Florida’s economy, praised by DeSantis, is robust but faces a major challenge.
Florida’s Booming Economy and High Inflation: A Tale of Inspiration and Caution
Florida’s economy is experiencing a remarkable boom, but it also faces a significant challenge in the form of high inflation. Governor Ron DeSantis (R-FL), who is vying for the 2024 Republican presidential nomination, proudly showcases the Sunshine State’s economic success. However, this serves as both an inspiration and a cautionary tale for other states.
The national economy has become a central theme in the lead-up to the 2024 election, with three prominent Floridians in the mix: DeSantis, former President Donald Trump, the GOP front-runner, and Miami Mayor Francis Suarez. President Joe Biden is working to portray the country’s economic circumstances as historically positive, even coining the term “Bidenomics.” On the other hand, Republicans are pointing to various economic indicators, including significant inflationary growth since 2021, as evidence of Biden’s lack of leadership.
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At the national level, the labor market is thriving, and unemployment is at a historically low level. According to the Bureau of Labor Statistics, the national economy added 209,000 jobs in June, and the unemployment rate is hovering around 3.7% — a level comparable to the pre-pandemic era. This is a surprisingly robust result considering the Federal Reserve’s aggressive interest rate hikes.
However, Florida, the third most populous state in the nation, has surpassed the national economy by a wide margin.
As of the most recent May data, Florida’s statewide unemployment rate was an astonishingly low 2.6%. Additionally, the state added approximately 38,000 new jobs from April to May. Governor DeSantis has been at the helm of this economic success and is using it as a compelling argument for his presidential candidacy. Furthermore, Trump’s residency at Mar-a-Lago brings even more national visibility to Florida, ensuring that the state will be under the constant scrutiny of the news media.
“It’s an interesting dynamic. You’ve got candidates that are going to want to tout what’s happened in Florida and others somehow trying to denigrate how Florida is doing,” said Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting, in an interview with the Washington Examiner.
“I think DeSantis’s candidacy, in large part, is built on a foundation of how Florida has performed coming out of, and during, the pandemic relative to other states,” Snaith added.
According to Snaith, the strong economy has benefited Floridians across the board, and his research indicates that the state’s economic growth is expected to continue, which bodes well for DeSantis. Alfredo Ortiz, president and CEO of Job Creators Network, also praised Florida’s free-market economic policies, calling them a model for the nation.
However, there is one significant challenge that many parts of Florida are facing — high inflation.
National inflation growth has been gradually moderating in recent months.
The June consumer price index report revealed that inflation fell to a 3% annual rate, marking a decline of one percentage point from the previous month. The producer price index on July 13, which measures wholesale prices, showed that inflation stood at just 0.1% for the year ending in June.
However, in certain areas of Florida, inflation is significantly higher.
In South Florida, which includes Miami, Fort Lauderdale, and West Palm Beach, annual inflation is nearly 7% higher than it was a year ago. In the Tampa-St. Petersburg area, it reached 7.3% in May on an annual basis.
Mark Hamrick, a senior economic analyst at Bankrate, explained that while housing inventory across the country has caused prices to rise, Florida, in particular, has experienced a surge in prices due to massive waves of in-migration and inventory hits caused by recent hurricanes. This has further contributed to the state’s overall inflation numbers.
Snaith emphasized that housing has been a key driver of persistent inflation in Florida. Housing prices heavily influence the consumer price index calculations, making Florida’s significant growth in home prices evident in the inflation data.
“Shelter inflation accounts for about a third of overall inflation and two-fifths of core inflation (excluding food and energy costs),” explained Abbey Omodunbi, vice president and senior economist for the PNC Financial Services Group, in an email to the Washington Examiner.
Omodunbi pointed out that the high inflation, coupled with rising interest rates, will “reduce consumers’ purchasing power and lead to a decline in economic output in the state.”
While the red-hot housing market is the primary driver of Florida’s overall inflation, as measured by the consumer price index, Hamrick noted that prices of goods and services in other categories have also increased due to the demand driven by migration.
“If you’re a restaurateur in a destination with plenty of customers and demand, you’re going to set your prices relative to the traffic you can command,” Hamrick explained. “People will set prices based on what they believe customers are willing to pay.”
Furthermore, the high demand for business and construction in Florida has created a need for workers. As companies compete for employees, they often have to increase wages and benefits to attract prospective workers who have multiple options. These increased business costs may then be passed on to consumers in the form of higher prices, further contributing to the state’s inflation.
“The labor shortage was pretty rough in Florida, and I think, in some instances, it is still an issue. These higher wages will often be passed along to the customers,” Snaith concluded.
Click here to read more from the Washington Examiner.
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