Florida: Shows How Messed Up Things Really Are

We know the response by governments all over the world to COVID-19 screwed everything up. Now the hen has come home to roost and, contrary to what many are proclaiming, things are a total mess.

No place epitomizes that more than the State of Florida. The Sunshine State resisted a lot of the calls for draconian lockdowns, moves that crushed state economies. Places such as New York and Illinois are in serious trouble (although federal bailouts are saving them), something that Florida mostly bypassed.

That does not mean, however, that things are great. In fact, the state is making the same mistake as many others believing we are in for some stellar recovery. Sure, year-over-year numbers (YoY) look good. But we have to keep in mind that this time last year saw things falling off a cliff economically. The second quarter of 2020 was horrific by every measure.

The Governor of the state, like many other Republicans, is hearing the calls from businesses. Recently, businesses are screaming they cannot find workers since "it pays more to stay on one's couch" due to the federal unemployment dollars that are flowing into those without a job.

This amounts to an extra $300 per week, in addition to the $250 or whatever the state pays. It is a problem that is designed to run through August.

For those without a job in Florida, that will run out in the later part of June. The state is no longer accepting the money from the Feds. They are answering the calls of businesses, basically forcing people back to work.

Of course, the presumption is that business are not finding workers due to pay. While I am sure that is part of it, there is another piece to the puzzle: the jobs they offer suck.

Anyone who worked in a fast food restaurant knows what I am talking about. The conditions are awful and the hours tend to be equally as bad. The pay is abysmal leaving many below the poverty line. Of course, it ought to tell you something that when unemployment of $550 a week outpaces the pay an entire industry offers. On a 40 hour workweek, that works out to $13.75 per hour.

Certainly not in Elon Musk or Jeff Bezos territory.

Now we are seeing the renter's moratorium ending. This was put in place by the CDC (how this was allowed to go through by this agency I will never know) claiming that evicting people could increase the spread of COVID. Well, that moratorium is coming to an end meaning that, according to CNBC, more than 11 million people could be evicted.

Isn't it interesting to see Florida on this list. It is one of the darker colors, placing it in the 23% category. That means that near 1 in 4 renters are behind on their rent as of the dates cited in the study.

So what gives?

Florida, even though they did not implement full lockdowns to the extent of some other states, did have its economy hit hard. The state depends heavily on tourism, something that was affected during the past year. While the hospitality industry has bounced back some, it is not to the point where it was before. In fact, executives in the airline industry, for example, believe it will take at least 3 years before they see the passenger traffic what it was pre-COVID. Foreign travel is still almost non-existent, especially from Europe where lockdowns still continue.

Who knows. Perhaps Floridians are just exceptional at bilking the system. Maybe they were taking their unemployment money and omitting paying their rent. Of course, if they were doing this, where was it going? Maybe some made it into savings but that is not typically how bilkers operate. Thus, we can only presume it ended up in other areas of the economy.

If that is the case, who benefited the most over the past year? That would be the likes of Amazon. Hence, if people are going to have to pay rent, in addition to losing their Fed money, they will not be buying crap off Amazon. Ultimately, the money has to go somewhere if it isn't in savings.

The bigger issue is what happens to these renters. With an eviction, many will not find new places since landlords will not touch them. That means shacking up with friends and family.

Taking 11 million people out of the rental pool could have an impact upon the real estate market. While these landlords are happy to get rid of them, that does not mean there will be others lining up to rent. Again, the market is only so big and if a large portion are removed, there suddenly is a surplus in rental houses.

This could force many landlords to proclaim they had enough and put the properties up for sale. Naturally, this could increase the supply on the markets, putting pressure on the demand side of the equation.

Couple this with a slowdown in the economy since people are jumping the gun, in my opinion, with their belief about the strength of the recovery. With stimulus diminishing greatly, we will see if it is able to stand on its own.

In the end, this is all a big mess and Florida epitomizes it. We will see how it all unfolds but my expectation is that it will not be great in a few months. People are going to quickly realize that calls for a strong recovery are way overblown.

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