The probability that Florida’s $1 trillion economy will lapse into recession has risen substantially since the spring, the chief economist for the Florida Chamber Foundation said Wednesday.
In April, foundation economist Jerry Parrish put the chances of a Florida recession within nine months at a little under 21 percent.
Now he sees a 34.2 percent probability.
“There are several things going on,” Parrish said in an economic update posted online by the foundation, the research arm of the Florida Chamber of Commerce.
At the top of his list was an ominous warning from the bond market.
Last week, the yields, or returns, on 10-year U.S. Treasury bonds briefly fell below those for 2-year Treasury bonds. This is the opposite of what you would typically expect. Normally, the government has to offer investors higher interest rates on its long-term bonds. But as global investors get anxious, more move to long-term investments in a search for safety. That led the U.S. government last week to offer a higher rate for its 2-year bonds than for its 10-year bonds.
This is called an inverted yield curve, and it has preceded every recession since 1955.
The inversion “doesn’t mean we’re destined to have a recession," Parrish said, "but the reduction in business investment that’s happening, along with the global slowdown, do increase the odds of it happening.”
Parrish is not alone in seeing signs that Florida’s economy is slowing. Last week, state economists predicted that Tallahassee should count on $452 million less in revenue to the state this year than was previously anticipated. A big chunk of this was not about the economy. Instead, the Seminole Tribe of Florida decided to stop sharing casino revenues with the state after lawmakers and Gov. Ron DeSantis couldn’t reach a new gambling agreement.
But aside from that, economists did warn of a slowdown that could put a dent in the collection of sales, corporate and other taxes that fuel Florida’s $91 billion state budget.
“In my mind, I think of it as winded,” said Amy Baker, head of the Legislature’s Office of Economic and Demographic Research. “If you’re on a marathon, and you’ve been on it for a very long time, those last few miles, you’re starting to get winded. I think that’s where we think the economy is. It’s moving into a slowing of growth.”
Despite the increased risk of recession, Parrish finds indicators that are still pointing in the right direction.
“The job numbers are going up — 227,200 jobs created over the past year — and the unemployment rate (of 3.3 percent) is also improving,” he said. Florida is growing by about 900 net new residents a day, and nearly a million dollars of adjusted gross income moves into the state every hour. The state’s 124.6 million tourists last year paid more than $12 billion in state and local taxes. “You could say that they’re the reason Florida doesn’t have an income tax.”
Contact Richard Danielson at firstname.lastname@example.org or (813) 226-3403. Follow @Danielson_Times