The 2021 Bounce

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Compiled by FGCU staff

 

While the stock market shows signs of a full recovery, other parts of the economy continue to be affected by the COVID -19 pandemic. As of January, Florida is one of more than 30 states with nearly all businesses allowed to open, and one of the few with no statewide mask mandate. That situation makes Florida’s economy unique for both businesses and consumers.

To get a sense of Lee and Collier counties’ economy, the Horizon Council of Lee County, the Collier County Government and Florida Gulf Coast University’s Regional Economic Research Institute conduct one quarterly business climate survey for each county. Three primary areas are covered each quarter— economic conditions, industry conditions and hiring trends. The latest report looks at executives’ feelings in the fourth quarter of 2020 and their expectations for the next year.

“If we think about the beginning of 2020, we were heading toward the end of one of the longest growth periods in history,” says Amir Neto, interim director of the Regional Economic Research Institute in FGCU’s Lutgert College of Business.

Neto said that even then there were small signs—such as subtle declines in hiring—that a crisis was on the horizon.

“With the addition of COVID-19, an unprecedented change occurred. It wasn’t just a decline; parts of the economy shut down due to state lockdowns,” he says. “I don’t have to tell you that the impact was massive.”

As one would expect, the Business Climate Survey in both Lee and Collier counties showed optimism about 2020’s economy at the start of the year. That quickly evaporated in quarters two and three. By the fourth quarter of 2020, Neto notes that while a majority (61% in Lee and 69% in Collier) felt the economy was moderately or substantially worse than the same time in 2019, optimism about the future was increasing.

“At the end of 2020, business leaders (66% in Lee and 79% in Collier) looked at their specific industries and expected the economy to recover. They saw where the economy is going, but they are still very concerned with the current situation,” Neto says.

Optimism for the future can come from many places, but Neto sees the election and the vaccine as likely drivers. The unemployment rate in the fourth quarter was dropping. Plus, a roaring real estate market like the current one can also help business leaders forsee a better future in a dark time.

Even so, it’s not all about the future. As it turns out, 15% of respondents in Lee County and 18% in Collier felt the fourth quarter of 2020 was better than the last three months of 2019. That wasn’t a surprise for Neto.

“Some industries are thriving right now. Think about warehouses or construction or a delivery company; they are thriving because of a large part of the population staying at home. It’s that sector that is providing the silver lining in a bad situation.”

In that sense, the Southwest Florida economy continues to face a significant challenge: a lack of diversification in the types of industries located in the region.

“Diversification is an issue for regions that seem to be especially susceptible to swings in the business cycle,” says Chris Westley, dean of Lutgert College. “More diversified regions tend not to overheat as much during boom phases, but they also don’t correct as much during the inevitable bust.”

In other words, when the economy is terrible everywhere, one can look

at past data to see the situation is likely to be worse in Southwest Florida. If other states implement lockdown procedures, Southwest Florida could see an increase in travelers. Then, the region’s plethora of accommodations and retail spaces should see business improve. That is, of course, following the assumption that Florida continues to allow its companies to remain open. Neto also sees a roaring stock market as a benefit here.

“As we know, there is an older population here; there is also a lot of wealth. As the stock market continues to perform, these individuals should make more money. We hope that means they will then spend it locally. That would be a great thing for this economy.”

The Business Climate Surveys (and others, including the diversification index and periodic COVID surveys) can be found at the Regional Economic Research Institute website at fgcu.edu/cob/reri

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