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Bay area recession promises to be longer, deeper

Ask key economists who focus on the Florida economy, "So just how long and bad will the recession be for the Tampa Bay area?" and the answers come back plain and simple.

Long and bad.

A pit bull of a recession reinforced by a credit crunch will prove nastier in the Tampa Bay area than it will be for the state of Florida or the United States.

"Tampa (Bay) will be worse than the U.S., longer and deeper," says University of Florida economist David Denslow. "Pretty much the same as Florida, perhaps slightly more severe."

The critical forecast?

Watch our metrowide unemployment rate eventually hit 8.8 percent, while Florida will peak at 8.4 percent — probably in early 2010. Currently 7.4 percent of Tampa Bay's work force is unemployed. Statewide, unemployment is 7 percent while the nation is in the high 6's.

Let's translate: About 101,000 Tampa Bay workers are unemployed. Close to 33,000 more will lose their jobs in the coming year — if the unemployment rate does indeed rise to 8.8 percent.

"We will remain in recession for the entire next year while the U.S. will start to emerge in the latter half," says University of Central Florida economist Sean Snaith in Orlando. "Florida was blessed with an incredible housing market when things were booming. It drove the economy and sent unemployment rates to their lowest levels. Now that blessing evolved into a curse."

The credit freeze, which crimps borrowing, compounds Florida's already severe housing blowback, Snaith says. It's a prime reason the recession will take longer to go away here.

On Friday via teleconference, Wachovia Bank economists discussed what's ahead next year and released their 2009 outlook, headlined When Will This Horror Show Come to an End?

Wachovia's Mark Vitner said home prices will start bottoming out between mid 2009 and mid 2010. That wide range depends on how aggressively the federal bailout is used to slow the pace of housing foreclosures.

Vitner and Raymond James economist Scott Brown stressed that discretionary spending — buying stuff we want rather than need — will shrink. More households faced with flat wages, falling home values and stock portfolios will be forced to spend more than 50 percent of their income on basics such as food, housing, energy and health.

Looking at Florida, there will be a lot of pressure on restaurants and tourism, Brown said. "Smaller firms generally have reduced access to credit and lack the resources to weather a long downturn. Disney, for example, can shutter a number of hotels and still operate. If you're a small hotel or restaurant owner, you don't have many options."

Even economists, while fascinated by the extreme financial and psychological forces at work lately, tire of the drumbeat of weaker and weaker data.

"This has been a tough time to be an economist," Brown acknowledged. "I feel like I'm in a bad dream that never ends."

So intense is the pace of economic change — from violent stock market swings to the constant federal flip-flops on bailouts worth hundreds of billions — that UCF's Snaith says his predictions now come with a caveat.

"My forecasts have a short shelf life," he quips. "Be sure to check the 'Sell By' date."

Robert Trigaux can be reached at trigaux@sptimes.com.

Bay area recession promises to be longer, deeper 12/13/08 [Last modified: Thursday, December 18, 2008 12:04pm]

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