Florida Legislature’s research arm sees short-term boon from baby boomers
Baby boomers retiring to Florida will be a boon to the state's economy and its budget through the end of this decade, according to a report by the Legislature's economic research arm.
However, greater numbers of retirees may put a strain on the state after 2020, said last week's economic overview report by the Florida Legislature's Office of Economic and Demographic Research.
The report said those baby boomers will come to Florida in the next few years better off financially than other retirees, with greater assets from the sale of their homes and other sources.
Those new retirees will not only buy homes in Florida but also "outfit them, generating additional tax revenues," it said.
This will be "new money" earned outside of the state coming into Florida.
"New infusion of dollars has the greatest multiplier effect," it said.
"They will also tend to be younger retirees, and therefore healthier and more active — meaning their demand for consumer services will be higher, strengthening the economy, while their demand for government services will be a minimum," it said.
However, as more baby boomers retire from 2020 through 2030, they will leave more vacancies than there will be workers available to fill them, and the lack of workers will keep businesses from adding new jobs.
"Both of these factors will lead to increased demand for workers and upward pressure on wages as the skilled supply of workers fails to keep pace with the demand," the report said.
"Inflated wages will hurt economic growth, as well as make government services more costly to provide — just as the Boomers increase their need for government-supported services," it said.
"The increased cost of government services and suppressed economic growth will make budget gaps worsen," it said. "This situation will be exacerbated by the fact that retirees tend to spend more on services and less on taxable goods."
The report describes a three-phase "Baby Boomer Economic Cycle."
• The first phase, from 2010 through the beginning of 2020 is the phase of "strength" as the new baby boomers move into Florida.
• The second phase, from 2020 through 2030, is the "transition" period.
• The third phase, from 2030 through 2050, is the "challenge" with aging people in place.
The report does not give details on what the economy will look like in the third phase.
The monthly economic overview report from the Legislature's research office also updated several trends it described in previous reports.
Florida continued to have the nation's highest foreclosure rate through the first half of the year but Jacksonville — which ranked second behind Miami among the nation's metro areas in the first quarter — dropped to third in the rankings for the first six months of the year. Orlando moved into the second spot.
Florida cities had the top five slots in the nation for foreclosures, with Ocala fourth and Tampa fifth.
The Florida housing market is continuing to show signs of improvement. Existing home sales through the first five months of the year reached 87.9 percent of their pre-recession peak, up from 84.9 percent for calendar year 2012.
The median sales price for existing homes of $171,000 in May was the highest since September 2008, but Florida still was 18.1 percent lower than the national median sales price.
Building permits through the first five months of the year, while still below historical levels, were nearly 50 percent higher than last year in the first five months of the year.
Not all economic indicators are improving.
The overview report also said that Floridians' personal income fell 1.5 percent in the first quarter of 2013, compared with the fourth quarter of 2012. That ranked Florida 39th in the nation.
"In Florida, losses in both net earnings and property income led to the slow-down. They reflected the expiration of the payroll tax holiday and the acceleration of dividends and salary bonuses into the fourth quarter," it said.
Floridians' property income (from dividends, interest and rent) fell $9.3 billion in the first quarter, the second-biggest drop in the nation behind California.
While Florida's unemployment rate has been dropping since the end of 2011, the research office said the labor market is still affected by people who have dropped out of the labor force.
When people without jobs are not actively looking for work, they are not counted as unemployed.
The report said that if the labor participation rate in May was the same as it was in December 2011, the state's reported 7.1 percent unemployment rate would actually have been 7.9 percent.
The Florida Department of Economic Opportunity reported Friday that Florida's unemployment rate was unchanged in June at a seasonally adjusted 7.1 percent.