I've been very surprised over the past year how few articles I've seen on how bad things are in Florida. But the New York Times had an article over the weekend about Florida's troubles. Its economy was strongly correlated to the housing boom, so obviously its economy has been decimated by this recession. Things are worse there than even common statistics suggest.
I have probably been a little more sensitive to Florida's problems than the average Washington journalist, since it's my home state. I still visit often and have many friends and family that reside there. As a result, I've seen just how rough a time the state is having.
The Times article explains one of the reasons for Florida's problems -- its real estate market is atrocious:
It is a mess of immense volume: In the first six months of this year, 268,064 properties in Florida received a foreclosure filing, up nearly 42 percent from the first half of 2008, making it the second worst state in total foreclosures nationwide behind California. And for those convinced that recent, positive sales figures signal a brisk recovery, consider this: foreclosures outpaced sales of houses and condos in the same period (99,010) by a factor of nearly three. If every home in Boston received a foreclosure notice, the total would still be less than Florida's.
To make matters worse, Florida has long relied on real estate as a major component of its economy. The Times also notes:
Real estate and fast money, after all, have defined this peninsula since the '20s, when empty lots of swamp could be flipped for a profit between martinis. Florida has generally relied far more on growth than its counterparts: in 2004 and 2005, housing construction's share of the state economy was close to twice the national average, according to the Bureau of Economic and Business Research at the University of Florida.
Another factor affecting Florida has less to do directly with real estate, but more to do with a global economic contraction. During a recession, tourism tends to feel a lot of pain. That's pretty much Florida's only major industry besides real estate. One of the first discretionary costs people feel they can delay during a recession is a vacation. Those who do not cancel vacations altogether probably spend less than they would have. This effect has certainly been felt by Florida.
The state's problems aren't well-reflected based on its unemployment rate alone. According to the June monthly statistics (July isn't available until Friday), Florida's unemployment rate was at 10.6% -- only about 1% higher than the national average for the month. That's certainly bad, but only the 13th worst.
I think it is helpful if you go a little deeper into the unemployment numbers. The Bureau of Labor Statistics released an "Alternative Measures Of Labor Underutilization" report a week ago. For some odd reason, they average these percentages from the third quarter of 2008 through the second quarter of 2009. But they're interesting nonetheless. Two of these statistics are especially telling.
First, Florida is tied with Oregon for the 6th worst duration of unemployment. That means those unemployed in Florida are having a tougher time finding jobs than in most other states. Second, total unemployment including all marginally attached workers and those forced to work part time shows Florida as the 7th worst state. This is likely a better indicator of economic hardship than the better known unemployment statistic, since it shows the true percentage of workers who would like full-time employment, but can't obtain it. For Florida, that number was 15.6%.
Even these expanded unemployment statistics fail to show how bad things are in Florida, because there's another reason Florida's unemployed are being under-reported: many are fleeing the state. A recent article from the St. Petersburg Times notes this very disturbing trend (hat tip: Real Time Economics):
University of Florida demographers will report Friday that the state shed about 50,000 residents between April 2008 and April 2009. That should knock the number of Floridians down a notch from the previously reported 18.3 million.
It's the first time since 1946 that Florida has been a net population loser. Even during the Great Depression, new residents swept into the state in search of work and leisure. But the severe housing contraction, combined with the sputtering of Florida's job creation machine, has eclipsed the state's former gravitational pull.
The New York Times article also reports a similar finding, and blames Florida's approach to basing its economy on its real estate market:
Weaknesses in the approach emerged quietly, even before the bust, as overdevelopment and rising costs started pushing people away. Some were "halfbacks" -- retirees originally from the North who ventured "halfway back" to Georgia or the Carolinas -- but young families fled, too. In 2005, Broward County lost 1,756 students, in a district that thought nothing of adding 10,969 in 2001. Since 2004, enough parents have left to shrink the student body by 6 percent.
It's obviously not the weather that's got people leaving: it's the job market. The reason I decided not to return to Florida after college was due to the dim job prospects: it really has little industry beyond tourism and real estate. This stacks up worse than some other ailing states. California, for example, with all its problems at least has technology in Silicon Valley, the entertainment industry in Los Angeles and a sprinkling of other corporate centers throughout the state. Florida has no such industries to pin the hopes for its future on.
That might also partially explain why, according to the WSJ, Florida ranks last in stimulus money per capita, while ailing California and Michigan rank 5th and 6th, respectively. Other than creating new infrastructure-related jobs in construction, there isn't any kind of government spending that can help Florida, unless you try to somehow stimulate tourism.
Earlier, I mentioned Florida ranks 6th worst for unemployment duration. I would expect that ranking worsen steadily. Those states with real industry can eventually improve their employment levels as the economy gets better. The real estate market in Florida might not recover for a long time; it may never recover if the state continues to see its population decrease. Moreover, tourism will likely be one of the last industries to improve -- nobody will begin traveling again, or spending a lot when they do, until employment improves, and they feel the economy has made a full recovery.
In the meantime, if you're looking for cheap real estate or great vacation deals, then you can probably capitalize on Florida's misery. The state would certainly welcome your business.