Florida’s economy is booming but also faces comparatively high inflation. With Gov. Ron DeSantis (R-FL) touting the Sunshine State’s economy in his bid for the 2024 Republican presidential nomination, it is both an inspiration and a cautionary tale for other states.
The national economy has become a central theme in the battle leading up to 2024, which features three Floridians: DeSantis; former President Donald Trump, the GOP front-runner; and, far back in the pack, Miami Mayor Francis Suarez. President Joe Biden is working to portray the country’s economic circumstances as historically positive, even branding the setup “Bidenomics.” Meanwhile, Republicans are pointing at every economic figure available, including massive inflationary growth since 2021, as proof that Biden is asleep at the nation’s steering wheel.
BIDEN TAKES NEW ACTION ON JUNK FEES, FOOD PRICES, AND CORPORATE MERGERS
At the national level, the labor market is doing well, and unemployment is historically low. The national economy added 209,000 jobs in June, the Bureau of Labor Statistics reported. And the unemployment rate is hovering around 3.7% — near the ultra-low level it was at before the COVID-19 pandemic and a surprisingly robust result given the Federal Reserve’s aggressive interest rate hikes.
But Florida, the nation’s third most populous state, has blown the national economy out of the water.
Florida’s statewide unemployment rate, according to the most recent May numbers, was an astonishingly low 2.6%. The state also added about 38,000 new jobs from April to May.
DeSantis presided over the state’s economic success and has been using it as an example of why he should win the presidency. But Trump’s residence at Mar-a-Lago gives Florida even more national visibility, meaning the state will increasingly be under the national news microscope.
“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,” Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting, told 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.
The strong economy has largely benefited Floridians across the board, according to Snaith, whose researchers forecast the state’s economic growth is expected to continue — something that likely bodes well for DeSantis.
“Florida’s free-market economic policies are a model for the nation. They have helped the Sunshine State lead the country in numerous economic indicators that matter,” Alfredo Ortiz, president and CEO of Job Creators Network, told the Washington Examiner.
But there is one big problem facing many parts of Florida — high inflation.
National inflation growth has been significantly moderating in recent months.
The June consumer price index report showed inflation fell to a 3% annual rate, representing a decline of a whole percentage point from the preceding month. The July 13 producer price index, which measures wholesale prices, showed that inflation came in at just 0.1% for the year ending in June.
But in parts of Florida, it is significantly higher.
In South Florida, which includes the Miami, Fort Lauderdale, and West Palm Beach areas, annual inflation is nearly 7% higher than a year ago. In the Tampa-St. Petersburg area, it was running at 7.3% in May on an annual basis.
Mark Hamrick, a senior economic analyst at Bankrate, told the Washington Examiner that housing inventory across the country has caused prices to rise, but Florida, in particular, facing massive waves of in-migration, has seen prices balloon. Add to that inventory hits caused by recent hurricanes, and prices tick even higher, weighing on the state’s overall inflation numbers.
Snaith said housing has been “really a key element of this persistent inflation.”
Housing prices factor heavily into the CPI calculations, meaning that Florida’s big growth in home prices can be seen quite clearly in the inflation data.
“Shelter inflation accounts for about a third of overall inflation and two-fifths of core (excluding food and energy costs) inflation,” Abbey Omodunbi, vice president and senior economist for the PNC Financial Services Group, said in an email to the Washington Examiner.
Omodunbi pointed out that the high inflation coupled with still-rising interest rates will “reduce consumers’ purchasing power and lead to a decline in economic output in the state.”
Yet while the red-hot housing market is the biggest driver of Florida’s overall inflation as gauged by the CPI (housing weighs heavily into the equation), Hamrick said goods and services prices are also up in other categories because of the demand driven by migration.
“I think that if you’re a restaurateur in a destination where you’ve got plenty of customers, plenty of demand, you’re going to some degree try to set your prices relative to the traffic that you think you can command,” he said.
“People are going to set prices to the degree that they think the customer is willing to pay,” Hamrick added.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Also, with big demand for business and construction comes a demand for workers. As companies in Florida fight for employees, they must often increase wages and benefits to win over prospective workers who might have several options. Those increased business costs may then be passed along to consumers in the form of higher prices, adding 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 and that will oftentimes be passed along to the customers,” Snaith said.