An Overview of Brevard’s Economy
by Paul O’Quin
2011 proved to be an eventful year for the economy in Brevard County and abroad. The global, national and local economies endured significant changes which will permanently alter the path of future developments, growth and policy. Mixed economic news was met with cautious optimism in Brevard County as it experienced the end of an era with the last shuttle launch in the midst of the slow recovery from the last recession. Several economic indicators point to a recovery in Brevard County in an uncertain global economic environment.
A Year in Review
For the first time in its history, the United States experienced a rating downgrade on its debt. S&P (Standard and Poor’s) cut the United States’ credit rating from AAA to AA+, dropping it from its list of risk-free borrowers. Fitch and Moody’s, the other two credit rating agencies, reaffirmed their top ratings for U.S. debt. However, both agencies warned that without significant changes in policy, the United States may be at risk of losing their risk-free rating. Several European countries also faced difficult financial reform. These concerns, along with other geo-political issues, erased some gains in the stock market after a strong first half of 2011. Additional perceived risk of United States sovereign debt and increased market volatility affects investors and consumers alike.
The world watched closely as a chapter in history concluded with the landing of Space Shuttle Atlantis at Kennedy Space Center on July 21, 2011. The Space Shuttle is an icon for Brevard County, representing a cornerstone of Brevard County’s cutting-edge technology and high-tech economic growth. Over its lifetime, the shuttle program created jobs, generated millions of dollars in tourism revenue and increased Brevard’s visibility on an international level. The shuttle was more than just a symbol to countless workers on the Space Coast, as many were employed to work on the shuttle or related programs. While the last shuttle landing did represent an end of an era, it did not represent the end of Brevard County’s competitiveness in state-of-the-art technology and engineering sectors. These sectors will continue to thrive and grow in Brevard County as job losses associated with the end of the shuttle program were met with new project announcements.
2011 brought new ventures by private companies in the aerospace and high-tech industries attracted to Brevard’s highly skilled workforce and competitive business environment. Embraer’s only U.S. manufacturing facility opened in February at Melbourne International Airport. Then, AAR Airlift Group opened its facilities in both Palm Bay and at Melbourne International Airport in April. In June, Professional Aircraft Accessories announced its expansion at Space Coast Regional Airport in Titusville. Existing Space Coast companies such as SolTec Electronics, Executive Wings and Barn Light Electric Company also announced expansions in 2011. The Boeing Company made an announcement in October to build the new commercial crew capsule at Kennedy Space Center and Harris renewed its commitment to Brevard in November by announcing a new $100 million hi-tech center in Palm Bay.
While the aerospace sector in Brevard County has experienced layoffs since 2008, noticeable increases in initial unemployment claims and other labor market metrics occurred with the end of the Space Shuttle program. Brevard County labor market statistics, which track several employment
and unemployment metrics, experienced a noticeable increase in July and August as the unemployment rate reached 11.7 percent. As the economy experienced evident improvement from its recessionary lows, the 11.7 percent unemployment rate represented only a 0.1 percent increase from August 2010 and a decrease of 0.8 percent from the peak rate of unemployment reached in November 2010 of 12.5 percent.
Additional measurable improvement in the labor market is found in initial unemployment data. Initial unemployment claims are often viewed as a leading indicator of the economy as firms attempt to forecast the correct level of employment based on future economic expectations. When viewed over the course of the year, in 2011, Brevard County firms are on pace to layoff approximately 9 percent less or 3,000 fewer positions then they did in 2010. A noteworthy benchmark occurred in February, as it marked the first time there were less than 2,000 initial unemployment claims in Brevard since March 2008.
Housing & Tourism
Due in part to Brevard County’s above-average concentration in the real estate and construction industry, the housing market crash largely contributed to the sharp regional economic contraction. This contraction hurt many households more than the stock market crash that followed, as homes are often Americans’ single largest source of savings. However, the number of single family homes sold has increased significantly in 2011 when compared to 2010. This is remarkable, especially considering the incentive offered in 2010, in the form of the First Time Home Buyer’s Tax Credit. Increased sales volumes are beneficial to the housing market; as existing surplus is sold, the amount of existing supply declines, improving market fundamentals which in turn apply upward pressure on prices. 2011 experienced several months when single family home sales transactional volumes experienced increases greater than 20 percent when compared with the same months of the previous year.
While labor and housing market data outlined several challenges Brevard County has overcome, tourism and recreation taxable sales is another important cornerstone of the County’s economy. Tourism and recreational taxable sales is a key proxy for consumer sentiment as it is a form of discretionary spending. With the exception of January, expenditures in the tourism and recreation category of taxable sales experienced a yearly increase for every month of available data in 2011. Additionally, Port Canaveral experienced over 3.1 million multi-day cruise passengers in their 2011 fiscal year, far surpassing their previous record of 2.78 million passengers in 2006 by more than 11 percent.
Melbourne International Airport also experienced strong numbers in 2011, as monthly data increased by a minimum of 10 percent and as much as 65 percent when compared to the same months in 2010. Consumer spending is even more significant when taking into consideration the role it plays in the greater economy, as it accounts for approximately two-thirds of GDP.
Regional Gross Domestic Product data was released in the last half of 2011 by the Bureau of Economic Analysis. Despite lagging by a year, the 2010 GDP data exemplified Brevard County’s economic vitality. In spite of the slow growth associated with the economic recovery from the last recession (from 2009 to 2010), Brevard’s economy grew by 4.7 percent to $18.05 billion. This 4.7 percent annual growth rate outpaced Florida’s and the nation’s 1.4 percent and 3.0 percent respective growth rates. Brevard’s strong growth against a backdrop of soft global and national economy provides hope that strong future regional growth is attainable despite uncertain national and global economic forecasts.
Looking Forward to 2012
In 2012, most economists and banks are forecasting for slow but continued growth in the United States and even recessions in some European countries. Brevard County will continue to face its own challenges as it did in 2011. However, when viewed collectively, Brevard County has not only endured challenges, it also demonstrated significant economic strength against the backdrop of uncertain larger economic events.
In 2011, as the economy in Brevard continued down the road of recovery, many key sectors of the economy exhibited signs of strength. The evidence in these important sectors lends support to the notion that 2012 will continue to be a year of economic growth and recovery in the many diverse areas that as a whole form Brevard’s economy.