Download 2011 Forecast - Florida Economic Advisors

The 2011 Economy:
What Exactly Does a
Recovery Look Like?
R. Christopher Jones, Ph.D.
So, where are we?
 We’re actually in a recovery that isn’t strong
enough to make up the massive job loss
Recession technically over June 2009
6 consecutive quarters Real GDP growth
Decent growth in retail sales
Industrial production of business equipment up
Inflation and interest rates remain low, but food
& fuel prices are rising
S & P 500 up 12 percent
2
So, where are we?
 BUT..
We’ve only created 1.2 million jobs this year
We lost 8.6 million jobs in 2008 and 2009
GDP needs to grow at 3.5% or more to see
significant improvement in unemployment rate
Industrial production of consumer goods and
durable goods still anemic
Increasing Federal debt and expansive
monetary policy creates inflation concerns
Housing sector still pathetic
3
What about Florida?
 Still bad, worse than the nation as a whole
Real estate, tourism continue to suffer
Stimulus may be a “paper tiger” for Florida
Anti-growth supporters haven’t helped the cause
 The horse’s back is cracked
Growth & vacations carried us to prosperity
The recession stopped both
Tourist sector will rebound before real estate
We’re not really affordable anymore
4
How Bad Is It?
 The “Good” News
We are recovering, yet modestly
We’ve had recessions of similar magnitude in the
past, and we’ve recovered from them
Mid 70’s & early 80’s recessions
72% of economic growth positive since WWII
U.S. per capita GDP growth since 1890 has
averaged just under 2% per year
Our ability to innovate has served as the
cornerstone for prolonged economic growth
5
How Bad Is It?
 The “Bad” News
We’re dealing with structural problems of a
serious nature




Monetary system is facing serious challenges
An increasingly leveraged economy (debt)
Relentless global competition
Economic pressures created by generational shifts
Are we dealing with a “new normal”?
 Higher unemployment, lower incomes
 We’re in a “transitional struggle” w.r.t. production
 Tough choices lie ahead
6
Who Rules the Global Roost?
2010 GDP Comparisons
United States
European Union
China
Japan
Aggregate GDP
Population GDP Per Capita
$14,624,184,000,000
310,062,000
$47,165
$16,106,896,000,000
492,387,344
$32,712
$5,745,133,000,000 1,330,141,295
$4,319
$5,390,897,000,000
126,804,433
$42,513
Sources: International Monetary Fund, CIA World Factbook,
U.S. Department of Commerce
7
Long-Term GDP Growth
1890-2006
8
$1,000
Q4 10
Q1 08
Q2 05
Q3 02
Q4 99
Q1 97
Q2 94
Q3 91
Q4 88
Q1 86
Q2 83
Q3 80
Q4 77
Q1 75
Q2 72
Q3 69
Q4 66
Q1 64
Q2 61
Q3 58
Q4 55
Q1 53
Q2 50
Q3 47
Billions
U.S. Real GDP
1947-2010
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
9
-15.0%
Q4 10
Q1 08
Q2 05
Q3 02
Q4 99
Q1 97
Q2 94
Q3 91
Q4 88
Q1 86
Q2 83
Q3 80
Q4 77
Q1 75
Q2 72
Q3 69
Q4 66
Q1 64
Q2 61
Q3 58
Q4 55
Q1 53
Q2 50
Q3 47
U.S. Real GDP Annualized % Growth
1947-2010
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
10
Jun-48
Jul-50
Aug-52
Sep-54
Oct-56
Nov-58
Dec-60
Jan-63
Feb-65
Mar-67
Apr-69
May-71
Jun-73
Jul-75
Aug-77
Sep-79
Oct-81
Nov-83
Dec-85
Jan-88
Feb-90
Mar-92
Apr-94
May-96
Jun-98
Jul-00
Aug-02
Sep-04
Oct-06
Nov-08
Dec-10
Percent
U.S. Unemployment Rate
1948-2010
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
11
Dec-10
Aug-08
Apr-06
Dec-03
Aug-01
Apr-99
Dec-96
Aug-94
Apr-92
Dec-89
Aug-87
Apr-85
Dec-82
Aug-80
Apr-78
Dec-75
Aug-73
Apr-71
Dec-68
Aug-66
Apr-64
Dec-61
Aug-59
000's
U.S. Housing Starts (SAAR)
1959-2010
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
12
Jun-92
Dec-92
Jun-93
Dec-93
Jun-94
Dec-94
Jun-95
Dec-95
Jun-96
Dec-96
Jun-97
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Millions
Real Retail & Food Svcs. Sales
1992-2010
$185,000
$175,000
$165,000
$155,000
$145,000
$135,000
$125,000
$115,000
13
Jun-92
Dec-92
Jun-93
Dec-93
Jun-94
Dec-94
Jun-95
Dec-95
Jun-96
Dec-96
Jun-97
Dec-97
Jun-98
Dec-98
Jun-99
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Inflation (CPI-U)
1992-2010
230.0
220.0
210.0
200.0
190.0
180.0
170.0
160.0
150.0
140.0
130.0
14
Jul-59
Jan-61
Jul-62
Jan-64
Jul-65
Jan-67
Jul-68
Jan-70
Jul-71
Jan-73
Jul-74
Jan-76
Jul-77
Jan-79
Jul-80
Jan-82
Jul-83
Jan-85
Jul-86
Jan-88
Jul-89
Jan-91
Jul-92
Jan-94
Jul-95
Jan-97
Jul-98
Jan-00
Jul-01
Jan-03
Jul-04
Jan-06
Jul-07
Jan-09
Jul-10
Real Per Capita Disposable
Personal Income 1959-2010
$34,000
$32,000
$30,000
$28,000
$26,000
$24,000
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
15
Oct-59
Jul-61
Apr-63
Jan-65
Oct-66
Jul-68
Apr-70
Jan-72
Oct-73
Jul-75
Apr-77
Jan-79
Oct-80
Jul-82
Apr-84
Jan-86
Oct-87
Jul-89
Apr-91
Jan-93
Oct-94
Jul-96
Apr-98
Jan-00
Oct-01
Jul-03
Apr-05
Jan-07
Oct-08
Jul-10
Credit Market Debt Per Capita
1959-2010 (infl. adj.)
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
16
Sep-78
Jun-79
Mar-80
Dec-80
Sep-81
Jun-82
Mar-83
Dec-83
Sep-84
Jun-85
Mar-86
Dec-86
Sep-87
Jun-88
Mar-89
Dec-89
Sep-90
Jun-91
Mar-92
Dec-92
Sep-93
Jun-94
Mar-95
Dec-95
Sep-96
Jun-97
Mar-98
Dec-98
Sep-99
Jun-00
Mar-01
Dec-01
Sep-02
Jun-03
Mar-04
Dec-04
Sep-05
Jun-06
Mar-07
Dec-07
Sep-08
Jun-09
Mar-10
Dec-10
Consumer Sentiment
1978-2010
120.0
110.0
100.0
90.0
80.0
70.0
60.0
50.0
17
Jan-71
Jun-72
Nov-73
Apr-75
Sep-76
Feb-78
Jul-79
Dec-80
May-82
Oct-83
Mar-85
Aug-86
Jan-88
Jun-89
Nov-90
Apr-92
Sep-93
Feb-95
Jul-96
Dec-97
May-99
Oct-00
Mar-02
Aug-03
Jan-05
Jun-06
Nov-07
Apr-09
Sep-10
Billions
Federal Debt
1971-2010
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Dom estic
Foreign
18
2011 U.S. Forecast
 For the year, real GDP will grow by 3%
 Job growth will continue, but unemployment
remains above 9%
 Stock markets grow by 6% - 8%
 Inflationary pressure in 2nd half of 2011, driven
by increasing fuel & food prices
 Global monetary instability will threaten a
robust recovery
 It’s a slow crawl from a deep hole
19
Florida: The Facts
 Dec. 2007 to Jul. 2010: Lost 930,800 jobs
 Equivalent to losing 92% of Orlando MSA, or
83% of Tampa-St. Pete-Clearwater MSA
 Jul. – Nov. 2010: Gained 131,500 jobs
 11.6% unemployment (Dec. 2010)
 14,346 housing starts from Aug. – Dec. ’10,
compared to 20,934 starts Aug. – Dec. ’08
 Home prices are down 35.6% from their Q4
2006 peak – comparable with early 2004 prices
20
The I-4 Corridor (Tampa to Orlando)
 Dec. 2007 to Jul. 2010: Lost 283,200 jobs
 Equivalent to losing all of Seminole County,
1.6x Pasco County, or 1.3x Polk County
 Jul. – Nov. 2010: Gained 49,100 jobs
 Unemployment (Dec.): Tampa MSA 12.0%,
Orlando MSA 11.3%, Lakeland MSA 12.5%
 Pasco: Lost 7,969 jobs Dec. ’07 to Jul. ’10
 Jul. – Nov. 2010, Pasco: Lost 2,922 jobs
 Pasco (Dec.): 13.0% unemployment
21
The I-4 Corridor (Tampa to Orlando)
 Aug. – Dec. ’10 Housing Starts: 4,366
 30.4% of state total (14,346)
 Aug. – Dec. ’08 Housing Starts: 7,394
 35.3% of state total (20,934)
 Pasco Aug. – Dec. ’10 Starts: 636
 26.7% of Tampa MSA (2,207)
 Pasco Aug. – Dec. ’08 Starts: 1,068
 28.8% of Tampa MSA (4,004)
22
Florida Metro Economic Activity
2008-2010
FLORIDA INDICATORS
BY MSA
Housing Starts (Permits)
Florida
Tampa-St. Pete
Orlando
Jacksonville MSA
Miami-Ft. Laud-PB
Lakeland
Employment (000's)
Florida
Tampa-St. Pete
Orlando
Jacksonville MSA
Miami-Ft. Laud-PB
Lakeland
Unemployment (%)
Florida
Tampa-St. Pete
Orlando
Jacksonville MSA
Miami-Ft. Laud-PB
Lakeland
Aug.
Sep.
2010
Oct.
Nov.
Dec.
Aug.
Sep.
2009
Oct.
Nov.
Dec.
Aug.
Sep.
2008
Oct.
Nov.
Dec.
3,196
436
384
277
438
123
2,772
490
321
242
348
88
2,630
434
300
204
527
122
2,710
501
360
215
478
86
3,038
346
310
165
324
65
2,802
491
327
293
248
92
3,040
524
284
354
309
112
2,881
434
387
328
312
106
3,002
1,074
324
266
200
68
3,495
1,054
363
285
249
92
5,825
1,189
626
293
824
188
5,245
858
850
354
558
121
3,634
694
435
337
447
145
3,052
699
452
301
255
123
3,178
564
364
283
735
86
n.a 7,168.6 7,162.0 7,183.5
n.a 1,123.8 1,124.3 1,123.8
999.6
995.6
998.1
n.a
579.0
577.2
578.1
n.a
n.a 2,166.4 2,168.3 2,174.3
194.1
193.4
193.2
n.a
7,216.9
1,126.4
1,001.9
584.3
2,186.8
195.3
7,237.3
1,128.2
1,005.7
585.7
2,200.1
196.3
7,657.8
1,195.3
1,070.7
616.2
2,319.2
206.2
7,629.2
1,190.2
1,064.1
615.5
2,315.0
206.7
7,600.6
1,184.6
1,060.1
614.2
2,308.2
205.2
7,607.9
1,183.9
1,058.0
615.6
2,320.4
205.7
7,607.2
1,185.8
1,056.0
613.0
2,328.8
205.8
11.5
11.9
11.5
10.9
11.2
12.6
11.4
12.2
11.7
11.1
10.7
12.7
11.6
12.4
11.8
11.2
11.1
12.7
7.1
7.3
6.5
6.6
7.0
7.8
7.1
7.3
6.5
6.4
6.9
7.8
7.2
7.5
6.8
6.4
7.1
7.8
7.5
8.0
7.4
6.8
7.1
8.2
8.0
8.4
7.7
7.2
7.7
8.5
7,179.1 7,181.6 7,208.5 7,253.9
1,118.2 1,121.9 1,120.7 1,127.9
995.7 1,007.9 1,013.5
997.5
582.7
578.8
576.5
576.3
2,162.9 2,171.0 2,175.7 2,192.1
194.5
193.6
192.6
192.2
12.4
12.6
12.0
11.9
12.8
13.5
12.0
12.4
11.8
11.5
12.1
13.3
11.6
11.9
11.3
11.0
11.8
12.6
12.2
12.6
11.9
11.6
12.1
13.3
11.6
12.0
11.3
11.0
11.8
12.5
11.2
11.6
11.1
10.7
11.1
12.4
11.4
11.8
11.5
10.8
11.0
12.7
n.a.: Data not available as of 1/27/11
Sources: U.S. Dept. of Commerce, U.S. Dept. of Labor, Florida Agency for Workforce Innovation
23
Apr-75
Jan-76
Oct-76
Jul-77
Apr-78
Jan-79
Oct-79
Jul-80
Apr-81
Jan-82
Oct-82
Jul-83
Apr-84
Jan-85
Oct-85
Jul-86
Apr-87
Jan-88
Oct-88
Jul-89
Apr-90
Jan-91
Oct-91
Jul-92
Apr-93
Jan-94
Oct-94
Jul-95
Apr-96
Jan-97
Oct-97
Jul-98
Apr-99
Jan-00
Oct-00
Jul-01
Apr-02
Jan-03
Oct-03
Jul-04
Apr-05
Jan-06
Oct-06
Jul-07
Apr-08
Jan-09
Oct-09
Jul-10
Florida Home Price Index
(Q1 1980 = 100)
500
450
400
350
300
250
200
150
100
50
0
24
The Question of Florida Recovery
 When?
We may just be hitting bottom now
Some signs of stabilization/uptick
 How?
Yesterday’s model won’t work tomorrow (growth
fueled by low-cost housing and loose mortgages)
 Central Florida Especially Vulnerable
Less economically diverse than S. Florida
30% of the state’s job losses in I-4 corridor
I-4 is the only major artery linking the Tampa and
Orlando markets
25
The Good News for Florida
 Amendment 4 defeated
 Governor Scott seen as pro-growth
 2010-11 open-market operations ($600B) by
the Fed may stimulate lending & investment
 “Price Sanity” is returning to the Florida
marketplace
26
Florida’s Challenges
 The housing free-fall may not be finished
Mortgage underwriters fear 2011 foreclosures
may surpass 2010 levels
 Rail transit projects are not a complete lock
Elections may have changed the complexion of a
“fully funded” high-speed rail
 State and local budgets are stressed to the
breaking point
Infrastructure and education dollars are in short
supply
27
Florida Recovery
 North v. South
Southeast Florida’s more diversified economy will
recover before the rest of the state
SW and Central Florida, heavily dependent on
real estate and population growth, will continue to
sputter through late 2011
Unemployment around 10.5 percent by early 2012
 The “New” Normal
Slower growth in traditional economic sectors
Future prosperity reliant on further diversification
of the economic base
28