The number 13 could be lucky for Florida’s economy should the nation avoid slipping into a new recession.The new year – 2013 – has all the signs indicative of increasing momentum for Florida’s economy with housing starts growing, employment improving and the state’s population growth continuing to fuel the state’s economy, said University of Central Florida economist Sean Snaith.
In his 2012 fourth-quarter economic forecast, Snaith suggests that Florida is poised to take off in 2013 unless elected leaders walk the economy right off the fiscal cliff.
The fiscal cliff is the term coined to explain the automatic activation of the Budget Control Act of 2011, which mandates several measures that are not particularly attractive to either Democrats or Republicans. Unless elected leaders come to a compromise, several fiscal changes will kick in including: the end of last year’s temporary payroll tax cuts, the end of certain tax breaks for businesses, shifts in the alternative minimum tax, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law.
At the same time, deep spending cuts to more than 1,000 government programs – including defense and Medicare are also set to kick in.
“Delusions that increasing the tax rates on the highest tax bracket will solve our fiscal problems or that we can leave entitlement programs untouched because they do not impact the budget deficit or national debt are still prevalent and go largely unchallenged,” Snaith said. “That’s wrong. We need to go large to fix this problem, but instead we remain petty and marginal in the proposals made thus far.”
Should no compromise be reached, the economy could falter and slip back into a recession nationwide, which would impact Florida. Should compromise be reached, Snaith suggests 2013 could be the running start Florida needs to get back to solid ground.
“We’re not talking about rocketing back to pre-recession status,” Snaith said. “But it will be a lot better than the stalled recovery we’ve been experiencing for the past couple of years.”
Among the sectors expected to have the strongest average growth during 2013-2016: construction, professional and business services, trade, transportation and utilities, education and health services.
To read the complete Fourth Quarter Florida Forecast with regional statistics click here .
- At the projected growth for payroll employment, Gov. Scott will hit his target of 700,000 jobs created in just 5 years, two years ahead of his 7-year pledge.
- Rising housing prices will in turn feed back into the economy via wealth effects and help the labor market continue to improve – a virtuous cycle that will finally supplant the cruel interaction of these two markets during the past five years.
- Payroll job growth year-over-year is expected to average just 0.9 percent in 2012, 1.9 percent in 2013, 2.3 percent in 2014, 2.8 percent in 2015 and 2.5 percent in 2016. It will be the third quarter of 2016 before payrolls recover to their pre-recession levels.
- Housing starts climbed higher in 2012 and will begin to accelerate in 2013. Total starts will be more than 128,000 in 2014, just over 164,000 in 2015 the hit 185,400 in 2016. This is the highest level since 2006, but still nearly 18,000 fewer starts than that year.
- Florida’s population growth will continue to pick up in 2013 and beyond. By 2016, the growth rate will be at 1.7 percent, the fastest rate since 2006, for the second year in a row. As the economy strengthens, job creation and Baby Boomers’ retirements will boost net migration.
- Unemployment rates continue to decline in large part due to labor force contraction and they will continue to decline through 2016. The pace of decline will moderate as labor force growth picks up and it will be the second quarter of 2014 before we see unemployment fall below 8 percent.
Snaith is the director of UCF’s Institute for Economic Competitiveness. He is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
Snaith also is a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of leading economists, the Associated Press Economy Survey, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, the Livingston Survey, Bloomberg U.S. Economic Indicator Survey, Reuters U.S. Economy Survey and USA Today Economic Survey Panel.
The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses. Through these analyses, the institute provides valuable resources to the public and private sectors for informed decision-making.