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Florida's economy was hit hard during the recession and has been on a slow but upward trajectory since mid-2010. Despite the loss of jobs and battered real estate markets, Florida has outperformed other states that were also hard hit by the recession. Florida's reserves, along with solid debt management and conservative budgeting practices, took the state through that difficult period without the pain or rating downgrades seen elsewhere. In fact, Florida has surpassed the national growth rate each year since 2012.
October's 4.8% unemployment rate is better than the 4.9% national rate and a marked improvement from the 5.1% recorded in Florida one year ago. The state gained 253,300 jobs, a 3.1% increase in 2016, much higher than the 1.7% gained across the U.S. Hourly earnings are rising and single-family home prices are also on the upswing, growing 2% faster than the nation this year.
With all this good news, what could possibly go wrong?
Forces within the state, the U.S. and the world could negatively impact Florida's ongoing recovery. Tourism, by far the lynchpin of Florida's economy, is dependent on domestic and foreign visitors. The threat of the Zika virus and warnings issued to women of childbearing age in the U.S. and abroad could continue to dampen travelers' enthusiasm to visit the state.
In addition, the historic recession in Brazil and the drop in value of its currency along with the British Pound and the Canadian Loonie make it that much more expensive for our out-of-country “snowbirds” to nest here during the winter months. In a state without an income tax, any loss of sales tax revenue will negatively impact local and state economic expansion and bottom line revenue.
Despite rising single family home prices, about 14% of Florida's homeowners are still underwater on their mortgages with little hope of refinancing. Additionally, uncertainties centered around policy changes as our nation's new president assumes office will persist until actual policy initiatives take hold.
With all of these factors considered, we still believe that Florida's prognosis is positive and that the state is poised to maintain its upward momentum.
Population and job growth are expected to continue as new residents and businesses take advantage of the state's low cost of doing business, a favorable tax structure and great weather. As the population continues to rise, fueled by baby boomers reaching retirement age and job-seeking millennials opting for a more simple life, the Sunshine State and its relatively low costs of living will become an even more popular place to call home.
Wages still have room to move up in the state and, as they do, more spending should have a positive impact on tax receipts. Enhancing Florida's economic improvement are three deep-water ports in Miami, Jacksonville and Fort Lauderdale. When complete, these ports will accommodate mega-vessels and attract businesses that ultimately will seek to reduce costs by locating plants and operations closer to import-export partners.
While presidential transitions can present many questions, the U.S. is poised to continue its healthy recovery through 2017 with steady growth occurring in the 2-2.5% range. The President-Elect and his administration, a majority position in both the house and the senate, and a pro-business agenda should pave the way for continued outperformance of the U.S. economy vs. its global peers well into 2018. Florida's solid financial position, business-friendly environment, advantageous ports of entry and great weather position it to take advantage of the new administration's agenda. Many eyes will be fixed on the nation's capital to try to decipher how the U.S. economy and Florida's economy will respond.
Susan Dushock is a Senior Vice President and Municipal Bond Analyst at SunTrust Bank.
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