The economy may be in recovery mode, but it would probably be doing better if the government would just get out of the way, according to the University of North Florida’s Local Economic Indicators Project, or LEIP.
According to the organization’s latest quarterly LEIPLINE newsletter, while labor markets, housing and some other indicators are improving, the nation’s gross domestic product was weak in the first quarter this year.
“Most pundits are blaming the GDP numbers on the perverse weather in the first quarter virtually everywhere, and we agree to an extent, but the investment numbers are troubling and they continue to tell us that the Federal Reserve policy oriented towards maintenance of very low interest rates is stifling recovery,” the newsletter said.
“It is truly disconcerting that the leadership in Washington continues to remain enslaved to traditional Keynesian economic policy to combat modern economic weaknesses that derive from circumstances that have little to do with traditional sources,” it said.
UNF economist Paul Mason, who runs LEIP, said “the government’s perception is that it’s there to fix the economy,” but he thinks that’s wrong. He believes the government should let the private sector work without help.
“They try to fix it even though they shouldn’t try to fix it,” he said. “All they’re going to do is make it worse.”
Despite government interference, LEIPLINE said there are some positive indicators in the economy, particularly for the Jacksonville area.
“Improving labor markets combined with potential strengthening of financial conditions for local companies and improving outlooks for housing and consumer expenditures suggest that the Jacksonville economy is still on the mend at a rate better than the United States as a whole,” it said.
“At this point we prefer to emphasize the positives over the negatives until we see what arises next quarter.”
The unemployment rate for the Jacksonville area fell below 6 percent at the end of 2013 and LEIP is forecasting the rate to drop to the low 5 percent range in the next few months.
“The job market locally continues to improve at a rate in excess of the national recovery, definitively good news for our area,” LEIPLINE said.
With the improving job market, consumer prices are increasing in the Jacksonville area, it said.
“So far in 2014, prices are not rising at the rate they did in 2013 (over three percent), but they are rising at almost 2.5 percent annualized, with housing leading the way,” the newsletter said.
“Our forecasts are recommending that inflation will be much higher in 2014 than it has been in the past ten years locally, but on par with the outcome for 2013 at about 3 percent for the year,” it said.
LEIP’s index of leading indicators for the Jacksonville area has produced mixed results so far this year.
“Local stocks have not performed as well as national stocks during the financial market escalation thus far this year and the combination of stagnant consumer confidence and fluctuating new claims for unemployment insurance have driven the index in opposite directions in February versus March and April,” LEIPLINE said.
The national economy is recovering, “but the hindrance on economic growth at this point is corporate and non-corporate investment expansion that is being deterred by interest rate policy at the Fed that motivates firms to focus more on their investment portfolios predicated on huge holdings of cash rather than producing products and services and selling to consumers and other businesses,” the newsletter said.
“The license that the Great Recession has granted Keynesian oriented governments to grow themselves will plague worldwide economic growth for decades to come, despite the ingenuity and entrepreneurial spirit throughout the world to countermand it,” it said.