“Is Florida Heading for a Recession?” | Florida State University Economist Dr. Jerry Parrish | July 19, 2022“Consumer sentiment is lower than what it was during the worst of the pandemic and you know, that’s really unusual, with almost full employment. If they have a poor outlook, that’s certainly a concern in the future.”Florida State University Economist Dr. Jerry Parrish shares the probability and how rising interest rates, housing costs, and gas prices affect consumers before a July 19, 2022 meeting of The Economic Club of Florida. Show notesDr. Jerry Parrish is the Chief Economist and Director of State and Local Policy Analysis at the Institute of Government at Florida State University. He said Florida has two different economies: one with almost full employment with more than 600,000 open jobs, and the other with persistently low consumer sentiment. “Consumer sentiment is lower than what it was during the worst of the pandemic and you know, that’s really unusual, with almost full employment,” he told the Club. “I watch that because it’s really an indicator of how people are going to spend their money. And you’ve heard all over the place that about 70% of the economy is people out there spending money, so if they have a poor outlook, that’s certainly a concern in the future. What’s driving it is inflation.” Dr. Parrish said Florida weathered the coronavirus pandemic’s economic upheaval better than most states, recovering all its jobs by October of 2021. The exception is in healthcare and especially registered nurses. Thirty-five other states still don’t have their jobs back. Other economic factors he noted at play:
“People at lower incomes take the biggest brunt of inflation,” said Dr. Parrish, who also chairs the Council of Economic Advisers at the University of West Florida’s Haas Center. “If you’re spending all your money on gas and rent and food, there’s not much money left for fun stuff. The economy runs on fun stuff. If you’re buying a motorcycle or a motor home, or taking a great vacation or something like that, that’s really, really good for the economy, right?” he asked the Club. Dr. Parrish has maintained a probability of recession forecasting model for the past several years. One component is the spread between 2-year and 10-year U.S. Treasury bond yields. “The interest rate on a 2-year bond, which should be lower, is inverted now,” he said, noting it’s the largest inversion since 2000 and “a lot of the time, this signals a recession is coming on.” So, is Florida heading for a recession? Dr. Parrish said his model shows about a 67% probability, noting as well a Wall Street Journal chart he displayed for Club members that shows a historical drop in consumer sentiment “very hard and very quickly right before we have a recession.” On the positive side, “If we do go into a recession, Florida will weather it better than the U.S.,” he said. In his question and answer session with Club members, Dr. Parrish also explored the positive factors in a recession, including easing inflation and increased entrepreneurism. Links and Resources Mentioned in this EpisodeFlorida Institute of Government at Florida State University
Date of recording 7/19/22 |