Tuesday, January 16, 2018
Business

A quartet of economists optimistic about Tampa Bay area's future

Snowbirds aren't the only ones flocking to Tampa Bay this time of year.

Every January, the bay area becomes a mecca for top bank economists. 'Tis the season to share annual forecasts in luncheons and meetings galore with current and prospective clients, area chambers of commerce and other business groups.

The Tampa Bay Times caught up with four visiting economists to get their take on where Tampa Bay and the broader national economy are headed.

By and large, they're an optimistic bunch. Some common themes emerged: The bay area's economic fortune hinges strongly on what happens in Washington; housing's comeback appears to be real; and the return of temporarily sidelined, discouraged job seekers into the labor pool won't be enough to push unemployment back up.

Richard Moody, chief economist, Regions Financial

Moody predicts the economy will grow a rather mild 2 percent this year.

His optimism is muted because the recent payroll tax hike is chewing up $125 billion in consumer spending power and other taxes are taking a short-term toll. As the year progresses, both consumer spending and job creation should pick up. "By the end of the year we'll be closer to 3 percent" growth, he said.

As the nation goes, he says, so goes Tampa Bay. In fact, the region may fare even better given its rapid drop in unemployment and the improved diversity of its economy beyond construction and tourism.

The housing recovery kicked into a higher gear in the last months of 2012, Moody said, with housing starts nationally up 27 percent for the year. He forecasts housing starts doubling within two years.

The pace of the housing comeback in Florida is still a wild card. "The big question is at what rate are (foreclosed properties) going to come back onto the market," he said. "I think we'll see those come back on the market more of a trickle than a flood. . . . That's a good thing."

Among other observations:

• His biggest immediate concern is the mandated budget cuts that will be automatically imposed if Congress and President Barack Obama don't resolve the next phase of the fiscal cliff debate.

• The European fiscal crisis may have moved off the news cycle and is no longer shaking up the stock market, but that doesn't mean it's over. Debt problems could continue to drag down economies throughout Europe.

• A large number of discouraged job seekers may re-enter the labor market at some point, but Moody doesn't see that having a significant impact. Long-term unemployment remains a stubborn problem, but he's encouraged to see that workers who were recently laid off are finding new jobs more quickly.

Bill Adams, senior international economist, PNC Financial Services

Adams, who focuses more on macro than micro economics, has become a global optimist for 2013.

He sees economies in North America growing moderately next year, the Euro crisis more contained and emerging markets in Brazil, China and India all seeing a growth uptick compared with 2012.

"It's a slow-growing economy, but it's a much less scary place than last year … when we were seen on the verge of a global recession."

Adams' forecast calls for 2.1 percent growth in the U.S. this year, with unemployment stagnating for the first half of the year before gradually falling to about 7.5 percent by year-end.

"It's true you have a huge number of discouraged workers," he said, but the pace of 150,000 jobs added every month should be able to counter that drag. "There should be more confidence that the recovery has legs."

The housing market, both nationally and in Florida, is on much stronger footing. The drop in home prices from their 2006 peak has positioned Florida once more as an affordable housing market. That bodes well for the state in attracting retirees and families, driving home prices up once more.

The biggest downside risk, he says, is if Congress doesn't resolve the debt ceiling issue and other looming budget crises in a timely fashion. He's encouraged that neither political party wants to be responsible for failing to raise the debt ceiling, but isn't expecting that spending cuts imposed this year will be the last.

"Our fiscal challenges weren't built up in a single year, and we're probably not going to be able to resolve them in a single year either."

Anthony Chan, chief economist for private wealth management, JPMorganChase

Part of the slow-growth camp, Chan thinks the United States will be fortunate to see the economy grow 1.8 percent to 2 percent this year. "No question the payroll tax (increase) will hurt economic growth in the first half," he says.

With fundamentals still solid, he sees the stock markets ending the year up 8 to 10 percent — and we're almost halfway there already with January's surge.

Housing prices throughout Florida are also heading up, particularly in the south, and Chan doesn't see the foreclosure overhang stopping it. "Look at the way prices are jumping in Miami. They're almost jumping Gangnam style."

He downplayed historically low labor force participation rates, saying it's driven largely by retiring baby boomers and the younger generation staying in school longer.

Depressed wages remain a concern for the rank and file, but even there Chan sees a silver lining as long as job growth itself continues.

"To the extent more jobs are being created, you have more bodies able to buy things and that should offset some of the wage issue" to help grow the economy, he said. "There are more ways to skin a cat here."

Among his top concerns are whether a still-fragile Europe slips back.

"I'm also worried that somehow Washington goes off the rails, but everything I've seen so far is encouraging," he said. "They are delaying the debt limit issue, and Democrats and Republicans are working together. . . . Maybe it's time we start at least being relieved that our politicians are working together."

Jeff Korzenik, chief investment strategist, Fifth Third Bank

The cut in payroll taxes and higher tax earners will dampen economic activity in the first half of the year, but it won't push us back toward recession.

"We see this as a year of accelerated growth," Korzenik said. "We are still facing the same challenges, but for the first time in several years we have new opportunities for growth."

Those opportunities are widespread — from the housing market's comeback to an improved international climate.

Foreclosures aside, housing prices will continue their upward trajectory, he predicts, in part because a new wave of home buyers is on the horizon.

"One thing particularly troubling during the recession is the way household formation rates came down," he said.

"They are now rebounding, which is very good news. We have the children of the baby boomers — the echo boom — coming to the age where junior is finally moving out of Mom's basement. They're forming their own households."

Korzenik also remains bullish that the jobs recovery will continue.

Rather than a surge of discouraged workers re-entering the market, he said, what's more likely is more dual-income households turning into single-income households. Couples with kids will increasingly opt for one parent to stay home because of stagnant wages, he reasons. "If your wages are significantly reduced, the trade-off between (paying) child care costs and free time gets to be a tougher calculation," he said. "Some of the drop in labor force participation will probably stay permanent."

His biggest concern: Who's going to buy U.S. treasuries when the Federal Reserve inevitably pulls back?

Jeff Harrington can be reached at [email protected] or (727) 893-8242.

   
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