‘They’re going to be hurt.’ Coronavirus strikes at heart of Miami’s small-business economy
If someone had designed a weapon that would strike at the heart of South Florida’s $355 billion economy, it is hard to imagine a more effective force than the coronavirus outbreak.
The dead stop to tourism and hospitality commerce — Florida’s economic backbone — instantly cost tens of thousands of jobs. Brick-and-mortar retail, which had remained more robust in South Florida than in most of the U.S., now has been shuttered.
Exacerbating the problem is the region’s dependence on small and even micro businesses, with fewer than five employees. More than half Miami’s economic output comes from companies with fewer than 500 employees, according to a Florida International University study. Unlike large corporations, small firms are less likely to have access to lines of credit, and are also less able to exert leverage over a landlord to relax lease terms.
The result is what could be a prolonged recession for the region, say experts.
“South Florida should be very concerned,” said Gwendy Brown, vice president of research and policy at the California-based Opportunity Fund, which provides financing to small businesses. “Immigrant, low-income, minority communities — firms there are going to be smaller, although they are still providing incredibly important jobs, sources of revenue, and services. But by nature, because they are smaller, they are more vulnerable. They’re going to have already closed their doors, or are going to be doing so very soon.”
Ned Murray, associate director of Florida International University’s Jorge M. Perez Metropolitan Center, agrees.
“We are an economy of small businesses,” he said. “They’re going to be hurt because they don’t have the credit to survive this long term. They need demand, but in the “Covid economy,” that’s not a moving part right now.”
Earlier this week, the StratoDem Analytics data firm in Cambridge, Mass., pronounced that South Florida was already in recession. Nationally, unemployment could hit 15%, up from record lows of 3.5%, according to a separate estimate from Ball State University. Since Miami’s economy generally follows national trends, the local rate will likely jump at least that high, according to Abbey Omodunbi, an economist with The PNC Financial Services Group.
The magnitude of the downturn appears to be growing. On Tuesday, Gov. Ron DeSantis announced that for the week ending March 7, Florida had received 5,325 applications for Reemployment Assistance — already up 10% from the prior week’s 4,853 applications. With restaurants, malls, hotels and tourist services now largely closed, the number is expected to soar.
According to the state’s Worker Adjustment and Retraining Notification (WARN) site, which tracks business layoffs, 1,812 workers in South Florida have been left without jobs in the past week. If economic projections are anywhere close to the mark, the true number is likely far, far higher. A representative for the Florida Department of Economic Opportunity said the state is processing a large volume of such notices, though she declined to call it a backlog.
Diversification
Economies invariably hit rough spots. To strengthen local foundations after the Great Recession of 2008, local civic leaders focused on protecting Miami from a downturn in tourism by diversifying the types of businesses here. The effort, called One Community One Goal, was initiated by the Miami-Dade Beacon Council, the public-private economic development agency.
Yet the evidence suggests that that job is far from complete.
While the Knight Foundation, Beacon Council and eMerge Americas, a digital conference, have worked diligently to encourage the startup and tech industries, progress has been slow. The Miami metro area added 9,600 digital services jobs between 2010 and 2018. As a share of all jobs, digital services barely budged from 1.2% in 2010 to 1.3% in 2018, according to data from the Brookings Institution, a nonprofit think tank.
Other targeted industries — like finance and life sciences — have also grown. Yet as a share of the overall economy, they’ve remained flat.
The reality: Tourism and hospitality remain key industries.
According to the Brookings Institution, the Miami metro area added 79,200 leisure and hospitality jobs between 2010 and 2019. During that period, the sector’s share of all jobs in the region rose from 11.8% to 12.7%. By comparison, leisure & hospitality jobs as a share of all jobs nationwide rose from 10.2% to 11.0%.
“So Miami remains as specialized in the sector as it was a decade earlier,” said Mark Muro, senior fellow and policy director of Brookings’ Metropolitan Policy Program, in an email.
And many of the enterprises that aren’t directly related to tourism still depend on discretionary spending, noted Omodunbi, the PNC economist.
“Most of the industries directly affected are consumer-facing industries, which makes up a huge part of the South Florida economy,” he said.
Miami’s largest employers remain government entities, followed by hospitals, banks, and the area’s three major cruise lines.
Those hospital jobs could help. The Dade-Broward-Palm Beach area has more than 230,000 healthcare workers according to the Bureau of Labor Statistics, feverishly working to staunch the spread of COVID-19. These workers represent just under 10% of the area’s workforce.
For now, construction is also holding steadier than most sectors, with many construction sites still open. There are approximately 100,000 construction jobs in the tri-county area, according to the BLS. A report from the Association of General Contractors showed Florida gaining 21,000 construction jobs in the weeks leading up to the downturn.
Still, Mike Finney, president and CEO of the Miami-Dade Beacon Council, is bracing for a hit.
“We know we are a community with almost 90,000 small businesses, driven by industries that have been disproportionately impacted by the coronavirus including aviation, tourism, and trade and logistics,” he said.
Finney said that at this stage, it is difficult to project any kind of timing to the recovery and lasting impact.
“We can’t pretend that the challenges aren’t there, or that it is going to be easy, but we are singularly focused on helping to secure and deploy the resources necessary to support Miami-Dade’s business community and the long-term health of our economy,” he said.
Possible bounce?
Experts say relief from Washington may ultimately determine the fate of South Florida and the nation’s economies. As of Tuesday evening, Congress was still debating the size and scope of what could be a multitrillion-dollar aid package.
While that continued, the Federal Reserve announced it would launch a Main Street lending program, though the details on how and when the program would be stood up remained sketchy.
Florida Republican Sen. Marco Rubio’s plan to provide $350 billion in emergency loans to small businesses — loans that will be forgiven if businesses keep their workers employed during the coronavirus pandemic — is included in a massive $2 trillion coronavirus relief bill that could pass the U.S. Senate Wednesday. The legislation, which is still being finalized, will also include direct cash payments to most Americans and help for industries like airlines that have been particularly hard-hit by the coronavirus.
Rubio praised Democrats for working with him on the small business portion of the bill on Wednesday morning.
“Unprecedented crisis requires unprecedented response, [Maryland] Sen. Ben Cardin, [Maine] Sen. Susan Collins, [New Hampshire] Sen. Jeanne Shaheen worked as patriots, not partisans, to help craft this relief package that gets cash to small businesses so they can pay their workers,” Rubio tweeted. “We did our best and the result is very good.”
Although the Small Business Administration is working to ramp up assistance through emergency lending programs, it could take weeks, if not months, for that money to trickle down — and many businesses may find they are not eligible.
Still, some, like Wells Fargo economist Mark Vitner, think there is reason for optimism.
“I think there will be a sharp drop, but then we’ll see a big bounce back,” he said. After that, growth will likely be modest, he said.
“So much [of the slowdown] has been in leisure and hospitality, activity has basically fallen 100%. Some restaurants are going to have trouble opening up, and it depends on what kind of stimulus we get. But when we get the all clear — I’m not sure if we’re going to be able to reverse all of that 100% drop, but I think we’ll get about two-thirds back immediately.”
Yet much is uncertain.
“It’s going to depend on the level and type of relief provided,” the Opportunity Fund’s Brown said. “If small businesses can get grants, or relief from payments, on rent, tax, utilities — if they can furlough employees instead of laying them off, or get them covered through unemployment, that will dictate the severity,” she said.
“This is a global natural disaster coupled with a recession. And the natural disaster is still coming. How deep the recession will be, when will workers be back to work...there’s still just a lot of questions there.”
Jacques Francois is already feeling the pain. The father of two was at North Miami’s Sant La Haitian Neighborhood Center Tuesday to file for unemployment after being laid off Monday from his job as a cook at a local restaurant.
“It’s going to be very hard,” he said. “I have bills, a mortgage. I feel very bad. Everything is uncertain right now.”
This story was originally published March 25, 2020 at 6:00 AM.
