Florida's Economic Shock Due To COVID-19

As we continue 2020, we’re receiving reports showing the true impact of the pandemic across the country. When it comes to the economy, the news predictably is brutal. Huge job loss, income loss, loss of businesses, and thus loss of tax revenue to governments. But there’s also been another trend. As bad as the economic impact of the pandemic has been, it’s not been near as bad as predicted at the onset. According to the Federal Reserve as recently as June, the 2nd quarter economy was expected to contract by an incredible 53%. The actual decline was 32.9%. That's a huge number no doubt, but nowhere near as cataclysmic as the projections. It appears something similar is happening in Florida.

According to Yelp, there are 3,000 small businesses that have been lost in South Florida during the pandemic. These businesses employed approximately 60,000 people. Significant impact? Yes. As bad as earlier projections? Not even close. WalletHub projected the South Florida metro to be the 4th most negatively impacted nationally. The decline in small businesses was actually about in line with the national average. The news was better still statewide as reflected through the collection of tax revenues. According to a report from the Urban Institute’s State and Local Finance Initiative, Florida’s tax revenue decline from March through May was less than the national average. Nationally states reported a 29% decline in revenue year over year. Flordia’s decline was 26%.

It was logical to suggest Florida would be one of the hardest-hit states given the reliance on tourism and entertainment to our state’s economy. Add in the unknowns as this is new territory for all of us and it’s hard to blame any analysts for missing the mark on Florida. But the question remains, why have we held up better during the pandemic than expected? It’s still early but I have a few ideas as to why and they’re instructive as to understanding how our economy may fare the rest of this year.

1. Florida’s economic record performance heading into the pandemic.

2. Snowbirds staying for the summer.

3. Unemployment benefits totaling more than the average income for those laid off.

Florida had a record low unemployment rate of 2.8% in February with record incomes and the fastest-growing big state economy in the country. That naturally softened the blow compared to much of the country. Yes, we’ve lost out on more than a third of the visitors to our state during normal times but that blow was softened, especially in South Florida, by many snowbirds staying longer and/or not leaving at all. There are approximately 900,000 snowbirds that leave Florida typically in the second quarter. Finally, the unemployment benefits. The average unemployed Floridian received more on unemployment benefits than working during the second quarter, at least at whatever point they finally managed through the mess of the Connect System. While the unemployment benefit extension questions remain, the other positive catalysts are intact. For this reason, it’s possible even likely, that Florida’s economic recovery will be faster and better than average as well.

Photo by: Getty Images North America

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