Amid major geopolitical and economic developments that occurred in 2016, there is an air of uncertainty regarding the future of Florida’s economy. While some anticipate continued economic expansion—at least within the US—others fear a recession may be on the horizon.
This has led to a poignant question: Is Florida’s economy in a better position today to handle a recession than before the Great Recession? Florida was one of the hardest hit economies during that time, but if a financial crisis or recession arises today, the state is in a much better position to weather the storm, thanks to a more diversified economy.
Major Players in Florida’s GDP Growth
The top four contributors to Florida’s GDP have been consistent from 2006 to 2015, with a few interesting shifts. Professional & Business Services and Government-related activities both increased their share. The most notable shift was in Construction now that the state is less reliant on it, partially due to a more stabilized housing market. Economic contributions are more spread out than in 2006, with Education & Health Services and Transportation & Utilities accounting for more of the economy, among others showing minor increases.
Although Florida significantly lagged behind the overall US economy over the ten-year period, the state has far outpaced overall US growth more recently. In the five-year period between 2011 and 2015, the state’s GDP grew at an annual rate of 3.7%, compared to the US rate of 3.1%. This demonstrates the severe adverse effects of the Great Recession on Florida’s economy compared to the nation as a whole.
Diversification for Stability
It also demonstrates the state’s diversification efforts since the economic crisis. Over the ten-year period, much of the state’s GDP growth was driven by Education & Health services and the Arts, Entertainment & Recreation sector. Given that GDP growth and employment growth are closely related, it’s important to note that these are sectors with low average annual salaries.
However, more recently, accelerated growth has been strongest among higher wage economic sectors such as FIRE related activities and Professional & Business Services. Additionally, the Construction sector has been rebounding since 2011, amidst a more modest housing development pipeline and other large scale infrastructure improvement projects throughout the state.
Although there are still underlying problems to be solved, Florida is much more prepared to roll with the punches now than in the past. This is due, not just to the diversification of growth sectors, but to diversification of some of the state’s traditional economic pillars.
Marc is the JLL Research Manager for the State of Florida, overseeing commercial real estate analysis across six markets with a strong focus on examining economic and demographic trends and variables that affect the performance of the office, industrial and retail markets in addition to the state’s overall economic health. In this role, Marc is responsible for monitoring real estate activity throughout the state, as well as analyzing market fundamentals and trends occurring in each market in order to provide insightful analysis and assistance to local and national clients regarding real estate strategies. Marc is also responsible for leading strategic advisory services to clients in Florida. Contact Marc.