by Karen Brune Mathis
Managing Editor
Hold on for a few more months and Jacksonville’s economy could turn the corner.
“The local economy is a long way from strong economic growth, but the end of the weakness may be months away at this point instead of years,” said the LEIPLINE newsletter of the University of North Florida Local Economic Indicator Project.
Data from the fourth quarter of 2010 and early data from January “provide some hope for optimism,” although continued unrest in the Middle East and its resulting jolt in gas prices could affect that.
Rising fuel prices affect the economy through increasing costs for businesses and consumers.
UNF economics professor Paul Mason, director of LEIP, said that if the crisis in the Middle East continues, “the growth will be slower.”
LEIP’s latest report measured the economy as of the fourth quarter of 2010. The newsletter reported that the economic recovery appears to be very slow nationally.
“But given that Jacksonville has been more severely hit than perhaps every recession since 1975 (if not that one too), the local recovery has a lot further to go than the average nationally,” it said.
The Jacksonville economy covers Baker, Clay, Duval, Nassau and St. Johns counties.
LEIPLINE summarized:
• The fourth quarter of 2010 was the 11th consecutive weak quarter for Jacksonville and the nation as it relates to the data LEIP collects or measures.
• Unemployment remained a full 7 percentage points higher than what would be optimal. Mason said healthy unemployment is around 4 percent.
• Local economic indicators fell slightly during the quarter and inflation rates fell for almost all of the past 12 months.
• Retail sales were better than expected during the holiday season locally as well as nationally.
The report was the 17th installment of LEIPLINE. Mason and seven UNF students collect and analyze data monthly.
They focus each quarter on four variables: inflation, unemployment, the leading indicator and stock prices.
Locally, the newsletter reports:
• Inflation. The local consumer price index is the most significant variable analyzed by LEIP. The local CPI was lower at the end of the fourth quarter from the third, and for all of 2010, “the local inflation rate was a paltry 0.11 percent.” While food prices were stable, gasoline prices were substantially higher at the end of the year and continue to rise.
The real estate market is keeping inflation muted, it said. “Although single-family (home) prices were somewhat higher at the end of the year relative to the end of 2009, condo prices continued their slide and sales were relatively anemic,” it said.
• Inflation outlook. For the first quarter of 2011, which ends March 31, inflation could return to normal or higher levels, “driven particularly by food and energy prices. “
LEIPLINE said the unrest in the Middle East and weather-related factors both locally and internationally will increase consumer expectations of inflation. How much prices increase also will depend on the Federal Reserve Board actions regarding “quantitative easing.” The Fed decided last fall to buy $600 million in bonds in an effort to boost the economic recovery.
• Unemployment. Jacksonville’s unemployment rate was 11.42 percent. Last year, just one month, June, had a seasonally adjusted rate below 11 percent. “The labor force size is shrinking yet there is persistent unemployment, particularly in construction and in financial service industries,” said LEIPLINE.
The local labor market has revealed very little improvement, it said. The labor force is the total number of people working and looking for work. “The civilian labor force from December 2009 until December 2010 grew by 1,025 potential workers, yet 378 fewer were actually employed,” he said. “There were 1,403 more unemployed workers at the end of 2010 relative to the beginning, locally.”
• Unemployment outlook. LEIPLINE predicts persistent unemployment above 10 percent, perhaps even 11 percent, “and jobs will be difficult to acquire.”
The outlook depends on whether consumers indicate they will buy more goods and services. “While some firms are still laying off workers locally, other firms are starting to hire again,” said LEIPLINE.
Construction activities are still a fraction of the volume of four years ago, and financial service companies are only marginally increasing hiring, it said.
“However, there is some light at the end of the tunnel since consumer confidence jumped (in January) and that may reflect increased consumer willingness to spend,” said LEIPLINE.
• Leading indicator. The LEIP leading indicator measures consumer confidence, building permits and other factors. The indicator was down overall during the fourth quarter of 2010. Within the quarter, it was down in October and December and up in November. For all of 2010, the indicator was up 1.5 points overall, although the comparative national index was up more than 6.5 points.
“After nine-plus years of doing this, we are aware that predicting the LEI over brief periods is a fool’s errand, but combined with the other positive news it seems likely” that the first quarter of 2011 “will provide better news than certainly during 2009.”
• Stock price index. Local stocks grew significantly in the fourth quarter, but gains were below the national Dow Jones Industrial Average. “For the last seven quarters, we implied that local stocks seem to have been hit harder than the Dow companies due to the substantial presence of financial companies in Jacksonville, and the fourth quarter numbers continue to reveal this reality,” said LEIPLINE.
To learn more about LEIP, visit www.leipjax.org.
356-2466