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How Florida's Unemployment Situation Will Blight its Property Market This Year

The latest employment survey shows no improvement.

Employment services company Manpower, Inc. released its Second Quarter Employment Outlook Survey that shows slow hiring among American companies in the next three months. The official press release states, “Each of the four U.S. regions surveyed expects weaker employment Outlooks compared to last quarter and last year, according to the seasonally adjusted data. Hiring in the Northeast is expected to be the strongest, while employers in the Midwest and West are less optimistic. Employers in the South, who reported the strongest hiring Outlook in Quarter 1 2009, anticipate the weakest hiring pace in Quarter 2 2009.”

One interesting result in the survey shows that Florida’s five cities are included in the 10 weakest metropolitan areas of the country. The Miami-Fort Lauderdale-Pompano Beach area has a net employment outlook of -14 percent. In a report by Forbes Magazine, Michael Doyle, vice president and general manager of the company’s southeast region explains, “Hospitality was hit hard. People aren’t traveling to Florida, and all the service industries, like hotels, rental cars and restaurants, are affected. Everything gets hit when fewer people come to visit.”

Florida’s situation is the same as those cities whose local companies are experiencing weaknesses in their balance sheets but the Sunshine State’s condition would take a longer period to recover. The survey pictures how the recession has taken its toll on the state. Florida’s home values are among the most depressed in the country. TheCase-Shiller Home Price Indices reports that Miami’s home values had a -28.8 percent change in December 2008 compared to its value a year before.

So if Doyle believes that commercial activity has taken a slow run and would last well this coming quarter, it wouldn’t be puzzling to understand how much housing values will be depreciating more. When there are fewer employment opportunities, workers will relocate to other states where they can find a livelihood. The state wouldn’t be also attracting new residents because of increased negative perception. Therefore, month-over-month changes in Florida’s home values will continue to deteriorate.

Portfolio manager Jerry Slusiewicz of Pacific Financial Planners puts this best: “Here is the real risk: if the non financial companies miss their numbers and corporate earnings slow appreciably. If unemployment also rises, then the conditions would be ripe for the economy to spiral down into a more significant, widespread recession than seen in recent history… If demand for goods and services wanes due to tapped out consumers, inventories will rise, and even more layoffs will follow. A snowball effect from rising unemployment to a further decline in housing prices is what has Fed Chair Ben Bernanke and others completely spooked.”

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