Florida’s projected 2.9% job growth rate, near 5% boost in real gross state product (RGSP) and a “robust” housing market offer “plenty of reasons to be cautiously optimistic” about the state’s 2021 economic outlook, according to public-spending watchdog Florida TaxWatch.
The Tallahassee-based research nonprofit, however, cautions that forecasts released Wednesday in its 2021 Economic Preview: An Uncertain Yet Hopeful Year of Growth are predicated by how the COVID-19 pandemic is remedied.
The report, largely gleaned from the University of Central Florida Institute for Economic Competitiveness’ 2020-2023 Florida & Metro Forecast and TD Ameritrade’s State Economic Forecast, projects Floridians’ personal income will decline by 3.2% and retail spending by nearly $40 billion – or 6.6% – in 2021.
“Overall, Florida’s economy in 2021 will be uncertain, influenced largely by pandemic changes, but there is reason to believe next year will be a hopeful year of growth for a state on the road to economic recovery,” Florida TaxWatch President and CEO Dominic M. Calabro said.
According to the report, Florida’s RGSP, which calculates state total economic output after adjusting for inflation, will grow by 4.9% in 2021 – significantly more than its 3.4% average annual growth and 1.3 percentage points more than the projected 3.6% growth in 2021 national gross domestic product (GDP).
Florida’s unemployment rate will fall to 5.5% in 2021, the forecast said, down from a pandemic peak of 13.8% in April but about 2 percentage points higher than its pre-pandemic rate.
The state’s labor force “exhibits a promising outlook with a growth rate around 2.9 percent, indicating the return of many Floridians who once dropped out of the job searching process due to the pandemic,” TaxWatch said.
Florida’s Leisure and Hospitality industry is projected to grow 11.9% in 2021, although “the bulk” of the sector’s job growth “will be due to companies reclaiming many of the jobs lost during the pandemic’s earlier months.”
Florida’s Education and Health Services industry is projected to grow by 8.1% next year, as is its Financial Activities sector.
“Financial Activities will be the fastest-growing economic sector in Florida over the 2020-23 period thanks, in part, to the sector’s high telework feasibility, making it easier for employees to work from home,” TaxWatch said.
Florida’s housing market will remain a “robust” seller’s market in 2021 with declining inventory and high demand driving “home prices to new highs.” New home construction, however, is expected to dip from 148,000 this year to 134,300 in 2021, according to the report.
“As the new year goes on, buyers are expected to receive some relief as inventories gradually increase; however, buyers may continue to face ongoing affordability challenges as mortgage rates and home prices eventually increase throughout 2021” TaxWatch projects. “Some estimates suggest mortgage rates will slowly rise to around 3.4 percent by the end of 2021, no longer offsetting some of the housing prices.”
The projected 3.2% decline in personal income “can be explained partly due to falling stimulus and unemployment payments for many families, which originally offset some of the recession’s impacts in 2020,” the report said.
“Coupled with a feeble tourism market, falling consumer spending will have the added effect of reducing potential tax revenue to the state of Florida,” TaxWatch warns, citing state economists’ forecast of a $2.84 billion decline in sales tax revenue this fiscal year and next, which “will constrain program spending across the state’s budget.”
Florida voters’ adoption in November of Amendment 2, which raises the minimum wage to $10 an hour in September 2021 and by $1 annually until it reaches $15 an hour in 2026, is “complicating employment forecasts,” the report said.
“Higher labor costs will inevitably affect employers’ decisions to hire more workers in the coming year,” the report said. “The exact magnitude of the impact remains unknown.”