Florida is not only richer than many states when it comes to personal wealth, but is more resilient for the time an expected national recession sweeps the country.
“Economically speaking, we have our flashlights, batteries, food and water,” Sean Snaith, an economist at the University of Central Florida, said Thursday upon the release of his quarterly state economic forecast “Compared to what Florida went through in the two previous recessions, the next recession will be more akin to a tropical depression.”
Snaith’s analogy, of course, is designed to greet the arrival of the 2023 Atlantic hurricane season, which started Thursday.
Many economists and financial analysts believe a U.S. recession of some magnitude is inevitable this year as the Federal Reserve has steadily raised interest rates in a bid to slow the economy and quell the fires of inflation that have driven up prices across the board. Economists and analysts who participated in a recent national Urban Land Institute survey “expect a slowing economy in ’23 and ’24, and a return to stronger growth in ‘25,” according to a ULI summary. “Employment growth is also expected to slow in ‘23 and ‘24, strengthening again in ‘25.”
One key factor for the state’s resilience is the growing influx of high income and net worth individuals who continue to relocate to the state from the Northeast, Midwest and the nation’s West Coast.
Snaith, the director of UCF’s Institute for Economic Forecasting, said the state’s “continued population growth, which led the nation last year, and the associated wealth and income it has brought to the state” are buffers against the erosion of economic activity.
At the same time, record-low unemployment and continued job growth would serve to lessen any damage “that a recession would do to our labor market,” he said.
“We have a labor market with sub-3% unemployment and lower still in some areas of the state,” he said.
“The labor market is another tool to deflect any damage from a national economic storm,” he said. “When I look at where we are now compared to 2020 or 2008-2009, Florida is pretty structurally sound.”
svengine / Getty Images
While Florida’s economic growth is expected to slow if a recession hits the national economy, some experts believe the state is well positioned to handle it.
“I think we’re in good shape to handle this downtown if it comes,” Snaith added. “I’m getting less confident this recession is going to show up in 2023.”
Still, there are some areas of the economy that will experience a slowdown as the year wears on.
Not totally immune
“There are some issues,” he acknowledged. “I’m not suggesting Florida is going to be unscathed by any recession.”
Commercial real estate is facing a “two-pronged challenge:”
They include “the collateral damage” from the Silicon Valley Bank failure “and regional banks taking some shrapnel from that. They are already tightening lending standards there.”
There is also the “tug-of-war” in the labor market where employers are still trying to resolve tensions over remote work preferences by employees versus requirements by businesses that they return to the office after remaining off-site during the COVID-19 pandemic.
The residential real estate sector, while still facing a shortfall in inventory, faces challenges.
“Housing starts will be suppressed by the slowdown and higher mortgage rates,” he said.
Total starts statewide of 158,349 in 2020 jumped to 193,049 in 2021 and held at 192,213 last year 2022 — ”all before higher interest rates and a slowing economy result in a deceleration.”
Snaith estimates housing starts will slip to 142,183 this year and 137,121 in 2024 “before ticking up to 147,146 in 2025 and 149,030 in 2026.”
“Rapid house-price appreciation has been washed away with demand dampened by rising mortgage rates, decreasing affordability and the slowing economy,” he said. .
Payroll job growth around the state will also start to “falter with a slowdown in the U.S. economy, but not in every sector,” he added.
“After year-over-year growth of 4.6% in 2021 and job growth of 5.3% in 2022, payroll employment in 2023 will decelerate to 1% and contract by 2.4% in 2024,” he said. It will ease by 0.5% in 2025 before growing again and turning positive in 2026 by 0.8%.
Rich South Florida counties
Still, a recent survey by the personal finance technology firm SmartAsset appears to support the theme that economic strength is being buttressed by upper-income earners who are relocating to the Sunshine State.
“These people are bringing income, they’re bringing new wealth,” said Snaith, who was not involved in the SmartAsset survey.
Last August, the New York-based firm concluded that Sun Belt states are seeing the most migration. Florida, the firm said, is leading the way with the largest influx of high-earning households.
In its latest survey released late last month, SmartAsset compared all U.S. counties in the areas of investment income, property value and per capita income.
Statewide, Miami-Dade, Palm Beach and Broward counties were ranked fourth, fifth and seventh respectively.
A number of their wealthy residents, perhaps, are likely buying boats.
Mike Stocker/South Florida Sun Sentinel
A continuing flow of boat buyers continues to be an indicator of a strong Florida economy that is showing the capacity to be resilient against a potential recession this year.
Yet another survey — of boat ownership nationally — shows the state leading the nation in economic activity driven by the recreational boating industry, according to the National Marine Manufacturers Association. The industry trade group says that recreational boating took a leap between 2020 and 2022 as many Americans viewed it as a safe escape from the COVID-19 pandemic.
In the survey, Florida tops the nation with the highest economic activity and job growth at $27.2 billion, up 33% year over year, and 109,000 jobs, up 19% from 2018.
“Recreational boating and fishing are a major economic engine in the U.S. and the latest economic analysis underscores the extraordinary growth and demand our industry has experienced coming out of the pandemic,” said Frank Hugelmeyer, NMMA president. “The profound impact the past few years have had on our industry cannot be denied as we’ve seen Americans seek out boating and fishing in record numbers, driving significant economic output and supporting tens of thousands of small businesses and nearly a million jobs.”