Florida’s economic performance last year was about as sunny as it gets. The state’s unemployment rate dropped to its lowest levels in more than a decade. More people returned to the work force and found positions. And the year ended with a 3.7 percent jobless rate in December.
"2017 was better than 2016 on almost all fronts," said Chris McCarty, an economist at the University of Florida. "It’s hard to find a number that’s truly negative."
According to state figures released Friday, December’s unemployment rate increased slightly from 3.6 percent in November, but was still below the national rate of 4.1 percent.
Tampa Bay’s jobless rate declined from 3.6 in November to 3.4 percent in December. Pinellas County was the area leader, dipping from 3.4 percent to 3.2 percent. Hillsborough County was just behind, inching down from 3.5 percent to 3.3 percent. Hernando County dropped from 4.7 percent to 4.5 percent and Pasco County dropped by the same margin to 3.8 percent.
The state added 27,400 jobs in December, and 213,500 jobs over the year. Professional and business services saw the greatest growth in 2017, adding 47,200 jobs — a 3.6 percent increase — followed by construction, which gained 43,900 jobs. That was a 9.1 percent bump.
And employment wasn’t the only bright spot. The housing market strengthened over the year, too, coming into line with pre-recession price trajectory.
"If you effectively remove the housing bubble and did a forecast on what housing prices should do, we’re about on par here," McCarty said.
The Sunshine State’s economic success in 2017 was driven in part by an upswing that began in 2015 and became more fine-tuned last year in terms of employment and job growth.
The positive outlook of consumers helped drive the improvement. In March 2017, UF’s "Consumer Sentiment Index" recorded the highest level of consumer optimism about the economy and personal finances in 15 years.
If people feel good about those points, "people will keep buying things — that’s what’s keeping the economy moving," said Hector Sandoval, a UF economist. "As long as this is going on, you’ll keep seeing an increase."
The only area that lagged was wage growth. Despite higher employment rates, wages haven’t increased significantly over the year in Florida and nationally.
"They’re still not keeping pace with that you would expect given the tightness of the labor market," McCarty said.
What 2018 has in store
Economists expect the positive economic environment to continue.
"I’d expect to see strong growth in 2018 as consumer spending remains solid and households benefit from the tax cuts. (That could) lead more people to take vacations in Florida," said Gus Faucher, the chief economist at PNC.
Because the state unemployment rate is so low, Faucher expects it to bottom out at around 3.5 percent. And with such a tight economy job growth, while steady, will likely be smaller.
One of the underlying reasons last year’s economic performance was so strong, said UF’s McCarty, is the Federal Reserve’s flush balance sheet. The central bank has a balance sheet of about $4.5 trillion, quadruple what it was several years ago.
Following the recession in 2008, the Federal Reserve helped revive the housing industry and stock market by buying mortgage-backed securities and treasury bonds.
"They did that by literally creating money," McCarty said. "That money is still out there."
But there’s a debate now among Fed governors about whether and how fast to pull the money back.
That could potentially decrease housing prices because of increased interest rates on mortgages and it could affect the stock market.
A hit to the stock market could be particularly problematic for Florida. The Sunshine State has one of the best funded pensions in the country, in part because of the fund’s stock returns. And about half of households nationally are invested, either through individual stocks or through participation in a 401(k) plan.
"If the stock market continues to do well, that’s good for pensioners and good for people who have retirement accounts," McCarty said. But if it doesn’t, he said, regulators would need to step in to prevent it from being significantly affected.
Contact Malena Carollo at firstname.lastname@example.org or (727) 892-2249. Follow @malenacarollo.