Economist speaks to JCCI about recession recovery in Northeast Florida

Below is an excerpt from Karen Brune Mathis' interveiw with Dr. Sean Snaith, Director of the Institute for Economic Competitiveness within the College of Business Administration at the University of Central Florida. Dr. Snaith spoke at JCCI's Annual Meeting on 9-29-2010. Check out the full story at the Financial News and Daily Record online http://www.jaxdailyrecord.com/showstory.php?Story_id=531975

What is your message to JCCI as it embarks on a new study about the recovery and how Jacksonville should position itself? We are in a recovery following a deep and prolonged recession, so we need to temper our expectations. The damage that was done, particularly to consumers’ wealth via the housing market and the stock market, has unfortunately put consumers in a bit of a retrenchment mode to save and try to build those nest eggs back up. When consumers are saving more, they are spending less. Consumer spending is 70 percent of our national economy, so we will have that chunk of the economy growing, but not at a robust pace.

Will Jacksonville’s economy recover more quickly, slowly or at the same pace as Florida recovers? Jacksonville did not suffer to the same extent in the housing cycle. It was not as pronounced as other parts of the state…the damage is less severe than in other parts of the state. I think it will recover at the pace of the Florida recovery, if not a little faster. I think the lower cost of living in Jacksonville relative to some areas will be beneficial. Going forward, in terms of attracting retirees, that element of Florida’s economy and the influx of retirees have really been damaged by the housing market and what happened in the stock market. It will change many retirees’ plans in terms of timing and what type of retirement they will be able to afford.

Speaking of Florida, is it out of the recession? Will it recover more slowly, quickly or at the same rate as the nation? In Florida, there is no official group to declare this. My contention is that Florida came out of the recession in the first quarter this year. That being said, I’ve referred to the labor market for some time as the scar that’s left over from the financial and economic trauma. That scar is a pretty ugly one and it is not going to fade quickly. We are going to be dealing with the aftermath with respect to the labor market for many years. We think unemployment will be in double digits until the second half of 2012 and payrolls will not recover to their pre-recession levels until 2014. We are looking at a very pronounced and prolonged cycle and a long period of recovery, unfortunately. Job growth has not resumed very strongly in the private sector. We are likely to see the unemployment rate drift up a few tenths of a percent before its long and gradual decline.

Is there or will there be a double dip recession? Last year our second quarter forecast said the recession is over but the recovery is shaped like a gravy boat where you see the handle, you plunge deep down and the recovery would be the gradual tapered spout, slow and protracted. There was a pseudo-V at the end of last year and the first three months of this year. It was directed by inventory cycles and over the course of the recession, businesses were slashing, inventories. No one was buying. They stopped slashing and (that) gave us a big boost of 5 percent of Gross Domestic Product growth in the fourth quarter and 3.7 percent growth (in the first). Inventory cycles are transitory and they are not the stuff that sustains strong recoveries and that is what we are seeing, (the results of) that inventory boost rather than the emergence of a double dip. It is the recovery displaying its true nature. With the housing and stock market, the damage is not going to be undone overnight. The extent of the damage is severe. When you go through that kind of trauma, the recovery is not rapid. It is slow, it is protracted and there’s therapy involved.

What specifically should Jacksonville and Northeast Florida do, or anticipate, as it positions itself for creating jobs in the future? What are the strengths? I think the transportation and warehousing sectors are one of the region’s real strengths. As the Panama Canal widening becomes complete and we get those ships coming through, there is real opportunity for Jacksonville, and Florida in general, to take a large step forward in terms of growing international trade. That means we need to invest in our ports, in our rails, in our highways. That kind of government spending provides returns over time.