4 predictions for Florida’s economy in 2023

It is the interest of the Florida Chamber of Commerce to advocate for keeping the state open for business, to keep people coming here and living here and spending as much money as possible.

But even a group like the chamber knows it might have its work cut out for it in 2023.

At the chamber’s annual Florida Economic Outlook and Jobs Solution Summit on Jan. 12, a virtual slate of financial experts, housing officials and workforce leaders discussed how a recession could impact the Sunshine State this year, as the Federal Reserve weighs further increasing interest rates to slow down inflation.

On the whole, chamber leaders were predictably upbeat about Florida’s future, as the state’s top-ranked population growth and associated migration of wealth bode well for demand across industries. But some warned that Florida could be more susceptible to hiring challenges and housing affordability than other states.

Here are four economic predictions taken away from the summit.

New residents will continue to buoy Florida’s economy.

In December, the US Census Bureau pegged Florida’s annual population growth at 1.9% from 2021 to 2022, leading the nation. It’s the first time in 65 years that Florida has ranked No. 1 in US population growth. Those new residents are bringing money from places like New York, California and Pennsylvania.

“By 2030 we’re going to add 3.5 million more residents on top of the 22 million that Florida already (has),” chamber president and CEO Mark Wilson said. That means the private sector will need to add about 1.5 million new jobs.

About half of that population growth is expected to come in just five counties: Miami-Dade, Orange, Hillsborough, Broward and Palm Beach. And it’ll be especially strong in areas with larger international populations.

“You’ll see some regional variation,” said Dave Sobush, director of research for the Florida Chamber Foundation. “Domestic migration is going to be a little dampened from its recent levels, but international migration will continue. So when you think about central Florida, when we think about South Florida, we’ll see less erosion of home prices in those areas.”

We’ll see a mild recession starting this spring, then improvements by 2024.

Gus Faucher, a senior vice president and chief economist with the PNC Financial Services Group, predicts the nation’s employment rate will reach a peak of 5.5% by late 2023 or early 2024. That’s significant, he said, but it puts the coming recession more in line with those experienced in the early ’90s or early 2000s, rather than the great recession of the late 2000s.

Like any state, Florida will feel the effects. But it should benefit from an uptick in its spring and summer tourism industry. Leisure and hospitality businesses saw the biggest job gains and growth rates in Florida from 2021 to 2022, Sobush said. And the Tampa Bay area was near the top on both counts, with the second-most job gains and the highest growth rate of any metro area in the state.

Ben Tabatabaei, the chamber’s chief economist and executive director of its International Center for Economic Development, said he believes the state’s unemployment rate will remain below 3% throughout 2023.

“Florida’s economy is in a much stronger position than the national economy,” he said. “We’ve gained all the domestic tourism that we had lost previously, and I think that trend is going to continue. … If it’s a very mild recession in the United States, Florida might not even go into a recession.”

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Even in a recession, employers may be reluctant to lay off workers.

Florida’s labor market is tighter than most of the United States, in part because its labor force participation rate is below the national average — which happens when a big chunk of your population is older and retired.

“We not only have a skills gap problem, we actually have a talent gap problem, where we have a lot more jobs than people looking for work,” Florida Chamber president Mark Wilson said.

In January last year, the state had 513,000 open jobs, according to the chamber, and 483,000 unemployed people. Today there are more than 455,000 open jobs, but only 280,000 unemployed people.

“What this means is that even as the economy contracts in 2023, businesses will be reluctant to lay off workers,” Faucher said. “They’re concerned, given the tight labor market that they’re experiencing now, that if there is a brief downturn, when the economy starts to pick up again, they won’t have enough workers. And so businesses will be cautious in decisions about laying off workers. That will limit job losses during any recession, that will limit the hit to household incomes, and that will limit the hit to consumer spending.”

Florida’s housing market could take a hit … at least temporarily.

Over the past year, home prices were up about 20%. In Florida, with so many people moving in, prices were up about 30%. As interest rates rise, Faucher said, Florida might have further to fall.

“Nationally, we expect to see house prices decline about 10% over the next year in a half or so,” he said. “In Florida, house price declines are likely to be closer to 15% because affordability is such a concern given the big runup in prices.”

But demand based on interest rates are only one factor in home prices and sales. Inventory is another.

Brad O’Connor, chief economist of research for Florida Realtors, said he’s not expecting a lot more new or existing homes to come onto the market next year. Builders are facing their own financial headwinds, and homeowners are more hesitant to give up their existing low mortgage rates.

“We’re not expecting to see a lot of foreclosures this time around,” O’Connor said. “People are locked-into fixed rates, so they’re not going to have adjustable rates that are going to explode their mortgage rates. A recession, if we have one, will not be significant enough to put that many homes on the market that we would see a huge shift in prices.”

As long as demand is still strong in 2024, Florida would be well-positioned for another surge of growth in the long run, with home prices once again outpacing the national average.

“Other than lower interest rates, all of the other underlying components necessary for the housing market in Florida to see a resurgence in demand are in place,” O’Connor said.

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