Economists, and the general American public, are concerned that the United States economy is quickly slipping into a recession. The word is so casually tossed around, that people not versed in economics are asking, what exactly is a recession?

The official definition of recession is when a country’s gross domestic product (GDP) – the value of goods and services produced - is negative (decline) for two or more consecutive quarters. However, signs of a recession can appear even if there are no consecutive negative quarterly GDP reports. This occurs when there are reports of several quarters of slowing but positive growth; businesses stop expanding, employment falls, unemployment rises, credit slows down and housing prices decline. This is exactly what is happening across America today, giving rise to the fear that the country is falling into a recession. Recessions are feared, because like tropical storms which can grow into damaging hurricanes, they can escalate into much worse economic depressions.

An economic depression is basically a recession that lasts too long, where too many jobs are lost, too many business fail, prices rise too high – because of the scarcity of some goods, start up of new businesses become too sluggish, and real estate sales are too slow.

In Florida, there is an opinion that with the decline in real estate sales, high incidence of foreclosures and sharp decline in sales-tax revenue, the state could be severely impacted if the country slides into a recession. The reason for this negative opinion is that it is believed that Florida’s real estate market has been more severely impacted than other states. With the domino effect that characterizes economics, the negative housing market will have a negative impact on retail sales, which in turn will cause the state’s government to earn less revenue from sales-tax. If the real estate market takes longer to return to normal, job losses would escalate, consumers would likely spend less money creating further constriction in business and additional loss in revenue to city, county and state governments.

A foreboding sign is that while home foreclosures increased 79 percent nationwide since 2005, in Florida the increase was 379 percent, and while the average time to sell the inventory of available houses in most states is 10 months, in Florida it takes 20 months.

On the other hand, some economic analysts, believe that South Florida will struggle through the first half of 2008, then move on to firmer footing during the second half of the year. These analysts’ slight optimism is based on South Florida’s links to Latin America which could foster strong trading with the Caribbean, Latin America and Europe. Also, investment from Latin America and Europe could offset the downturn in the housing market, rising gas prices, and sluggish employment. It is expected that tourism will grow in the region this year because of the demand from European and Latin American visitors, who will take advantage of the weak US dollar to visit warm weather Florida.

South Florida also has a fair amount of direct foreign investment which should cushion the employment decline in the region. In fact, according to some analysts, there should be job growth in professional and business services in South Florida.

With these two different analyses one for Florida, and the other for South Florida, it will be left to see, as was reported a few weeks ago, if any growth in South Florida’s economy will be sufficient to offset the downturn expected in the state, should a national recession become a reality.