Economists Give Miami’s Economy A Thumbs-Up

Despite uncertainty surrounding tariffs and inflation, Miami’s economy is outperforming expectations and faring better than many other U.S. cities, according to local economists.

“Growth in key sectors such as services and construction remains strong,” said Manuel Lasaga, president of StratInfo, a Miami-based business economics and finance consulting firm. “The outlook is positive, with Miami expected to continue growing faster than the national average into the first quarter of the year. However, uncertainties related to tariffs—particularly their impact on supply chains and consumer costs—remain a concern. It could take up to six months for these effects to become fully apparent.”

Miami’s economic momentum continues to be driven by solid consumer spending and ongoing construction activity. Growth in the first quarter is expected to exceed national averages, reaching approximately 2.5% to 3%, although lingering economic uncertainties warrant caution, Mr. Lasaga noted. The inflationary impact of tariffs remains unclear, he added, compounded by disruptions caused by the recent federal government shutdown. The shutdown interfered with the collection of Consumer Price Index (CPI) data, making inflation trends more difficult to assess.

“The shutdown affected GDP and created additional uncertainty,” Mr. Lasaga said. “With CPI data missing for October and complications in calculating fourth-quarter figures, it’s challenging to accurately measure inflation. The temporary layoff of federal employees also reduced government spending and economic activity during that period.”

As a result, fourth-quarter GDP growth may appear marginal and serve as an outlier compared to other quarters. The absence of official CPI data for October further complicates efforts to gauge economic trends in Miami and nationwide.

Mr. Lasaga advised closely monitoring inflation and broader economic indicators as the effects of tariffs and the shutdown work through the economy. He also urged vigilance regarding Federal Reserve developments and preparedness for unexpected impacts.

Although inflation currently stands near 3% and the federal funds rate is approximately 3.7%, those figures could change amid political pressure on Federal Reserve Chairman Jerome Powell. Speculation about potential leadership changes at the Fed adds uncertainty to future monetary policy, particularly interest-rate decisions that could influence inflation and economic stability.

“Uncertainty surrounding the Fed’s direction under possible new leadership is a significant concern for economic outlooks, including for Miami,” Mr. Lasaga said.

“From a global perspective, geopolitical risks are a major concern,” said David Andolfatto, chair of the Department of Economics at the Miami Herbert Business School at the University of Miami.

Key issues include disruptions stemming from U.S. foreign and tariff policies, as well as shifts in international trade and supply chains due to rising global tensions. The growing rivalry between the U.S. and China, Mr. Andolfatto said, has introduced “tectonic shifts” in global politics that could have long-term economic consequences.

“Historical parallels, such as the Cold War, show how geopolitical events can profoundly shape economic conditions worldwide,” Mr. Andolfatto said.

The global outlook remains unpredictable, influenced by developments in countries such as China and Iran. Still, the U.S. economy has demonstrated resilience, with inflation declining from its 2022 peak and unemployment remaining low, though slowly increasing as businesses hesitate to hire.

“Technological disruption from artificial intelligence and automation is another major factor likely to reshape the workforce,” Mr. Andolfatto said.

While advanced technologies may displace some jobs, history suggests society can adapt, as it has during past transitions from agriculture to manufacturing and later to services. AI is expected to have particularly strong effects in areas such as healthcare and robotics. However, if productivity gains from AI fail to materialize, managing inflation and public debt could become more challenging.

Mr. Andolfatto emphasized the importance of contingency planning over rigid forecasts, noting that geopolitical developments often produce unexpected shocks. He also warned that political attacks on the Federal Reserve could undermine its independence.

“Chairman Powell has upheld the Fed’s technocratic and nonpartisan role,” Mr. Andolfatto said. “Continued political pressure risks eroding institutional credibility, politicizing monetary policy, and destabilizing American economic governance.”

Uncertainty surrounding aggressive tariff policies and rising debt levels further complicates the economic outlook, with concerns that some fiscal measures could fuel inflation and make the Fed’s job more difficult.

Source: Miami Today