The University of North Florida’s Local Economic Indicators Project’s quarterly economic newsletter, LEIPLINE, has produced a lot of doom and gloom since it was first published in early 2007. But it’s not LEIPLINE’s fault.
The newsletter began just before the beginning of the “Great Recession” and conditions haven’t improved that much over the past few years, so “there has not been much evidence to recommend optimism during the LEIPLINE run,” the latest newsletter said.
UNF economist Paul Mason, who runs the LEIPLINE, said Tuesday that there may be slight improvements in the economy in the coming months but realistically, he doesn’t expect to see significant improvement.
“I don’t see anything (significant) until after the election,” Mason said.
LEIPLINE looks at both the Jacksonville and national outlooks. The latest issue, published last week, notes that Jacksonville outperformed the rest of the country in three areas during the second quarter: inflationary pressures, housing and stock prices.
However, with so much uncertainty heading into November’s election, “it is difficult to produce unabashed optimism, or much beyond very cautious confidence that eventually both the local and national economies will rebound,” it said.
LEIPLINE said weak consumer and investment demand will keep inflation in check despite the recent spike in oil prices. There also have been concerns that drought in some U.S. states will lead to an increase in food prices, particularly for corn.
Mason said typically, when the price of a commodity like corn rises, consumers decide not to buy it and find substitutes.
“You just see changes in what people buy,” he said.
LEIPLINE said the forecast for the labor market in the Jacksonville area remains uncertain.
“The outlook for the third quarter of 2012 is difficult to predict given all of the national uncertainty and the continued decline in public sector employees. The no-new-tax stance of the Legislature and the governor implies that municipalities and state employers will continue to bleed jobs without much outlook for private sector hiring,” it said.
The national economic outlook isn’t very promising, either.
“With GDP growth still well below desired levels, unemployment rates nearly double full employment values and inflation barely rising, the expected path would seem to be continued slow recovery with excessive unemployment,” LEIPLINE said.
“Last quarter we thought that we were moving in the right direction. However, the second quarter dashed those hopes as domestic events seemed to be moving as negatively as those in Europe,” it said.
LEIPLINE did not want to take sides in the political debate over economic policy, but it did criticize the Federal Reserve Board’s policy of keeping interest rates low in an effort to stimulate the economy.
“The Fed seems complicit with the Treasury in maintaining low interest rates not to stimulate production and investment, but to reduce financing burdens for the fiscal side of government,” the newsletter said.
“We are of the opinion that it would be better for the Fed to adopt the opposite stance relative to interest rates for two purposes: one, to motivate consumers and particularly investors to lock in lower interest rates for durable goods purchases or investments in capital before they rise, and two, to motivate the federal government to pay down the debt through reductions in wasteful federal agencies, entitlement programs, and initiatives more appropriately designed for the states and local governments, before the interest costs escalate,” it said.
LEIPLINE said it’s up to the private sector to make the economy move again.
“The U.S. economy thrived for two centuries based on private sector initiative and innovation based on quality education and entrepreneurial spirit. We desperately need to return to those ideals – and the sooner the better,” it said.
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