by Karen Brune Mathis
Managing Editor
If you’re planning for an economic recovery, rest assured there will be one.
Paul Mason, a University of North Florida economics professor, told about two dozen business owners and executives Thursday that historically, it’s inevitable.
“There has never been a recession or a depression that wasn’t followed by a recovery,” he said.
While the recession officially ended two years ago, in June 2009, economic growth hasn’t been as strong as it could be to engender consumer and business confidence, according to Mason.
“What we need is some certainty,” he said.
By that, Mason means that businesses want to know which policies and regulations will be created and enforced by government that will affect how they operate. Among those are the costs of health care resulting from health care reform.
“How are you supposed to figure out your likely profit if you don’t know what your costs are?” asked Mason.
Mason’s presentation was called “The local economic picture: The Good, Bad and Ugly.” His presentation was arranged by “Advantage Small Business” magazine and sponsored by 121 Financial Credit Union.
“He’s always spot-on,” said Brian Barquilla, founder and publisher of the magazine, in introducing Mason.
Mason is also director of the Local Economic Indicator Project, which tracks and reports the area economy.
In addition to certainty, Mason said there also needs to be a limit to commodity speculation. He said the speculation in oil has driven up prices, and that’s what led to the recession, which began in December 2007 and ended two years ago.
He traced it like this: The increase in oil prices led investors to withdraw money from real estate and instead invest in oil, gas and gold. Housing prices dropped, which decreased the value of homes.
Homeowners, as consumers, then stopped spending because they no longer had equity in their homes on which to borrow.
And when consumers stopped spending, businesses stopped selling and producing, leading to layoffs and unemployment.
Hence, the recession.
Mason said the economy began growing in the third quarter of 2009. “But the growth is not that strong,” he said, adding that the growth rate in the first quarter of this year, from January-March, was 1.9 percent.
“That, quite frankly, is not enough,” said Mason.
This morning, the government reported the second-quarter growth rate was 1.3 percent.
Mason also said that growth needs to be at a 5 percent rate to reduce unemployment by 1 percentage point. “We’re nowhere near that,” he said.
The national unemployment rate is 9.2 percent and the Duval County rate, adjusted for seasonal factors by LEIP, is 10.33 percent. The Jacksonville rate has been above 10 percent since March 2009 except for the past May, when it dipped to 9.66 percent
As for the future, Mason said that the world’s economies are on the mend and hiring is likely to pick up because of some rise in consumer and business confidence, but “the real estate market is really hurting.”
According to the Florida Legislature Office of Economic and Demographic Research, the recent recession lasted 18 months.
Among Mason’s comments about the Jacksonville area:
• The economy was at its recessionary worst during the fourth quarter of 2008.
• Retail sales rose at yearend 2010 but have moderated.
• Building permits are not strong.
• Inflation in Jacksonville had been running below the national rate, but now is even at 4 percent.
• Unemployment is rising, and “that’s not good for Jacksonville.”
• Interest rates remain low overall, with the 30-year fixed mortgage rate at 4.5 percent.
• Also in general, as houses in foreclosure are sold, people who are waiting to put their houses on the market will start doing so. That will increase the inventory for sale. Housing absorption “will be really slow for about a decade,” said Mason
“It’s not supply,” he said. “It’s the shortage of demand.”
Mason also spoke about the federal government and advocated for less regulation.
“We do have to shift away from the expectation that the federal government is going to solve our problems,” he said.
Asked about negotiations in the U.S. House and Senate to vote on raising the federal debt limit by the Tuesday deadline to avert a government default, Mason made a prediction.
“The politicians at the last minute will rescue us by agreeing to something,” he said.
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