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Monday, July 27, 2009

Delay Foreseen in Florida Economic Recession

According to a new prediction, Florida’s economic recession will bottom out in the middle of next year. This is six months later than state officials formerly projected.

The forecast from the Florida Legislature's Office of Economic and Demographic Research brings the state's predictions in line with those of at least two nongovernment economists who offered similar outlooks last month.

Through the end of 2011, State forecasters also are forecast an unemployment rate near 11% with close to 1 million out-of-work Floridians. After seeing last week's reports of increased unemployment and foreclosure rates, they also pushed back their forecast for the start of the economic recovery by six months.

``We had hopes there would be changes at the national level that would benefit Florida more,'' said Amy Baker, head of the Office of Economic and Demographic Research. ``But everything that's been done with the stimulus, with fixing the credit markets hasn't had enough of an effect.''

Even after a difficult budget season this year, the new numbers could force state lawmakers to slash services or raise taxes again.

University of Florida economist Dave Denslow says the state will need to come up with an additional $2 billion to balance the budget, based on the new forecast.

Lawmakers balanced the budget using $2.2 billion in new fees and taxes and $5 billion in federal stimulus money, this year.

The State has seen an increase in demand for Medicaid, which provides healthcare for people who can't afford it which has added to the State’s problems.v ``This is a double negative,'' said Don Gaetz, a Niceville Republican who chairs the Senate economic-improvement committee. ``When more people are out of work and there are more foreclosures, that shows there is not the business activity we need for a recovery. And when people are out of work, they're more likely to need food stamps, Medicaid and housing assistance and that costs money.''

Gaetz added, ``This recession has created a whole new layer of poor folks who don't want to be on Medicaid or food stamps but are forced into it by joblessness and economic conditions''.


CALIFORNIA’S CRISIS IS WORSE

However, Florida is not facing anything like the $26 billion budget shortfall that California is faced with.

Economists on Tuesday said that California has unique issues like higher salaries and benefits for government employees and powerful unions to protect them. A two-thirds legislative majority required for budget approval and tax increases and a variety of voter-approved mandates that tie lawmakers' hands.

Sean Snaith, a University of Central Florida economist who previously worked at a college near Sacramento, ``we share similarities, but we don't have the same extremes.''

Snaith's most recent Florida forecast which was published last month, called for a 10.6% unemployment rate next year and 9.8%$ in 2011. He shows economic growth resuming in the second quarter of next year.

Mark Vitner, a Wells Fargo economist, made similar predictions regarding the Florida economic recession last month.


MORE OPTIMISTIC

Economist Tony Villamil, dean of the business school at St. Thomas University in Miami Gardens, was a bit more optimistic.

Villamil who was undersecretary of commerce under the first President Bush said, South Florida economic recession could show a faster and stronger recovery than other parts of the state because of the region's more diverse economy, which is less reliant on population growth and real estate development.

He said Miami-Dade's unemployment rate is unlikely to get much higher than 11.5% seen in June, before seasonal adjustment. ``If it peaks at 12%,'' he said, ``I will be surprised.''




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