When will it end? Economic observers say Florida's downturn likely will last another year
Sun-Sentinel - 7/7/2008 12:00:00 AM
by Harriet Johnson Brackey
Recession for another year, rising unemployment and $4.10-a-gallon gasoline, too? You might say this is getting to be difficult.
The questions now, at the mid-point of 2008, are: How long will these troubled economic times last? How far down will the economy go? And how many people will be able to hold on to their jobs while they wait for the economy to recover?
Here's what economic analysts say are the answers: The downturn will continue for another year, according to some of Florida's best-known economic forecasters. Joblessness could rise by as much as another half percentage point, to 6 percent, before it levels off.
And the predictions point to mid-2009 as the point at which the economy begins to perk up.
The downturn is actually a recession for the state, in the view of University of Florida economist David Denslow at the Bureau of Economic and Business Research. His prediction: The economy will show little growth or a decline of perhaps 2 percent or 3 percent in gross domestic product until the recovery begins in mid-2009.
Denslow figures the recession began in March 2007, which would make it about as long as the recession the state went through in the early 1990s. A similar view is held by forecasters for the Florida Legislature, who in April issued a report saying that "normal economic growth" isn't expected until mid-2009.
If the recession lasts two years, it will be more than twice as long as the average nationwide recession. Since World War II, recessions have lasted 10 months on average.
What Florida has going for it at this point: The number of retirees is growing nationwide. The Legislature's forecast notes that Florida's population continues to increase. And Florida's exports were up 22 percent during the first quarter, partly because of the weak dollar.
What's hurting us: The overhang of unsold homes on the market. Home prices in South Florida are now almost 27 percent lower than last year, according to the S&P/Case-Shiller index.
What hasn't shown up in the numbers yet: Whether high gas prices will cut down on tourism this summer. At the start of the year, almost 24 million tourists visited Florida, a 3.4 percent increase over 2007 for the first quarter.
Unemployment may rise
The job losses will continue until next year, according to another forecaster.
At the University of Central Florida, economist Sean Snaith figures Florida's unemployment rate, now at 5.5 percent, will fluctuate between that and about 6 percent by the end of the year, then stabilize. He says we will see payrolls grow again in the second half of next year. But don't look for another boom in employment, as Florida experienced from September 2002 through last August.
Last week, the state revealed that the number of people without jobs jumped 11.5 percent in one month.
In May, 459,000 Floridians were unemployed, up from 300,000 in May 2006, according to state figures.
By comparison, in the last recession in 2001, unemployment also peaked at a 6 percent rate.
For those whose jobs have not been affected by the slowdown, life is going on in a hunkered-down mode.
At the gas pump recently, Bob Anderson, a Fort Lauderdale insurance agent, said, "I'm in a recession-free kind of business." Still, he added, "You have to face the continual toll [high prices are] taking out of one's paycheck."
John Timmons, a math teacher and high school football coach who lives in Wellington, figures it may be a couple of years before things get much better. Still, his family — he has three young children — is able to get by with his wife working only during the summer months when Timmons is out of school.
"In the last six months, everything has jumped up in price," he said. "So you cut back on things, entertainment, and we're more careful with the eating."
Like many people who have secure jobs, Michelle Ferguson of West Palm Beach, who has been driving a Pepsi truck for seven years, says she is doing OK because she's made adjustments in her spending.
"I don't know how we can change it," she said. "What can honest working people do?"
Signs to watch for
How will we know the economy's changing direction?
When the job losses stop, says Lynn Franco, who is in charge of consumer research at The Conference Board.
When hiring begins to spread beyond tourism and other lower-paying sectors, says UCF's Snaith.
When the housing market begins to recover in the rest of the country, says Denslow.
And perhaps when ordinary Floridians start spending again. Statewide, sales tax revenue through May was 5 percent below the level of last year, indicating consumers were cautious about their spending.
In June, a University of Florida survey showed that consumers don't think this is a good time to buy big-ticket items and they have a dim outlook for their personal finances. The index of consumer confidence among Floridians hit an all-time low last month.
"We were the darling of all the major states, leading in employment growth and income growth. Nothing could go wrong here," says economist Antonio Villamil, head of Washington Economics Group in Coral Gables. "But we fell to earth very quickly."
His prescription for returning the state to growth: "We've got to get the consumer back on his feet."