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Recession has arrived in Florida, economists say

By Helen Huntley, Times Personal Finance Editor
In print: Friday, August 1, 2008

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Wachovia economists confirmed Thursday what many Floridians already felt in their bones:

The state is in a recession.

In its first down quarter in 16 years, the Florida economy shrank 1.6 percent during the second quarter. It was the state economy's worst performance since 1991. The numbers produced the most miserable showing of all the large states and a sharp contrast to the U.S. economy, which grew 1.9 percent.

"We're going to bounce back from this, but it's going to take a couple of years," said Wachovia senior economist and longtime Florida watcher Mark Vitner. "We have the Florida economy losing momentum right through 2008, then bottoming out late this year or in early 2009."

Although the traditional definition of a recession is two consecutive quarters of negative growth, Vitner says we're already there.

"The test is 'has there been a significant, broad-based decline?' and there has been in Florida," he said. "Most of the weakness has been in housing, but we've seen it impact so many other things."

He said that as housing became less affordable, fewer people moved to Florida and "when people stopped coming, that weighed on virtually every industry."

Consumer spending slowed, with taxable sales down 6.5 percent over the past year, motor vehicle sales off 12 percent and consumer confidence near record lows. Unemployment has risen to 5.5 percent. Tourism has been a bright spot, but Vitner said even that's losing steam with airlines cutting back flights.

"Businesses are really hesitant to commit to any purchases," said Russ Jones, who owns Dazzle Decals, a St. Petersburg company that turns vehicles into mobile billboards. "Everyone is just trying to hold on to what they have because they don't know how long this slowdown is going to be. We're in a recession all right."

But not everybody has the same perspective. Caroline Spencer, co-owner of Wilsey Auto Service in St. Petersburg, said her auto repair business is doing better than last year, thanks partly to a boost from the IRS economic stimulus checks.

"I had a lot of people tell me they used theirs for car repairs," she explained. Spencer said she has noticed fewer cars in restaurant parking lots, but said, "I think things are going pretty good, considering everything that's happening."

Even builders are cautiously optimistic.

"Last year we had a lot of inventory under construction and not a lot of sales. This year we're starting to move the inventory," said Scott Shimberg, owner of Hyde Park Builders in Tampa.

Randy Simmons, owner of R.R. Simmons, a commercial construction company in Tampa, said business has been good this year, but 2009 is less certain. "It's a little early to tell," he said. "But it's hard for Florida to be down a long time."

Simmons said the drop in housing prices should help in the long run. "Affordable housing had gotten completely out of whack, and that's key to attracting new business," he said.

A major reason the current situation feels so bad is that Floridians are accustomed to feeling so good.

"Even sluggish growth seems like torture when you are accustomed to being one of the fastest-growing economies in the nation," Vitner said. Instead of doing better than the national economy, Florida has been doing worse for the past year.

Competitively, Florida's economy is slipping relative to such states as Texas, North Carolina and Georgia, according to Wachovia economists.

Don't look for a quick rebound. Vitner predicts a downturn of 0.4 percent for this year as a whole, positive but anemic growth of 0.4 percent next year, improving to 2.2 percent in 2010. The model Vitner uses to determine how fast the economy is growing — or shrinking — is based on growth in jobs, hours worked and personal incomes, as well as other factors.

In the last national recession, in 2001, Florida's economy continued to grow, albeit slowly. You have to go back to the second quarter of 1992 to find another downturn, a mere 0.2 percent — nothing near the latest's quarter 1.6 percent contraction. Last quarter's decline was the worst since a 1.9 percent drop in the first quarter of 1991.

Helen Huntley can be reached at huntley@sptimes.com