Following five years of solid economic growth, the Miami economy is definitely taking a break, based on the recent pattern of employment growth (or rather lack of it) over the past five months.

Since November 2007, employment in Miami has fallen by 23,000 jobs. While this is a significantly larger job loss than the metro area experienced in 2002 (8,100 jobs), it pales when compared to the almost 46,300 drop in employment that occurred during a comparable period in 1991.

The current economic hiatus appears to be more serious than the 2002 slowdown, but much less severe than the major economic downturn that the metro area experienced in 1991.

Despite the fact that employment in Miami has fallen since late in 2007, the metro area's unemployment rate (4.3% in March) is much lower than it has been in previous slowdowns. Not only does this reflect a slower rate of net migration, it also suggests that firms are trying to avoid laying off trained staff since they may have difficulty replacing them when conditions improve.

Assuming that this pattern of increased worker retention continues, the overall severity of the current downturn should be more moderate than previous slowdowns. However, given the relatively high proportion of sub-prime mortgages in Miami, it appears likely that the area's housing market will remain depressed for some time. Consequently, a further weakening in housing demand will likely cause employment in construction (which was -10.4% year over year in April) to shrink further during the remainder of this year.

One important contributor to the metro area's economy in the near term will be the weak U.S. dollar, not only versus Canada's currency but also relative to the Euro. The combination of the lower U.S. dollar and the drop in nominal house prices will mean that foreign investment, particularly in real estate, will make an important contribution to the metro area's economic health over the next several quarters.