Chief Economist Corner: The Coming Global Economic Slowdown and Its Impact on Florida

By: Dr. Ben Tabatabaei, Chief Economist & Executive Director of the International Center of Economic Development, Florida Chamber of Commerce

Alphabet, Microsoft, Goldman Sachs, and Salesforce are all examples of well-known industry giants cutting their workforce amid concerns over a global slowdown in the tech sector.

• Amazon recently notified its workforce that it will be laying off 18,000 of its employees; concentrated among those who hold administrative and corporate positions. This is mainly due to pandemic restrictions being lifted and more people returning to physical stores and purchasing fewer items online.
• The parent company of Google, Alphabet, announced that it will be reducing its workforce by 12,000, a 6% reduction.
• IBM will be laying off 3,900 people, a 1.4% reduction in its workforce. Kendyl Holdings Inc., an IBM spinoff, caused IBM to sustain a $300 million charge. IBM has had a flat fourth-quarter revenue due to the global economic slowdown.
• Microsoft announced that it will be laying off 5% of its global workforce or about 10,000 jobs.

There are several reasons for this slew of layoffs that are being felt across the country and the globe.

Inflation remains a major concern. Both U.S. and global economic growth have slowed down. As the cost of energy has remained high, it has cut into the ability of consumers to spend on other items. Additionally, a strong U.S. dollar compared to other currencies has decreased the demand for U.S. exports of goods and services.

After demand initially picked up at the end of the COVID-19 shutdowns and economic restrictions, it has again fallen due to falling demands and inflation due to high energy prices. The Managing Director of IMF, Kristalina Georgieva, at the beginning of the year, said, “We expect one-third of the world economy to be in recession.” However, she felt that it could be mild due to low unemployment in the US and continued job creation  adding, “if the US labor market holds, that resilience holds, the US would help the world get through a very difficult year.”

The World Bank has reduced its 2023 global economic growth outlook from its earlier projection of 3% down to 1.7% for 2023.  The World Bank has reduced global economic growth predictions significantly from its earlier projections, reducing US economic growth from 2.4% to 0.5%. China’s growth outlook for 2023 has been reduced from 5.2% to 4.3%, Japan from 1.3% to 1%, and Europe and Central Asia from 1.5% to 0.1%. The World Bank stated, this is “the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis.”

The predictions of limited US economic growth by the World Bank may be overexaggerated. Inflation was largely caused by massive and unprecedented government spending during the pandemic plus an intentional reduction of domestic energy production by the current administration.  Inflation continues to slow down due to demand falling for energy and will further continue to recede as new leadership in the House appears less willing to spend money.

The broader labor market in the U.S. has continued to add jobs, even though the growth has slowed. Employers added 223,000 jobs in December and the overall unemployment rate fell to 3.5%.

Now, what does this mean for Florida? In Florida, we have a stronger labor market than the U.S. Our unemployment rate is one percent lower than the national average at 2.5%. Last month Florida job creators added an additional net 21,400 jobs; Florida was responsible for adding 9.5% of jobs that were added in the US for the month of December. Income migration continued at $23.7 billion dollars annually for 2019-2020 (last available data). That is $2.7 million dollars an hour, 24 hours a day, 365 days a year. This is just personal income and does not include business or corporate income. These are individuals that filed personal taxes previously in another state and now are filing in Florida. We expect this number will continue to grow. There are also a lot of high-tech companies in Florida. Some of these talented individuals who have been laid off will find work with a company based in Florida either virtually or by moving to Florida. While the US economy went into a recession, Florida’s economy continued to grow. As long as there is not a prolonged global economic slowdown, Florida will continue to do well.

For regular updates and analysis of the metrics impacting the future of Florida, please follow the Florida By The Numbers Twitter account, @FloridaBTN.