Editor's Note: Florida: Statistical is an occasional series from the Times Opinion team.
Floridians don't feel good about the economy. Overall sentiment remains well below average, and while our collective outlook has improved in recent months, it is not improving as quickly as the nation as a whole.
According to the University of Florida's Bureau of Business and Economic Research Center, consumer sentiment in Florida reached 69.5 in December. By comparison, the index's all-time monthly low (58.8) was reached in June 2008, when Florida's economy was being treated like a chew toy by the Great Recession. The all-time high (110.5) was reached in August 2000 during the dot-com boom.
For all of 2023, ending in December, the index averaged 67.9, the third-lowest annual average since measurement began in 1985. The only worse years: 2022, after inflation exploded, and 2008, during the aforementioned financial crisis of the state.
The index includes five components. Respondents are asked: 1. What their personal financial situation is compared to a year ago. 2. What it will be like in a year. 3. What they expect from the national economic situation next year, 4. The same applies to the next five years, and 5. Whether it is a good time to buy important household items.
The good news is that all five components increased from December 2022 to December 2023. Also positive is that Florida's overall financial sentiment has improved for three months in a row. As with other aspects of life, it's not always about where you are, but rather about where you're going. In other words, what is the trajectory? This admittedly incipient trend looks positive.
Unfortunately, sentiment in Florida remains poor relative to the rest of the country, at least when compared to the recent rise in consumer sentiment. From November to early January, national sentiment rose 29%, the strongest two-month increase in more than 30 years. The most recent increase in Florida was a comparatively paltry 5%. In other words, national sentiment is 7 percentage points below the historical average. Florida's is more than 17 percentage points below its average.
So why are Floridians in the Sunshine State finding it harder to shake off economic decline?
It's hard to know for sure. Consumer sentiment isn't about counting vehicle sales or measuring employment. It is even more imprecise. Much more about feelings – in the truest sense of the word. It can be harder to figure out why residents in one area say they feel better than their counterparts in another. Feelings and reality don't always match.
Florida, for example, has the lowest unemployment rate of any major state. At 3% in December, it remains below the national average of 3.7%. The state added jobs every month last year, faster than the entire country. All 10 of Florida's largest sectors added new jobs in 2023, and the number of Floridians quitting their jobs each month remains well above the number from just a few years ago, a sign that people are confident to find another job. Sounds pretty sunny, right?
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That's true, but then there's inflation. For consumers, high inflation is often the financial trump card that has an outsized impact on their personal financial prospects. Residents suffered from drastic price increases in 2022 and 2023. Food and gasoline prices skyrocketed, as did prices for many other goods and services. If basic needs take up a larger portion of your salary, it's a financial mood killer. Declining purchasing power is leading to a decline in consumer sentiment, even though most people who want a job still have one.
If prices were skyrocketing across the country, why would things continue to remain bleak in Florida? Maybe because inflation has hit parts of Florida worse. Miami and Tampa Bay consistently rank in the top 10 areas with the highest inflation rates in the country, with Miami sometimes topping the list. Real estate prices in Florida have skyrocketed in recent years, making many people richer on paper but also making it significantly more difficult for others to buy a home. People tend to react more strongly to negative events than to positive ones. We will sweat losing $1,000 for much longer than we will enjoy making the same amount. The phenomenon even has a name – negativity bias or negativity effect. In the context of home ownership, the pessimism of people who have turned away from home ownership may outweigh the optimism of homeowners who benefit from the same higher prices. The negativity is weighing on consumer sentiment.
The state's rapid population growth and lack of sufficient housing near employment centers have also increased the cost of rent and transportation. Of course, Florida is also notable for its recent struggle to reduce insurance costs for both property and automobile insurance. Florida also has many retirees on fixed incomes. They can feel – there are those amorphous “feelings” again – more vulnerable when prices fluctuate wildly, undermining their financial confidence.
Inflation in Florida fell from 6.4% in January last year to 3.1% in November, a significant decline although still higher than the recent historical average, which was closer to 2%. Hector H. Sandoval, director of UF's Economic Analysis Program, which publishes the consumer sentiment report every month, sees blue skies for 2024.
“Looking forward, we expect consumer sentiment among Floridians to gradually improve given the economic outlook,” he wrote when the report was released earlier this month.
We hope he's right.
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