by Karen Brune Mathis
Managing Editor
Wells Fargo Senior Economist Mark Vitner said the effects on the U.S. economy from the devastating earthquake and tsunami in Japan are very uncertain.
That uncertainty can put the economic environment at risk because businesses do not know what to expect, causing them to be wary of adding jobs and making capital investments.
“It is likely to slow economic activity a little before any rebuilding activity,” said Vitner, who will be in Jacksonville for a presentation Friday to the Association for Corporate Growth at the Crowne Plaza Hotel Downtown.
Vitner said another question concerns nuclear power. Japanese officials are struggling to prevent meltdowns at three damaged nuclear reactors.
“We may see some setbacks in that industry,” Vitner said Monday.
“The economy is constantly evolving,” he said. “I think it is a real game changer.”
Vitner also said the United States could see higher interest rates over the next few years that would not have been expected without the disaster. Japan has been “a big exporter of savings to the U.S. and they helped us keep interest rates lower than they would be,” he said.
Vitner, a former Jacksonville banker, said he plans to talk to the group of financial executives Friday about challenges to the United States and questions regarding the strength of economic growth.
However, he does not see a double-dip or second recession.
“That’s not even on the radar screen,” he said.
Vitner expects economic growth to continue at an annual pace of about 3 percent, and said it is difficult to project growth any stronger than that.
“We have these big clouds hanging over the economy with state and local budgets that are under intense pressure,” he said, also saying that the housing bust is still a factor in economic growth.
Vitner said that governments are trying to tackle the problems. “In two years, state and local governments will be in relatively good shape again,” he said, “and that is how long it would take housing to move through the doldrums.”
He expects housing prices to start rising again in 2013. He expects a continued drop throughout most of 2011 as foreclosures continue toward resolution and a leveling off of prices in 2012.
Vitner said Wells Fargo is optimistic about the economy. “Most of my life as an economist, I have been accused of being too optimistic,” he said, adding that usually the optimism was borne out.
Vitner said that the recession of December 2007-June 2009 affected the South more severely than other parts of the country because of its impact on real estate.
“Once we get the housing bust behind us, the South and Florida will become one of the fastest growing places in the country,” he said.
Vitner also said Florida Gov. Rick Scott will be a factor in business growth.
“He seems to be very pro-business and he has a background that he should know what businesses want,” said Vitner.
Vitner said Florida’s economy was moving toward adding more higher-paying jobs, particularly in the medical, specialty manufacturing and financial and professional services fields.
“One of the biggest challenges in the state is we have such a large proportion of the work force that moved here to take jobs that didn’t necessarily require a college degree,” he said, referring to construction and other jobs that won’t recover until the housing market improves.
Vitner said Jacksonville is positioned for higher-paying international trade, logistics and financial services jobs, among others.
“You now are attracting more highly skilled positions. More college graduates are moving to Jacksonville,” he said.
Still, unemployment rates in Florida and Jacksonville might take longer to decline because of the large supply of lower-skilled workers looking for jobs.
“Usually, when I finish speaking, I have to tell people I am pretty optimistic,” said Vitner.
“We don’t have any negative numbers in our forecast the next two years.”
Yet, there are potential problems, in addition to the uncertainty of the situation in Japan. One is credit availability for business expansion. Another is the European debt crisis. An ongoing one is unrest in the Middle East. Another is the Federal Reserve’s “quantitative easing” to assist economic growth.
Then there are rising gas prices, which Vitner said appeared to have dampened consumer confidence, although he does not see them throwing the economy back into a recession unless there is a major supply disruption.
“There are a lot of potential problems, but there always are,” said Vitner.
“We are never problem free.”
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