Managing Editor
Economist Sean Snaith intends to share today that while Jacksonville’s economy is recovering from the recession, it won’t be a quick recovery. Or easy.
It might be painful, too, considering the depths of the recession and the scar of unemployment that remains.
Snaith is director of the Institute for Economic Competitiveness at the University of Central Florida College of Business Administration.
He is scheduled to speak today at the 35th annual meeting of Jacksonville Community Council Inc., whose new community study is “Recession, Recovery and Beyond: Job Creation, Employment and Improving Northeast Florida’s Competitiveness.”
Snaith also serves on the Wall Street Journal’s economic forecasting panel as one of 56 economists surveyed throughout the year about national unemployment, growth and housing, along with Federal Reserve and policy decisions.
Snaith will speak at the lunch meeting at the Schultz Center for Teaching and Leadership. For more information about JCCI, visit www.jcci.org.
Snaith responded Tuesday to questions in advance of the meeting.
What is your message to JCCI as it embarks on a new study about the recovery and how Jacksonville should position itself?
My message is we are beginning and we are in a recovery that is following a deep and prolonged recession, so I think we need to temper our expectations. The damage that this recession and financial crisis has done isn’t going to go away overnight. That is an important thing to recognize. This is not going to be a quick-fix, 180-degree rapid turnaround, unfortunately. The damage that was done, particularly to consumers’ wealth via the housing market and the stock market, has unfortunately put consumers in a bit of a retrenchment mode to save and try to build those nest eggs back up. When consumers are saving more, they are spending less. Consumer spending is 70 percent of our national economy, so we will have that chunk of the economy growing, but not at a robust pace.
Will Jacksonville’s economy recover more quickly, slowly or at the same pace as Florida recovers?
In some sense, Jacksonville did not suffer to the same extent in the housing cycle. It was not as pronounced as other parts of the state. It was still very significant, but the damage is less severe than in other parts of the state. That implies a faster pace of recovery in Jacksonville, relatively speaking. I think it will recover at the pace of the Florida recovery, if not a little faster. I think the lower cost of living in Jacksonville relative to some areas will be beneficial. Going forward, in terms of attracting retirees, that element of Florida’s economy and the influx of retirees have really been damaged by the housing market and what happened in the stock market. It will change many retirees’ plans in terms of timing and what type of retirement they will be able to afford.
Speaking of Florida, is it out of the recession? Will it recover more slowly, quickly or at the same rate as the nation?
In Florida, there is no official group to declare this. My contention is that Florida came out of the recession in the first quarter this year. That being said, I’ve
referred to the labor market for some time as the scar that’s left over from the financial and economic trauma. That scar is a pretty ugly one and it is not going to fade quickly. We are going to be dealing with the aftermath with respect to the labor market for many years. We think unemployment will be in double digits until the second half of 2012 and payrolls will not recover to their pre-recession levels until 2014. We are looking at a very pronounced and prolonged cycle and a long period of recovery, unfortunately.
Job growth has not resumed very strongly in the private sector. We are likely to see the unemployment rate drift up a few tenths of a percent before its long and gradual decline. There is not a lot of good news in the near term as far as the labor market is concerned.
Is there or will there be a double dip recession?
That has come up in large part due to the deceleration of the recovery in the second quarter and that is likely to remain in place the rest of the year. Last year our second quarter forecast said the recession is over but the recovery is shaped like a gravy boat where you see the handle, you plunge deep down and the recovery would be the gradual tapered spout, slow and protracted. There was a pseudo-V at the end of last year and the first three months of this year. It was directed by inventory cycles and over the course of the recession, businesses were slashing, slashing, slashing inventories. No one was buying. They stopped slashing and (that) gave us a big boost of 5 percent of Gross Domestic Product growth in the fourth quarter and 3.7 percent growth (in the first). Inventory cycles are transitory and they are not the stuff that sustains strong recoveries and that is what we are seeing, (the results of) that inventory boost rather than the emergence of a double dip. It is the recovery displaying its true nature.
With the housing and stock market, the damage is not going to be undone overnight. That damage was not done overnight. The extent of the damage is severe. When you go through that kind of of trauma, the recovery is not rapid. It is slow, it is protracted and there’s therapy involved.
What specifically should Jacksonville and Northeast Florida do, or anticipate, as it positions itself for creating jobs in the future? What are the strengths?
I think the transportation and warehousing sectors are one of the region’s real strengths. As the Panama Canal widening becomes complete and we get those ships coming through, there is real opportunity for Jacksonville, and Florida in general, to take a large step forward in terms of growing international trade. That means we need to invest in our ports, in our rails, in our highways. That kind of government spending provides returns over time.
I think the work JCCI does is also something Jacksonville has going for it. At a personal level, you don’t effect change without some level of introspection and thoughtfulness, and what the JCCI is doing for Jacksonville is just that. You need to take an honest, hard look at yourself. That way, you know how you are progressing and if you are doing the right thing.
356-2466