Rosy Florida economic forecast imperiled by COVID-19 surge, labor shortage, housing costs
Florida economists assessing the state’s tourism, housing and labor sectors say the metrics add up to a post-pandemic economy poised for a boom.
But, they cautioned, it could go bust if COVID-19 positivity and hospitalizations are not quelled, labor shortages don’t dissipate and new home inventories aren’t boosted.
In a presentation Tuesday to Florida’s Economic Estimating Conference (REC), Vesselka McAlarney of the Legislature’s Office of Economic & Demographic Research (EDR) forecast Florida’s economy in the second quarter of 2021 exceeded pre-pandemic levels “due to faster than expected improvements in economic activity.”
The REC includes economists from state agencies, the Governor’s Office and the EDR who meet regularly to update economic projections. Lawmakers rely on EDR data and REC forecasts to build the state’s budget.
Florida is expected to finish Fiscal Year 2021 (FY21), which ended June 30, with a growth rate of 1.9%, outpacing the nation’s 1.6%, McAlarney said.
“However, there is some emerging sense that growth may have peaked already, and we have had, as we’ll see on the charts, significant growth recovering from the depths of the recession last year,” she said. “There are some concerns about more restrictions that can set things back.”
Those concerns are the 45,604 new cases, double the number reported the previous week, posted by Florida Department of Health (DOH) for the week of July 9-15. The state’s 11.5% positivity rate is alarming because only 47.8% of eligible Floridians have been vaccinated.
McAlarney said Florida’s $90 billion tourist/hospitality industry benefited from the state’s “early” reopening last June and will receive an unanticipated boost when Canadians return this fall.
Domestic visitors represented 98% of travel to Florida through the first quarter of 2021, according to VISIT FLORIDA, the state’s tourism marketing agency. Domestic travelers constituted 89% of Florida visitors in 2019, it notes.
McAlarney said domestic travelers stayed longer in FY21, an average of 6.2 days, than previous years. In FY20, the average stay was 4 days, she said.
“So domestic travel travelers are staying longer, anecdotally, due to restrictions in their states or due to the opportunities for remote work,” McAlarney said. “People, obviously, have been flocking to Florida and staying longer.”
The Canadian government announced Monday that starting Aug. 9, fully vaccinated U.S. citizens can visit Canada without quarantining for two weeks. The U.S. is expected to announce a reciprocal policy.
Every year, an estimated 1 million Canadians spend up to six months wintering in the Sunshine State, contributing an estimated $6.5 billion to Florida’s economy, according to the EDR.
Canadian travel into Florida for the first quarter of 2021, however, was down 97.2% from 2020, with only 34,000 Canadians visiting, according to VISIT FLORIDA.
“The borders closed. The border opens. You're going to have a big jump in people,” Governor’s Office of Policy & Budget Coordinator Holger Ciupalo said.
New single-family home construction grew by 30% in FY21 and will grow by 6% in FY22, McAlarney said, adding home-buying is at “the highest peak” since the 1990s.
The median price for a Florida home was $321,400, exceeding the $318,000 U.S. median price. Home prices will rise until builders construct new subdivisions, she said, forecasting a 2.5% price increase over the next two years.
A shortage of existing homes is among factors driving up costs – and a shortage of labor is cited by developers, economists noted, linking “labor availability” with the building permit process to project the market’s evolution.
Construction usually begins three-to-six months after permit approval, Governor’s Office senior economist Azhar Khan said, but the labor shortage is extending timelines to six-to-12 months after permits are issued.
If not for the labor shortage, “We would have started to see some easing in inventory constraints,” he said. “Whatever phenomena is causing that to go up, they will start to dissipate soon.”
Story originally published at The Center Square.