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Economists are making rosy forecasts for the state economy

The state’s economists met Tuesday to update short- and long-term projections about Florida’s economy.

The economic forecast data discussed during the valuation conference will be used to update the upcoming sales cycle. The economic variables will be finalized in the coming days and uploaded to the Office of Economic and Demographic Research (EDR) website.

The discussion during Tuesday’s meeting focused on metrics leading to an economic recovery.

EDR economist Schiffka McAlarney said Florida’s economy will continue on its uptrend, with the second quarter of calendar year 2021 expected to surpass pre-pandemic levels.

“In general, the outlook is better compared to the March forecast as economic activity is improving faster than expected,” said McAlarney.

Florida overtakes the state economic recovery. McAlarney said the state is expected to end fiscal 2021 at a growth rate of 1.9%, while the US is expected to grow 1.6%.

“However, there is some sense that growth may have peaked and, as we shall see on the charts, we have had significant growth over the past year that has bounced back from the depths of the recession,” added McAlarney added, warning that “there are some” concerns about other restrictions that can set things back. “

The following are some of the economic drivers that dominated the projection discussions of Florida economists in the tourism, housing and employment sectors, and unemployment.

tourism

Tourism, the largest sector in Florida’s economy, continues to benefit from the state’s above-average reopening and travelers replacing international visits with domestic travel, according to economists. Domestic traffic is increasing, but not back to its previous levels, McAlarney said.

Domestic visitors now make up 98% of all trips to Florida, according to VISIT FLORIDA data in the first quarter of 2021. That’s an 89% increase in the fourth quarter of 2019.

What helps, McAlarney said, is the length of stay for domestic travelers has increased from around four days in 2020 to 6.2 days in 2021.

“So, anecdotally, domestic travelers stay longer due to state restrictions or remote working opportunities. People are obviously flocking to Florida and staying longer, ”McAlarney said.

Both economists for the EDR and Azhar Khan, chief economist in the governor’s office, had improved forecasts, but they disagreed on how much Florida’s tourism industry will grow in the coming months.

Kahn’s claim was based in part on a premonition.

“I just think the May (coronavirus) measures in Florida – or lack thereof – are a very attractive destination for domestic visitors. I mean there are other parts of the country that are reintroducing restrictions, but that is not the case here, ”said Buselka. “I think we’re giving people a place to go, and that’s the reason to be optimistic about visiting the state we relied on.”

Khan also saw a rosier picture for the return of international travel.

“As soon as everyone is vaccinated, the majority of the population in the countries of the world, vaccination measures are carried out. I don’t see why the growth in international visitors should not return,” said Kahn.

However, McAlarney said she believes the first quarter tourism numbers will be “artificially boosted” by a new breed of Florida tourist.

“Tourism numbers seem to have returned, but it might just be temporary residents or long-term visitors, some kind of new breed of snowbirds with remote work that may not be falling. Now that the rest of the country is open, now that the European Union is open, tourists will be moving to other destinations and taking their dream trip to Europe this summer instead of spending the winter in Florida. ” McAlarney suspected.

casing

Home buying has seen its peak in Florida since the 1990s, McAlarney said.

“That’s higher than during the housing boom before the Great Recession,” she added. “Of course the real estate boom with house flipping was excessive, but we haven’t reached our goal yet.”

The numbers are enough to worry the EDR economist Amy Baker.

“I’m a little worried about the bubbling in the housing market. If you look at (it) some of the things are not back at the highs of the boom, but some of the metrics are starting to look very similar to the booms – if not a boom, maybe a boom-let. ”Baker added.

McAlarney said some home purchases are being driven by people buying second homes or condos in Florida in an attempt to avoid severely restricted lockdown states or lands.

“Florida markets are much narrower than national markets, and anecdotal evidence from last winter that home sales have slowed or are longer-term nationally may not necessarily apply to Florida, given that Florida’s population is expected will grow faster than the national population, ”McAlarney said.

The median price for a Florida home in the first quarter was $ 321,400. The median US price for the same quarter was $ 318,000.

House prices are expected to continue to rise, but McAlarney said their data shows that growth will slow to a rate of 2.5% over the long term.

Limited inventory is one factor driving up prices on Florida homes, which could be eased if labor availability can catch up with building permits. Construction is scheduled to take place three to six months after the approval process has been completed, but due to a labor shortage, Kahn says, some permits are being extended, with construction taking place six to twelve months after the approval has been granted.

“If (the existing permits) had been built on, we would have seen some easing of the inventory restrictions,” argued Kahn.

“Whatever phenomena cause them to rise, they will soon dissolve,” Kahn said of the Florida housing stock restrictions.

Migrations from urban to suburban areas caused by cultural shifts due to pandemic lockdowns could also spur new housing construction.

McAlarney predicted that Florida new construction will grow 30% in FY 2021 and 6% in FY 2022 over the long term.

McAlarney forecast condominium sales to grow 41% year over year in fiscal 2021. However, she expects these sales to decline to pre-Covid levels in the long term.

The recent tragedy in Surfside after the partial collapse of a condominium, in which 97 people were killed, also made it into the economic debate.

“One thing I’m a little worried about is that we haven’t had enough time to know if there will be a short term surfside effect on condo sales that will lead people to one pause a little, slow down a little. We just don’t know, ”said Baker.

Work and unemployment

McAlarney is forecasting an unemployment rate of 3.4% for Florida in the third quarter of 2021, compared to the national estimate of 3.5% for the same quarter.

“The unemployment rate could be even lower,” added McAlarney.

Florida’s unemployment rate in the second quarter of 2021 was 4.9%, which was lower than the forecast 5.9% and exceeded the national unemployment rate of 5.9% in the second quarter.

McAlarney said June employment data reflects more people entering the labor market, likely due to the setting of an additional $ 300 in federal unemployment benefits for Florida.

The overall improvements in the labor market are expected to continue, but economists said labor problems in the hospitality industry, particularly restaurants and hospitality, could persist due to the low wages in these jobs.

McAlarney said after workers received “expanded and very generous” unemployment benefits during the pandemic, “there is debate that the wage workers are willing to return to work for has increased”.

“As a result, I don’t expect employment in this sector to come back much. Partly because business tourism isn’t clear to what extent this will return, and partly because I’ll assume that the hospitality industry – both lodging and restaurants – will be more focused on automation, given the cost of capital and the cost of automation become more competitive for employers relative to rising labor costs, ”said McAlarney.

The average annual Florida wage rose in the first quarter of 2021 and was $ 62,600, or 11.7%, higher than wages a year earlier, with McAlarney noting that Q1 2020 average wage data “wasn’t really affected by the closings.”

Economists assume that wages will continue to rise.

One factor: The new minimum wage in Florida will be raised from $ 8.65 to $ 10 per hour from September. The wage will continue to rise over time until it reaches $ 15. Around 10% of all jobs pay a minimum wage.

However, Baker suggested that the rise in wages could be due to the fact that there were more office jobs during the pandemic, while the low-paying jobs – such as those in the hospitality industry – were suspended and therefore ignored the wage data.

“We know restaurants have trouble hiring people. So when we get through this and we’re on the other side of it and we’ve got the full range of people busy everywhere, you don’t think it’s going to get a bit closer to where we were before we’ve seen that (wage data) go up? ” Interviewed by the baker.

McAlarney considered that this was possible, but also suggested that employers could raise wages for low-paying jobs to attract some workers back into the labor market, or the constitutional amendment-triggered increase in the minimum wage will further increase the average Annual wages anyway.


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