.9 238

Computer Facilities Management Serv. 3.4 1,074

Administrative, Support, Serv. (56)

Convention Visitors Bureaus 15.6 750

All Other Travel Arrangement Services 13.9 6,300

Convention & Trade Show Organizers 9.9 2,765

Tour Operators 9.2 1,489

Telemarketing & Other Contact Centers 3.8 7,363

Professional Employer Organizations 3.3 12,413

Educational Serv.(61) Other Technical & Trade schools 5.0 1,775

Amusement & Theme Parks 58.8 45,439 Arts, Entertainment, Rec.(71)

Other Performing Arts Companies 7.9 259

Accommodation & Food Svcs.(72) Hotels and Motels, except Casino Hotels 5.2 42,399

Exhibit 2: Top 25 Industries by Location Quotient and Employment in Orange County

Source: BLS Location Quotient Calculator, 2009

ECONOMIC OUTLOOK MAY 2009

The Southwest submarket is the next largest employment center in the County. While it has fewer firms than the Northeast and Northwest submarkets, the Southwest submarket has the second highest number of large employers. Most of the firms in the “leisure” sector are located on this submarket including the theme parks and the Orange County Convention Center. The rest of the submarkets, except for the East, have almost the same number of jobs between them. Being home to the Orlando International Airport, the Southeast market has a higher number of large employers than the rest of the submarkets. Moreover, this is the home of the Burnham Institute and what is expected to become a future medical city in the Lake Nona area. Thus, the importance of this submarket to the local economy will continue to grow through the next ten years. Conclusions The purpose of the Economic Research Initiative is to examine Orange County’s economy in a comprehensive way. The next series of articles would help to provide a thorough look at some of the leading industries in Orange County and future economic growth. A list of the next articles in this series is included in the next page. Today, Florida’s economy is at a “crossroads”. The old growth model is showing signs of fissures, and the “three- legged stool “concept does not seem to apply to Orange County anymore . To be able bring back economic prosperity, it is important to have a good understanding of how the local economy works. This means that we need to know what industries are driving economic activity locally, their location, and how these economic sectors are interrelated to each other. Economic indicators can be a useful tool to help measure the impact that the different industries may have on the local economy.

ECONOMIC OUTLOOK MAY 2009

Exhibit 3: Location of Orange County’s Major Employers by Employment Submarket

Source: infoUSA Database, 2005

References

Bureau of Labor Statistics, U.S. Department of Labor. (March 2009). Economic New Release. The Employment

Situation: March 2009. Originally published on April 3, 2009. Retrieved on April 7, 2009 from http://

www.bls.gov/news.release/pdf/empsit.pdf

Bureau of Labor Statistics, U.S. Department of Labor. 2007 Location Quotient Statistics for Orange County, Orlando MSA,

and State of Florida. Retrieved on March 11, 2009 from http://data.bls.gov LOCATION_QUOTIENT/servlet/

lqc.ControllerServlet

Hegenbaugh, B. and Hansen, B. Jobs: Maps shows states hit hardest; forecasts for rebound . USA Today. Originally

published on February 10, 2009. Retrieved April 7, 2009 from http://www.usatoday.com/money/economy/

employment/2009-02-08-recession- unemployment-relocation_N.htm?csp=DailyBriefing&POE=click-refer

Howard , M.R. (2009). Florida Trend. Not a Lot of Jobs, But the Right Jobs. Originally published on April 1, 2009. Retrieved

on April 3, 2009 from http://floridatrend.com/article.asp?aid=50772

infoUSA Database License Group. (2005). Orange County Business Leads Report . Database provided by METRO PLAN

ORLANDO

Jackson, J.W. Florida should end Ponzi scheme based on growth, economist says. Orlando Sentinel. Originally

published on March 31, 2009. Retrieved on April 4, 2009 from http://www.orlandosentinel.com/business/orl-bk-

florida-economy-ponzi-scheme 033109,0,5455806.story

Phillips. R. (2003). Community Indicators. Planning Advisory Report 517 . [Electronic Version}

Issues Month of Publication

Introduction May

Nursery and Floriculture Production July

High Technology Sectors August

Leisure and Hospitality October

Health Care and Biotechnology December

Orange County Growth Management Department Planning Division

Research & Intergovernmental Coordination Section Post Office Box 1393

Orlando, FL 32802-1393

Telephone: 407.836.5600 Fax: 407.836.5862

E-Mail: planning@ocfl.net www.ocfl.net/planning

ECONOMIC OUTLOOK MAY 2009