With the national economic recovery in its eighth year, economist Sean Snaith predicts the possibility of a downturn in 12 to 18 months.
He bases that on several indicators, including economic growth nationally “shows the initial descent into recession.”
Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida, spoke Friday at the Federal Reserve Bank of Atlanta public affairs forum held at the bank’s Jacksonville branch Downtown.
During an interview after the presentation, he said the next recession might not be as severe as the December 2007-June 2009 experience known as the “Great Recession” and could be minor by comparison.
He doesn’t see a repeat of the dot.com bust of 2001 or the housing and mortgage crisis of the mid-2000s.
“I don’t see any of the gauges on red,” Snaith said. He considers a lot of the threats are coming from international conditions.
The National Bureau of Economic Research identifies recession cycles. While most recessions consist of two or more consecutive quarters of declining GDP, not all of them do. The bureau also takes into account other economic indicators.
Nonetheless, once a recession begins, the psychological domino effect sets in. “These things start to snowball,” Snaith said.
One major question now is what happens Nov. 8.
While the presidential election, like others before it, has created uncertainty, the tone is different this year because neither Hillary Clinton nor Donald Trump has laid out specific plans or policies in enough detail, he said.
“Both forks in the road are unclear,” Snaith said, which compounds the uncertainty.
Yet in some ways, he said, a recession might be good because it would force lawmakers and regulators to take corrective action.
Snaith told the audience of about 100 the vast increase in the number of government regulations continues to change the “rules of the game,” which affects the economy and business decisions.
For example, the Code of Federal Regulations expanded from about 20,000 pages in 1949 to almost 140,000 pages in 2005.
Had the rules remained at the earlier level, gross domestic product would have grown to $53.9 trillion in that period rather than to its actual level of $15.1 trillion, he said, citing a study in the Journal of Economic Growth.
“Rules and regulations change the way the players play the game,” he said.
In response to a question, he said the Fair Labor Standards Act of 2016 and the call by Democrats for a $15 minimum wage are made with good intentions.
But both will affect the number of paid hours for staff, which will most impact the working poor.
The Fair Labor Standards Act more than doubles the minimum salary level to more than $50,000 for employees considered to be exempt from overtime pay.
Snaith said Florida continues to outpace the national economy.
The state housing market and population growth continue and the gross state product, which is the sum of all the goods and services produced in Florida, is growing at a faster rate than the national GDP.
Job creation still outpaces the national rate, but the pace will slow.
“The nation as a whole is not growing terribly fast,” Snaith said, calling the recovery subpar.
Unlike the V-shaped recovery predicted by some economists, in which the economy recovers as steeply as it plunged, Snaith has long predicted a “gravy-boat” recovery.
That is a shallower and longer recovery before the economy grows strongly, although Snaith said Friday that “growth never did pick up.”
In the six full calendar years since the recession ended, real annual GDP growth has not exceeded the 2.5 percent it reached in 2010, according to the National Bureau of Economic Research.
Snaith said in the interview that Jacksonville’s economy remains solid. Population growth is on par with the state’s rate.
He did plug dredging the St. Johns River so the port can compete for the larger ships coming through the Panama Canal.
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