1. Issue 6
Summary of Major Project Findings and Conclusions
by Luis Nieves-Ruiz, AICP
Introduction
Last year, the Orange County Planning Division started the Economic Research Initiative series, a
thorough study of Orange County’s economic sectors. These publications were supplemented by a
series of Outlook articles that addressed different aspects of our economy, such as population
growth, retail vacancy, government intervention, and the construction industry. The premise behind
these publications was simple. To foster economic growth and prosperity, one needs to understand
the industries and sectors that comprise the local economic structure.
There have been several changes in the national and state economies since the publication of the
first issue of the Economic Outlook in May of last year, Most of these changes have not been
positive. Job losses started to slow down around May of last year. This indicates a stabilization of
the job market. However, while layoffs have declined, companies are still not hiring aggressively
(Harrington, 2010). Moreover, the measure of unemployed and underemployed workers reached
17.5 percent this year, the highest rate since 1982 (Leonhardt, 2009). Pay cuts or furloughs, the
result of downgrades in rank or shortened workweeks, have now become the preferred cost-cutting
method for companies to reduce labor costs. Indeed, the total weekly pay for production workers
index fell for 10 consecutive months before rising again in July of last year (Uchitelle, 2009).
Several events led to the current economic meltdown, but the decline of the real estate and
construction industries is probably the most significant factor. Most of the economic growth
between 2002 and 2006 was driven by large flows of capital coming from Wall Street and abroad.
Most of these funds were invested in the financing of real estate projects across the nation,
especially in the Sunbelt region of the country. These new developments catered mostly to the
baby boomer population that would be migrating from the northern states. The building boom of
commercial and residential developments, in turn, helped to fuel the rapid population growth that
occurred during these years. Many people would move to Florida to build the houses and stores
that would serve the next wave of people moving to the area. These newcomers would then
increase the demand for a variety of goods and services, and thus the cycle would continue. It
finally stopped when people realized that there was not any demand for most of these new projects.
The State of Florida has suffered some of the worst consequences of this economic situation. The
effects of the decline of construction and real estate “spilled over” to other sectors of the economy.
Now the state’s unemployment is expected to reach 12 percent before it starts to decline again.
Most residents can not afford to wait for the economic return, bringing population declines this year.
According to BEBR, the state of Florida lost 58,000 people in 2009. This was the first population
loss since the World Wars I and II periods. This sudden loss is a problem, because Florida’s
government is primarily funded through sales and property taxes, which are closely linked to
population growth. The state banned the use of a state income tax in 1924 (Cave, Damien 2009).
Some of these conditions were detailed in Outlook’s March issue. The 2008 preliminary population
numbers for the County showed an increase of just over 9,000 residents. This was unusual
because the county had been adding more than 20,000 residents annually since 2001. Then came
the 2009 population numbers, which showed a decrease of more than 6,000 residents. This
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2. decrease in population growth has been steeper in unincorporated Orange County, as can be seen
on Exhibit 1.
Many of these people may have left because of the lack of jobs. According to the Bureau of
Economic Analysis, construction and real estate represented almost 33 percent of all economic
output in the Orlando area in 2006. Meanwhile, the national average at the time was closer to 20
percent (Cave, Damien, 200). Once these activities diminished, non-residential builders started to
see higher vacancy rates, and in turn, construction companies started to consolidate as a means to
survive.
Exhibit 1: Absolute Population Changes in Unincorporated Orange County 2000-09
Sources: BEBR Population Estimates 2001-2009, U.S. Census Bureau 2000
In times of economic turmoil, it is very important to understand what industries are key to the local
economy. The industries studied for this project had several common characteristics including high
location quotients, representing high levels of export activities, established local suppliers, and other
anchor industries. The methodology used for the study was simple. Once a sector was identified,
staff verified the agglomeration of similar industries using the InfoUSA database.
Mature agglomerations of industries within the same field are often referred to as “clusters”’. Clusters
are comprised of firms and related economic actors and institutions that draw competitive advantage
from their proximity and connections (Corthright, 2006). These agglomerations can include
companies that produce similar products, their suppliers, and related institutions such as research
organizations and universities.
They are a sign of economic specialization and hint at possible regional competitive advantages.
More important tough is that industries within mature clusters are also the ones driving local
economic growth. Therefore, economic diversification efforts should focus on building on or extending
the strengths of the local clusters. The cluster assessment methodology used in this project provides
a good framework for understanding how the local economy works and helps to define which
industries drive economic growth.
Major Project Findings
On each of the series articles, staff used the InfoUSA database to identify possible industry clusters
in Orange County. Through this research, staff found 11 agglomerations within the following
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3. industries: Healthcare, Floriculture and Nursery, Modeling Simulation and Training, and Tourism. Exhibit
2 shows the general location of these agglomerations in Orange County. Altogether, these clusters are
responsible for over 75,000 jobs in Orange County. All of these industries have their own challenges for
growth that need to be overcome. A complete list of the industries that comprise these clusters can be
found at the end of the article.
Exhibit 2: Employment Agglomerations by Industry Sector in Orange County
Source: InfoUSA, 2009
The Health Care agglomeration is comprised of Hospitals and Ambulatory Health Services, Medical
High Tech, and Medical Wholesale. Even though medical services are spread through the County, staff
found three agglomerations. Two of them were found along Orange Avenue. The North Orange
agglomeration employs over 18,000 people and the South Orange one employs over 22,000. These two
agglomerations would benefit from the arrival of commuter rail, because each of them would have its
own station. The two hospitals in the area have already announced redevelopment projects in the area,
which should solidify the status of the two corridors. A third corridor is found in the City of Ocoee along
Colonial Drive, This agglomeration employs about 3,000 people. As a sector, healthcare is expected to
continue to grow, because of the demands of the aging population. It remains to be seen how the
developments at Lake Nona would enhance Orange County’s health care sector, and whether they
would have any potential effects on the current corridors. Thus far, it seems that the health care sector
has not developed a mature cluster because its establishments mainly serve the local population.
Since the 1880s, Northwest Orange County has been noted for its concentration of nurseries and green
houses. These business produce a variety of flowers and ferns sold across the United States. The
Nursery and Floriculture cluster is comprised of plant growers and supporting industries, such as
fertilizer manufacturers, landscape services, and bio technology firms. The cluster also includes an
office of the University of Florida’s Institute of Food and Agricultural Sciences. The high location
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4. quotients in some of these industries suggest that there is a lot of export activity in this sector.
Furthermore, the concentration of these industries in one part of the County implies that there is a
strong connection between these industries. Overall, the sector is responsible for about 2,500 jobs.
Suburbanization trends within the City of Apopka are of concern to the future viability of this cluster in
Orange County.
Several high technology service industries have location quotients that are greater than 1, including
Commercial and Service Industry Machinery, Data Processing and Hosting, Architectural and
Engineering Services, Telecommunications, and Scientific and Research Development Services.
Together, these industries employ about 20,000. Of these sectors, Orange County is recognized as a
national leader only in the Commercial and Service Industry Machinery, which includes photonics.
However, the only technology sector that shows signs of clustering is the Modeling, Simulation &
Training (MS&T) industry. MS&T is comprised of a variety of industries, including Computer and
Peripheral Equipment Manufacturing, Computer and Software Stores, Human Resource Consulting,
Management Training, among others. While many identify Central Florida Research Park as the only
cluster of MS&T activity in Orange County, staff found three other areas of interest. A second cluster is
located near the Aloma-University area around Winter Park. It has 17 companies and about 500
employees. Two additional smaller concentrations (5 businesses each) can be found in the City of
Orlando and West Sand Lake Road. Together, they employ 259 people. The continued increased in
federal funding for defense companies solidifies the standing of the MS&T clusters in Orange County.
Exhibit 3: Orange County Convention Center
Source: ernierosa, 2008
Tourism is the most important industry in Orange County, and industries within this sector have the
county’s highest location quotients. The core industries within this sector are Amusement & Theme
Parks, Hotels and Motels, and All Other Amusement and Recreation Industries. The economic benefits
of these industries go far and include over 15 supporting industries. Staff identified three clusters of
activity that had highest concentration of core and supporting industries. The first cluster follows
International Drive from the City of Orlando to Lake Buena Vista. This cluster employs over 12,000
people in core and supporting industries. The second cluster is on State Road 535 near the Downtown
Disney entrance. Just over 11,500 individuals are employed by tourism related establishments in this
area. The final cluster is in South Orange Blossom Trail. This area has the highest concentration of
tourism support industries, such as convention trade organizers, tour operators, promoters, and
transportation providers. This area benefits from its easy access to the Orange County Convention
Center, a big generator of tourism activity (Exhibit 3).
The biggest challenge to the tourism industry is the local recession, which has decreased the number
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5. of leisure and business visitors. A second challenge is that the Central Florida region can be perceived
as a mature market, which has implications for the growth in number of visitors each year. The recent
passage of Travel Promotion Act will hopefully help to increase the number of international visitors to
the area. The private sector would also need to continue to enhance local offerings by refurbishing the
current properties and adding more attractions.
Community Indicators
One of the premises discussed in first issue of the Economic Research Initiative was the need for
community indicators that reflect the local economy. Three indicators used locally to measure quarterly
economic activity are the gas tax, building permits, and the Tourism Development Tax. Now that
construction has decreased significantly and most sales activity is based on foreclosures and short
sales, it becomes important to verify the utility of some of these indicators. While the gas tax still
remains a good indicator, construction has gone down dramatically, and is not expected to come back
to previous levels within the next couple years. Therefore, there is a need to find new indicators that
can take its place.
Any new indicators of economic activity need to be based on the current basic industries and the
County’s main industry clusters: nursery and floriculture, simulation, and tourism. Exhibit 4 lists some
possible indicators by cluster.
Exhibit 4: List of Possible Indicators by Economic Cluster
Cluster New Indicators
Nursery and Floriculture Plant Exports
Fertilizer Sales
Fertilizer Production
Modeling Simulation & Training Amount of Federal Contracts Signed
New Employment
Companies Attracted
Airport Visitor Arrivals
Transportation Company Receipts
Tourism
Number of Conventions/Attendees
Hotel Occupancy/Number of Nights
Staff recognizes that some of the information described here may not be as easily found as the
previous indicators and that some currently are in use by their respective industries. However, they
could help to complement the current indicators and provide a better perspective on the economy.
Conclusions
The purpose of the Economic Research Initiative was to study the local economic structure and find
areas of economic specialization. Based on staff’s research, there has not been such a study done at
the local level in the County’s recent history. What we found was that some of the sectors that are
currently promoted at the state level do not have an established economic position in Orange County.
Meanwhile, other areas of economic importance are currently less of a focus. To foster long-term
prosperity, economic research and policy must highlight and enhance the contributions of these
important clusters. This is especially relevant in an economic climate were economic incentives are
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6. becoming scarce.
The location quotient methodology used for this project is not beyond critique. This method assumes
that the demand for services is constant across the region and that firms within a sector produce
identical products. Moreover, the base area used for comparison and the level of specificity used to
describe the industries can certainly have an effect on the location quotient outcome. Finally, as
mentioned on the third issue, the NAICS classification system does not aggregate some cutting edge
technology sectors.
Exhibit 5: Aloma-University High Tech Agglomeration
Source: InfoUSA, 2009
Because of these reasons, staff used the business establishment database to support the location
quotient data. Each sector was carefully studied at the six-digit NAICS level to provide more
specificity, and establishments that did not fit the profile of the industry were purged from the list. To
measure the County’s competitiveness more effectively, the United States was used as the base
region. These measures should bring confidence to the assumptions and arguments made through
the series.
To conclude, the findings of this project should be seen not as the end, but more as the start of a new
discussion of the local economy. While some of the sectors studied had the highest location quotients,
there are several others with relatively high location quotients that need to be further studied. Other
studies could look at the individual clusters and identify the location factors that led some industries to
choose that location within Orange County. This is very important for technology clusters, such as the
Aloma-University corridor (Exhibit 5). A future study could examine more in depth the actual
relationships between these companies. Finally, and perhaps the most important, one needs to find
ways to foster these clusters so they can continue to grow and benefit Orange County’s economy, its
citizens, and its communities.
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7. Appendix
Cluster Sectors
Ambulatory Health Services (NAICS 621)
Hospitals (NAICS 622)
Pharmaceutical and Medicine Manufacturing (NAICS 3254),
Electromedical Apparatus Manufacturing (NAICS 3345),
Health Care Medical Equipment Supplies (NAICS 3391),
Scientific Research and Development Services (NAICS 54171)
Medical Supplies (NAICS 42345),
Ophthalmic Goods (NAICS 42346)
Other Professional Equipment (NAICS 43349)
Nursery & Tree Production (NAICS 1114)
Nursery & Florist Merchant Wholesale (NAICS 4249)
Nursery Garden & Farm Supply Stores (NAICS 4442)
Fertilizer Manufacturing (NAICS 3253)
Nursery Farm & Garden Equip Merchant Wholesale (NAICS 4238)
and
Other Chemical Merchant Wholesale (NAICS 4246)
Floriculture
Farm Supplies Merchant Wholesale (NAICS 4249)
Nursery Garden & Farm Supply Stores (NAICS 4442)
Florists (NAICS 4531)
Research & Development in Biotechnology (NAICS 5417)
Landscaping Services (NAICS 5617)
All Other Support Services (NAICS 5619)
Amusement & Theme Parks (NAICS 71311)
Hotels and Motels (NAICS 72111)
All Other Amusement and Recreation Industries (NAICS 71399)
Other Travel Arrangement Services (NAICS 56159)
Tour Operators (NAICS 56152)
Convention and Trade Show Organizers (NAICS 56192)
Tourism Charter Bus (NAICS 48551)
Luggage and Leather Goods Stores (NAICS 44832)
Other Machinery Rental and Leasing (NAICS 53249)
Fish and Seafood Merchant Wholesalers (NAICS 424460)
Other Ground Passenger Transportation (NAICS 485999)
Data Processing, Hosting and Related Services (NAICS 51821)
Independent Artists, Writers, and Performers (NAICS 7115)
Performing Arts Companies (NAICS 7111)
Full-service Restaurants (NAICS 72211)
Special Food Services (NAICS 7223)
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8. Cluster Industry Sectors
Highway, Street, and Bridge Construction (NAICS 237310)
Other Computer Peripheral Equipment Manufacturing (NAICS 334119)
Other Electronic Component Manufacturing (NAICS 334419)
Search, Detection & Navigation Instruments (NAICS 334511)
Other Aircraft Parts & Equipment (NAICS 336413)
Ophthalmic Goods Manufacturing (NAICS 339115)
All Other Misc Manufacturing (NAICS 339999)
Modeling
Photographic Equip & Supplies Merchant Wholesalers (NAICS 42341009)
Simulation &
Training Computer & Software Merchant Wholesalers (NAICS 423430)
(includes both Electric Equip & Wiring Merchant Wholesalers (NAICS 423610)
developers and
Computer & Software Stores (NAICS 443120)
Technology users)
All Other Publishers (NAICS 511199)
Engineering Services (NAICS 541330)
Custom Computer Programming Services (NAICS 541511)
Human Resource Consulting Services (NAICS 541612)
Process & Logistics Consulting Services (NAICS 541614)
Other Management Consulting Services (NAICS 541618)
Other Technical Consulting Services (NAICS 541690)
Research & Development in Biotechnology (NAICS 541711)
Marketing Research & Public Opinion Polling (NAICS 541910)
All Other Professional & Technical Services (NAICS 541990)
Colleges & Universities (NAICS 611310)
Computer Training (NAICS 611420)
Management Training (NAICS 611430)
Offices of Physical, Occupational, Speech Therapists, and Audiologists (NAICS 621340)
Other Individual and Family Services (NAICS 624190)
Other Performing Arts Companies (NAICS 711190)
Civil and Social Organizations (NAICS 813410)
National Security (NAICS 928110)
Unclassified Establishments (NAICS 999999)
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9. References
Bloomberg News. Jobless Rate Up in 29 States, Hitting Records in 4 of Them. New York Times. Originally
published on November 21, 2009. Retrieved on February 8 from http://www.nytimes.com/2009/11/21/
business/economy/21jobless.html?emc=eta1
Cave, Damien. After Century of Growth, Tide Turns in Florida. The New York Times. Originally published on
August 30, 2009. Retrieved on February 8, 2010 from http://www.nytimes.com/2009/08/30/
us/30florida.html?_r=1&emc=eta1
Collins Rudolf, John. Construction That Fueled Growth in the Sun Belt Slows. New York Times. Originally
Published on August 28, 2009. Retrieved on February 8, 2010 from http://www.nytimes.com/2009/08/28/
business/economy/28growth.html?emc=eta1
Cortright, Joseph. (2006). Marking Sense of Clusters: Regional Competitiveness and Economic Development.
The Brookings Institution Metropolitan Policy Program [electronic version]
Davidson, Paul. Commercial Real Estate Gets Worse. USA Today. Originally published on August 17, 2009.
Retrieved on February 8, 2010 from http://www.usatoday.com/money/economy/2009-08-17-commercial-
real-estate_N.htm?csp=DailyBriefing&POE=click-refer
Ernierosa. Orange County Convetion Center picture. Retrieved from www. panoramio.com
Harrington, Jeff. Are we in a recovery? Yes and No. Saint Petersburg Times. Originally published on May 8,
2009. Retrieved on February 8, 2010 from http://www.tampabay.com/news/business/article999414.ece
Leonhardt, David. Broader Measure of U.S Unemployment Stands at 17.5%. New York Times. Originally
published on November 7, 2009. Retrieved on February 9, 2010 from http://
www.nytimes.com/2009/11/07/business/economy/07econ.html?emc=eta1
McLean, Mary L. and Voytek, Kenneth P. Understanding your Economy: Using Analysis to Guide Local Strategic
Planning. Planners Press: Chicago IL p.63
Uchitelle, Louis. Still on the Job, but at Half the Pay. New York Times. Originally published on October 14, 2009.
Retrieved on February 9, 2010 from http://www.nytimes.com/2009/10/14/business/
economy/14income.html?emc=eta1
Wiseman, Paul. Smaller banks at risk if commercial real estate falters. USA Today. Originally published on
February 11, 2010. Retrieved on February 12 from http://www.usatoday.com/money/industries/
banking/2010-02-11-banks11_ST_N.htm?csp=DailyBriefing&POE=click-refer
Orange County Growth Management Department Economic Research Initiative Series
Planning Division
Research & Intergovernmental Coordination Section
Post Office Box 1393 Introduction to the Economic Research Initiative
Orlando, FL 32802-1393
Nursery and Floriculture Production Sector
Telephone: 407.836.5600
Fax: 407.836.5862
E-Mail: planning@ocfl.net The High Technology Sector in Orange County
www.ocfl.net/planning
The Tourism Sector in Orange County
The Health Care Sector in Orange County
Summary of Major Project Findings and Conclusions
ECONOMIC OUTLOOK MARCH 2010