April 16, 2008 / 12:09 AM / 10 years ago

Sour economy casts pall over once sunny Florida

MIAMI (Reuters) - Economic data continues to suggest that fears of a new “Great Depression” in the United States are overblown. But in places like Miami and Fort Lauderdale, where the housing bust has bitten hard and prices are rising fast, the specter of economic stagnation twinned with inflation looms all too real.

“Since the 1970s we haven’t really seen this simultaneous threat of an economic slowdown, and recession, side by side with the threat of inflation,” said Sean Snaith, an economics professor at the University of Central Florida.

Nationally, inflation was flat in February, according to the U.S. Labor Department’s consumer price index, the most widely used gauge.

But in Miami and Fort Lauderdale, prices were up by 5.3 percent that month, according to the department’s southeastern office, in Atlanta, the highest of any metropolitan area in the country.

The department gives national figures for March on Wednesday. The regional figures are released every two months, with the next ones out in May.

For many in Florida, a state that people are leaving in droves because of high property tax and home insurance rates, the biggest and harshest rise has been in energy costs, up 18 percent in the 12 months to the end of February.

And they could continue surging amid Energy Department warnings that gasoline prices could soon hit $4 a gallon in some areas.

“Everything is high. Everything is going up,” said Cookie Elias, a Miami-based mother of three as she packed her young children into a minivan after shopping at a local Costco discount retailer in Miami.

“I have to fill this car up with $60 and it doesn’t last the whole week,” said Elias. “I don’t think most people are going to survive this,” she added, referring to what she called the “economic recession” and spiraling cost of living in south Florida.

A woman who asked to be identified as Miss Davis said she was struggling to makes ends meet on her income as a public school treasurer of less than $25,000 a year.


“You’re basically one paycheck away from a disaster,” said Davis, as she ate a hot dog for lunch in the Costco cafeteria. “I budget whatever I‘m going to spend in a week, it’s highly budgeted, because if I don‘t, forget it, I won’t make it.”

With a falling U.S. dollar spurring price hikes across the economy -- a cheaper greenback makes imports more costly -- some analysts say there is evidence to suggest that stagflation is back and taking root again in the U.S. economy.

The term takes its name from the combination of economic stagnation, or a severe growth slowdown, and steep inflation and it was last used to describe the pernicious state of the U.S. economy is the last 1970s and early 1980s.

“It already is happening,” said Martin Weiss, president of Weiss Research Inc, which is based in Jupiter, Florida.

“Whether you’re living in Florida or living elsewhere, you’re facing potential declines in income, or job losses, a recession and all that goes with that,” he said.

“At the same time you’re looking at rapidly rising prices in food and for fuel and for living expenses,” said Weiss.

In addition to pressure from commodities prices, he attributes what he now sees as a threat of double-digit inflation primarily to the Federal Reserve’s bid to offset the U.S. housing bust and its impact on Wall Street by flooding retail and investment banks with cheap money.

“My view is that you will see rising prices and a contracting economy at the same time for most of this year,” Weiss said.

“Inflation is coming from energy costs and stagnation is coming from the housing sector,” said Bruce Nissen, director of the Research Institute on Social and Economic Policy at Florida International University.

“What’s really alarming is the combination of those two together because that’s where people really, really get hurt,” he said.

“To me this is worse than anything I’ve ever seen,” said Harriet Lefler, a retired garment industry worker who sat alongside Davis one recent afternoon, having lunch with her husband in the Costco cafeteria.

“There are no jobs available and there’s not enough money to pay for the price of things,” Lefler said.

(Editing by Michael Christie and Eddie Evans)

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