The 2011 Economy: What Exactly Does a Recovery Look Like?

1. The 2011 Economy:What Exactly Does a Recovery Look Like? R. Christopher Jones, Ph.D.

2. 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

3. 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

4. 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

5. 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

6. 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

7. Who Rules the Global Roost?2010 GDP Comparisons

8. Long-Term GDP Growth 1890-2006

9. U.S. Real GDP 1947-2010

10. U.S. Real GDP Annualized % Growth 1947-2010

11. U.S. Unemployment Rate 1948-2010

12. U.S. Housing Starts (SAAR) 1959-2010

13. Real Retail & Food Svcs. Sales 1992-2010

14. Inflation (CPI-U) 1992-2010

15. Real Per Capita Disposable Personal Income 1959-2010

16. Credit Market Debt Per Capita 1959-2010 (infl. adj.)

17. Consumer Sentiment 1978-2010

18. Federal Debt 1971-2010

19. 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

20. 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

21. 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

22. 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)

23. Florida Metro Economic Activity 2008-2010

24. Florida Home Price Index (Q1 1980 = 100)

25. 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

26. 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

27. 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

28. 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