Regional Economic Commentary

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Florida Economic Outlook: February 2011

Tue, Feb 15 2011, 10:34 GMT
by Mark Vitner Wells Fargo Investments, LLC | View company's profile

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Executive Summary: Florida After the Great Reset

Florida’s economy is only begrudgingly emerging from its deep recession slumber. Job growth turned slightly positive in 2010 and a full recovery is still years away. Housing remains extremely overbuilt and prices have started to slide again. The unemployment rate, which looked like it had peaked last spring, has also risen further in recent months. Most troubling of all, however, is that Florida is still struggling to regain its status as a premier location for new and emerging businesses. Florida’s new Governor, Rick Scott, is working to address this challenge by slashing the state budget, reforming the state pension system and cutting corporate taxes. The moves are designed to reassure businesses, entrepreneurs and job seekers that Florida will remain a competitive place to do business in the years ahead. Enhancing Florida’s competitive position is imperative to reversing the recent slide in nonfarm employment and population growth.

We expect Florida’s economy to gradually gain momentum in 2011 and look for the state to move into full recovery mode by late-2012. The economic landscape has changed, however, and new business strategies will need to be adopted for Florida’s economy to flourish again.

Is Florida’s Population Growth Slowing?

Over the past decade, Florida saw its total resident population rise 17.6 percent, representing an increase of 2.8 million residents. Total resident population at the end of 2010 stood at 18.8 million. While Florida added the third-largest number of residents to its population of any state, and was the eighth-fastest growing state on a percentage basis, the past decade marked the slowest percentage growth for Florida’s population in the modern era. Since 1910, Florida’s population growth has averaged close to 40 percent per decade. While some moderation would be expected given the state’s larger population base, conditions clearly deteriorated during the latter part of the past decade, when the state’s housing boom turned to bust.

Population growth projections from The Office of Economic and Demographic Research (EDR)— a research arm of Florida’s Legislature—closely anticipated the Census findings. The EDR predicted Florida’s resident population would grow 17.5 percent from 2000 to 2010, roughly in line with the 17.6 percent increase we reported in the 2010 Census. Current EDR forecasts show population growth rates moderating further, with the decades ending in 2020 and 2030 showing population growth of 13.2 percent and 12.1 percent, respectively. Even with this more modest growth trajectory, Florida is still on track to become the third-most populous state in the nation by the end of 2015, surpassing New York.

In a previous report we published on the 2010 Census data, we noted the strong correlation between population growth and employment prospects. 1 Low land costs, low taxes and inexpensive real estate helped attract scores of businesses to Florida over the past 50 years, creating an attractive employment picture across the state. Population growth itself served as an enormous catalyst for economic growth, creating thousands of jobs in construction and household and professional services. This historical dependence on continued population inflows also skewed Florida’s economic base heavily toward industries tied to population growth, such as construction and real estate finance. Both immigrants from out of the country (especially from Mexico and Cuba) and in-migrants from other states rushed in to fill these job opportunities, fueling a virtuous cycle.

So what are the implications of slower population growth? As mentioned, part of the slowdown simply reflects base effects, with the state’s large population base making big percentage increases a thing of the past. The slowdown rooted in the bursting of the housing bubble and the ensuing diminished job prospects in Florida relative to other states is more troubling. Similar stories can be told of Georgia, California, Arizona and the Carolinas. Now, many of these formally rapidly growing areas are being weighed down by the ongoing housing slump, which continues to hinder job creation and worker mobility. Moreover, the negative wealth effects brought on by the recent housing burst have made it more difficult for people to start or expand businesses and are also cutting into the number of retirees moving to the state.

Florida also faces a number of unique challenges relating to the way growth has been financed in the past with many new residential developments taking on significant debt to finance infrastructure. Falling home prices and a large number of long-vacant homes mean many municipalities are seeing significant shortfalls in property tax receipts, making it difficult for them to reduce the tax burden on individual properties. The higher tax burden new home buyers likely face, combined with continued questions about the cost and availability of property insurance, will continue to discourage many would-be new residents.

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Published On Tue, Feb 15 2011, 10:38 GMT

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Wells Fargo Investments, LLC

https://www.wellsfargo.com/

sam.bullard@wachovia.com

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For example, you place an order to buy at a stop of $50 which is above the current price of $45. If the price of the stock moves to or above the $50 stop price, the order becomes a market order and will execute at the current market price. Your trade will be executed above, below or at the $50 stop price. In a fast market, the execution price could be drastically different than the stop price. A "sell stop" is very similar. You own a stock with a current market price of $70 a share. You place a sell stop at $67. If the stock drops to $67 or less, the trade becomes a market order and your trade will be executed above, below or at the $67 stop price. In a fast market, the execution price could be drastically different than the stop price. A stop limit has two major differences from a stop order. With a stop limit, you are not guaranteed to get an execution. If you do get an execution on your trade, you are guaranteed to get your limit price or better. For example, you place an order to sell stock you own at a stop limit of $67. If the stock drops to $67 or less, the trade becomes a limit order and your trade will only be executed at $67 or better. Glossary All or None (AON) A stipulation of a buy or sell order which instructs the broker to either fill the whole order or don't fill it at all; but in the latter case, don't cancel it, as the broker would if the order were filled or killed. Day Order A buy or sell order that automatically expires if it is not executed during that trading session. Fill or Kill An order placed that must immediately be filled in its entirety or, if this is not possible, totally canceled. Good Til Canceled (GTC) An order to buy or sell which remains in effect until it is either executed or canceled (WellsTrade® accounts have set a limit of 60 days, after which we will automatically cancel the order). Immediate or Cancel An order condition that requires all or part of an order to be executed immediately. The part of the order that cannot be executed immediately is canceled. Limit Order An order to buy or sell a stated quantity of a security at a specified price or at a better price (higher for sales or lower for purchases). Maintenance Call A call from a broker demanding the deposit of cash or marginable securities to satisfy Regulation T requirements and/or the House Maintenance Requirement. This may happen when the customer's margin account balance falls below the minimum requirements due to market fluctuations or other activity. Margin Requirement Minimum amount that a client must deposit in the form of cash or eligible securities in a margin account as spelled out in Regulation T of the Federal Reserve Board. Reg. T requires a minimum of $2,000 or 50% of the purchase price of eligible securities bought on margin or 50% of the proceeds of short sales. Market Makers NASD member firms that buy and sell NASDAQ securities, at prices they display in NASDAQ, for their own account. There are currently over 500 firms that act as NASDAQ Market Makers. One of the major differences between the NASDAQ Stock Market and other major markets in the U.S. is NASDAQ's structure of competing Market Makers. Each Market Maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the Market Maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds. Market Order An order to buy or sell a stated amount of a security at the best price available at the time the order is received in the trading marketplace. Specialists Specialist firms are those securities firms which hold seats on national securities exchanges and are charged with maintaining orderly markets in the securities in which they have exclusive franchises. They buy securities from investors who want to sell and sell when investors want to buy. Stop An order that becomes a market order once the security has traded through the designated stop price. Buy stops are entered above the current ask price. If the price moves to or above the stop price, the order becomes a market order and will be executed at the current market price. This price may be higher or lower than the stop price. Sell stops are entered below the current market price. If the price moves to or below the stop price, the order becomes a market order and will be executed at the current market price. Stop Limit An order that becomes a limit order once the security trades at the designated stop price. A stop limit order instructs a broker to buy or sell at a specific price or better, but only after a given stop price has been reached or passed. It is a combination of a stop order and a limit order. These articles are for information and education purposes only. You will need to evaluate the merits and risks associated with relying on any information provided. 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