As local officials rush to take credit for a recent report that showed the Tallahassee MSA had the fastest growing GDP per capita in the state of Florida during 2016, new information threatens the credibility of the explanations offered by these officials.
Based on research by Tallahassee Reports and lengthy discussions with Bureau of Economic Analysis (BEA) officials, information indicates that the rebuilding efforts after Hurricane Hermine, financed by millions of dollars in insurance payments, was the main driver of the 4.3% growth in GDP during 2016.
From 2012 to 2015 the Tallahassee GDP growth was basically flat.
In a previous article, Tallahassee Reports, with help from BEA officials, determined the main driver of the 2016 growth in GDP was the “Insurance carriers and related activities” category.
This finding is in contrast to the comments of local officials who quickly pointed to local development projects as the reason for the jump in GDP.
Mayor Gillum tweeted, ” The numbers don’t lie, folks! #Tallahassee has the fastest growing #economy per capita in #Florida!”
The Office of Economic Vitality (OEV) tweeted: “2016 GDP per capita showed highest growth rate among FL’s 22 metro areas.”
Their comments were parroted by the local media.
On Thursday the Tallahassee Democrat published a story on the front page about the economic growth:
“The private sector, due to milestone infrastructure efforts, is pushing the economic wave, said Tallahassee Mayor Andrew Gillum.
‘These are a result of the kind of development and redevelopment we’ve seen throughout our city1” said Gillum, who is running for governor. “A lot of things had to co-conspire to make it possible to allow us to be one of the leading economies in the state of Florida and, in fact, in the nation per capita.”
Chamber Vice President, Jay Revell told WTXL’s Ashley Richmond, “When a community is building, you’re progressing. That’s really been the reason that Tallahassee is now the state’s leader in economic growth. Tallahassee has the fastest growing GDP per capita of any community in the state of Florida.”
However, it appears no one was interested in understanding what was actually driving the growth.
A simple review of the components of the GDP numbers, provided by BEA, showed growth in the construction category in the Tallahassee MSA actually ranked 17th out of the 22 Florida MSA’s in 2016.
However, the BEA data showed the Finance and Insurance category jumped approximately 32%, which was ranked number 2 among the 22 Florida MSA’s in 2016.
Disasters as Drivers of GDP
It is not uncommon for disasters to drive economic growth captured in the GDP measure. But the growth is short lived.
After Hurricane Katrina, The Economist said, “While big hurricanes like Katrina destroy wealth, they often have a net positive effect on GDP growth, as the temporary downturn immediately after the storm is more than made up for by the burst of economic activity that takes place when the rebuilding begins.”
And the New York Times said, “Economists point out that although Katrina has destroyed a lot of accumulated wealth, it ultimately will probably have a positive effect on growth data over the next few months as resources are channeled into rebuilding.”
After a round of California fires in 2007, Alan Gin, a University of San Diego economist said, “In the odd nature of economic accounting, this will probably be a stimulus. There will be a huge amount of rebuilding in the next couple of years, financed by insurance payments.”
The Impact of Hermine
Bloomberg.com reported that Hermine, the first hurricane to strike Florida since 2005, caused approximately $300-$400 million in insured damage. As much as 70 percent of the expense was estimated to be tied to residential properties, and insurers will also pay claims related to business interruption and vehicle damage.
The Florida Office of Insurance Regulation shows that Leon County had twice as many Hurricane Hermine claims than any other Florida county.