August 2020 – “Worry does not empty tomorrow of its sorrow. It empties today of its strength.” — Corrie ten Boom
As we face continued pandemic and bad economic news from the last three months (Q2 2020), it may help to take a longer view. Fortunately, the July Economic Estimating Conference – Florida Economy report was just published[i]. This biannual report is prepared by the Office of Economic and Demographic Research (EDR)[ii]. We are monitoring three economic variables: Consumption, personal income, and unemployment. In short, EDR expects these variables to show year-over-year improvement by June 2021.
Before we review the EDR forecasts, there is an unavoidable word of caution. Although it is not explicitly stated in EDR’s report, the forecast numbers below are conditional on our willingness and ability to individually and collectively comply with the COVID-19 health protocols. As researchers from USF Muma College of Business’ Project ASPeCT showed, folks moving about and gathering in large groups has led to a spike in COVID-19 related emergency admissions since Memorial Day. The researchers are urging residents to limit their optional travel and avoid crowded places[iii].
For each variable (i.e., consumption, personal income, and unemployment), EDR forecasts two values: Over-the-quarter (OTQ) and over-the-year (OTY). OTQ refers to changes from one quarter to the next. For example, personal income grew 3% from December 2019 (Q4 2019) to March 2020 (Q1 2020). A positive number indicates recovery. OTY refers to changes over a year for a specific quarter. For instance, personal income was 3.6% higher in March 2020 (Q1 2020) than in March 2019 (Q1 2019). A positive number indicates growth when compared to the same period in the previous year.
As seen in Figure 1, personal income is expected to start recovering by March 2021 (Q1 2021). Overall growth is expected to return by June 2021 (Q2 2021)
Figure 1. Florida Personal Income
In terms of consumption, EDR does not forecast total consumption. However, it does forecast three consumption-driven activities: Housing starts, new light vehicle registrations, and total visitors. As seen in Figure 2, housing starts are expected to start recovering in the next three months. OTY growth is expected by June 2021. Although growth is expected to be modest, housing starts should average 150,000 units per quarter from June 2021 through June 2022.
Figure 2. Florida Total Private Housing Starts
Vehicle registrations is another proxy for consumption. As seen in Figure 3, vehicle registrations are expected to jump 56% through September. OTY growth starts June 2021. From that point on, EDR expects nearly 300,000 new light vehicles registrations per quarter.
Figure 3. Florida Total New Light Vehicle Registrations
The last consumption proxy is total visitors. Quarterly visitor totals are expected to grow dramatically between 100% and 400% through June 2021. From June 2021 (Q2 2021) onward, visitors are expected to grow slowly and steadily to nearly 33 million per quarter.
Figure 4. Florida Total Visitors
Unfortunately, unemployment is expected to remain high over the forecasting horizon (Figure 5). The June 2022 unemployment forecast is 6.8%. This is two times higher than the pre-pandemic forecast of 3.3% (Q1 2020). Alternatively, that high rate is nearly half the unemployment rate expected for June 2020 (Q2 2020) (12.6%).
Figure 5. Florida Civilian Unemployment
The unemployment rate only includes those out of work and still looking for work. Alas, we know that thousands of businesses have failed[iv]. Hence, the number of available jobs has dramatically decreased and competition is fierce. Many jobless folks have given up searching and thus may not be included in the unemployment figures. As seen in Figure 6, employment is not expected to reach the pre-pandemic level within the forecast horizon. By June 2022, we will still be nearly 120,000 jobs below the pre-pandemic employment level (~9 million jobs). This is a structural problem that will take some time to resolve. However, as businesses adapt and brand-new industries and businesses emerge, these employment numbers should improve considerably.
Figure 6. Florida Non-farm Employment (in thousands)
Lastly, we look at the forecast for Florida’s entire economy. As suggested earlier and seen in Figure 7, EDR expects the economy to be humming along by June 2021.
Figure 7. Florida Real Gross Domestic Product
To conclude, EDR expects economic recovery to begin in earnest by next spring (Q2 2021). Except for unemployment, most sectors are expected to show improvement in the next three months. Of course, the speed and strength of the recovery now depends entirely on how rapidly and effectively the pandemic is contained.
i Economic Estimating Conference – Florida Economy. July 17, 2020. http://edr.state.fl.us/Content/conferences/fleconomic/index.cfm. Last Revised: July 20, 2020. Last accessed on July 24, 2020.
ii The Office of Economic and Demographic Research (EDR) is a research arm of the Florida Legislature principally concerned with forecasting economic and social trends that affect policy making, revenues, and appropriations. http://edr.state.fl.us/Content/
iii “COVID-19 Community Forum: Can We Predict the Curve?”. State of the Region Event. Tampa Bay Partnership in collaboration with Community Foundation of Tampa Bay, United Way Suncoast and USF Muma College of Business. Webinar. Broadcast date: July 22, 2020.
iv Lyons, David. “More businesses are folding and leaving laid-off workers in the lurch
Lyons”. Sun Sentinel. July 26, 2020. https://www.sun-sentinel.com/coronavirus/fl-ne-coronavirus-florida-business-failures-reemployment-20200726-bditvghk3fhbdpt3aqoa33bazy-story.html. Last accessed: July 28, 2020.