from staff
While the national recession officially ended two years ago this week, at the end of the first half of 2009, the recovery hasn’t taken hold enough to spark significant consumer or corporate confidence.
Unemployment remains higher than comfortable while employers are reluctant to add significant numbers of jobs. Debt hangs over consumers, businesses and governments. Housing growth remains slow while prices continue to fall and foreclosures remain troublesome. Inflation lurks on the fringes.
The recession began 3.5 years ago in December 2007 and ended 18 months later, yet some consumers say its effects linger too strongly.
| The experts say... | The U.S. recession ended two years ago. How strong is the recovery? | How is the Jacksonville area economy faring? | What is your forecast for the coming 12 months? | What factors should business owners watch and why? |
| Carol Dole Associate Professor of Economics, Davis College of Business, Jacksonville University | The strength of the U.S. recovery is relatively weak. The confluence of supply chain interruptions, European Union and U.S. debt concerns, the housing market and input price increases has created tepid conditions for significant economic growth. Firms are unwilling to use their profits for expansion and hiring given this uncertainty. Households’ re-sponses to this uncertainty, in addition to rising food and gas prices, have continued to dampen consumer confidence. | Jacksonville’s unemployment rate is higher than the national rate, but lower than Florida’s unemployment rate. It is positive to note that employment has been growing through 2011, and the number of unemployed people has been falling in the Jacksonville area. The local economy is still facing an oversupply of housing, but has pockets of job growth potential in transportation and logistics, finance and health care. | I would expect continued slow growth of about 2 percent for the nation’s economy. | Retail business owners are watching consumer responses to pricing. Firms are still offering regular sales and discount buying is still important. Unexpected inventory changes are also an important signal of consumer and manufacturing expectations. Finally, the amount of lending provides signals of the economy’s health, both from the amount demanded by firms and the lending standards required by banks. |
| Ajay Samant Dean, Coggin College of Business, University of North Florida | The pace of recovery is not very fast. Unemployment rates remain at 9 percent nationally. There are structural issues in the economy that have yet to be resolved. Tax revenues are not able to keep up with rising public expenditure. The downturn in the housing market is dampening consumer spending. The Federal Reserve has kept interest rates low with a policy of quantitative easing, but low rates have not stimulated an increase in investment by businesses because they are not confident that additional consumer spending will be forthcoming. | The main drivers of the economy in the Jacksonville metro area are the transportation and logistics industry, financial services, medical services and military services. The first two have yet to recover fully from the economic downturn. Medical services are on the rise and military services are holding steady. The decline in property values in Jacksonville is leading to a decline in the city’s tax base and it is an ongoing struggle to keep civic services at desired levels. The number of foreclosed houses on the market is rising, the number of houses for sale (nondistressed) is holding relatively steady and new construction projects are few. Unemployment continues to exist at above the national rate. | At the national level, most growth forecasts for gross domestic product for the next 12 months are in the 2.5 to 3.5 percent range. At this rate we may have to wait until 2015 for economic activity to reach the pre-recession level. Unemployment levels, too, are unlikely to fall below 7.5 percent in the next 12 months. The national trend will continue to cast a shadow on our local economy. The one bright spot on the horizon is the performance of U.S. exports, stimulated by the favorable exchange rate of the dollar. This bodes well for international transportation hubs like Jacksonville. | The condition of the housing market is a major determinant of the state of our national and local economy. Low interest rates are necessary, although not sufficient, for a recovery in the housing market. For these reasons, business owners need to watch trends in interest rates and availability of credit. The inflation rate and the price of gasoline are also important determinants of purchasing power. These variables, along with local economic conditions, need to be factored into any plans for future business expansion. |
| Sean Snaith Director, Institute for Economic Competitiveness, University of Central Florida | The recovery has lost momentum, thanks to the oil price surge and the supply chain disruptions from the earthquake and tsunami in Japan. The second half of the year should see momentum building again. | The supply chain interruption hit the Jacksonville metro hardest, but weak growth will gradually build through 2011. It will be 2012-13 before stronger growth finally makes a return. Looking forward, Jacksonville should fare better than most metro areas in the state. | 2011 is Florida’s runway and we will see growth speed up as we move down this runway, but the economy doesn’t take off until we get to the end of the runway. In 2012 we will begin to gain some economic altitude. | The housing and labor markets are critical and the fate of each is intertwined with the other. Job creation and falling unemployment will ease the foreclosure flow of housing supply and also help bolster demand by expanding the pool of potential homebuyers. This should finally put a bottom on housing prices and help bring an end to the destruction of wealth that has plagued Florida’s homeowners. |
| Mark Vitner Managing Director and Senior Economist, Wells Fargo Securities | The recovery has been unusually anemic and the economy has had a great deal of trouble regaining its strength. The economic environment remains highly uncertain, which is keeping many businesses on the sidelines in regard to expanding their operations, investing in new equipment or hiring workers. We are also hampered by a general lack of confidence by businesses and consumers, which really seems to be limiting the effectiveness of monetary and fiscal policies. | Jacksonville’s economy is struggling right along with the nation. The collapse of the housing market has left many of the developments in outlying areas partially built and there is little sign things will improve anytime soon. Development is picking up a little closer into town, but the carnage from the housing collapse will likely continue to weigh on the local economy for another couple of years. There are a few bright spots. We continue to add a small number of jobs in financial, business and professional services. Tourism has bounced back up at Amelia Island and down in St. Augustine. International trade activity is also increasing and the region’s health care sector continues to expand. | We expect growth to pick up slightly during the second half of this year as some of this past spring’s temporary drags on growth reverse themselves. Gasoline prices have already fallen by more than 10 cents a gallon after peaking in early May. Motor vehicle production also is set to ramp up this summer as manufacturers recover from parts shortages following the big earthquake in Japan. Even home sales should see a slight boost, following the rash of storms we saw in April and May. We are not looking for a huge pickup. However, real GDP should rise at close to a 3 percent pace in the second half of the year and then slow again in early 2012. A return to sustained gains of 3 percent or more is not likely in the cards until the housing market turns up. | Business owners need to watch the negotiations to push the Greek debt issue further out and the debt ceiling discussions here in the U.S. If these two do not go well, the financial markets could be in for a rough ride later this summer and growth could slow significantly. Businesses should also keep an eye on the high frequency data (weekly first-time unemployment claims, weekly mortgage applications, periodic consumer confidence readings and pending home sales). If these indicators do not improve over the next six weeks, then maybe the temporary factors that slowed the economy this spring were not all that temporary. |