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Economists say recession threat looms for next president, whether it's Trump, Clinton or someone else

The last national recession smacked Florida so hard in so many ways, it's hard to believe that wrenching downturn officially ended way back in June 2009.

Seven years ago, almost. That's a long time between economic downswings. So long, in fact, that business chatter is rising fast over how soon the next recession will arrive, and how bad it might be.

A Wall Street Journal survey, unveiled Thursday, finds most economists think the country has a 20 percent chance of falling into recession in the next year. While 1-in-5 odds are far from a sure thing, the Journal says they are twice the odds quoted last September.

Here's a harder-edged forecast.

By 2017, this will be the third-longest (and one of the weakest) recovery without a recession since the Great Depression. At some point, it will run out of steam.

Private-equity billionaire David Rubenstein, who co-founded Carlyle Group, told Bloomberg TV this month that the next president will face a downturn in his or her first term.

"At some point in the next year or two or three, you can expect a recession," Rubenstein said. "We tend to have recessions every seven years, more or less, in the U.S. since World War II. It's inevitable at some point."

Donald Trump? Hillary Clinton? A Hail Mary candidate? It does not matter to Rubenstein who gets elected. As in the past, no president has much sway against economic cycles.

(That's one reason it's so laughable to hear Florida Gov. Rick Scott or White House officials claim personal credit for the dramatic national and state reductions in unemployment. They may have nudged the jobless rate a bit lower here and there but most of the increase in hiring was going to happen whether they were in office or not.)

There is a silver lining for Florida, however, should a recession strike, as so many economists and business leaders fear. A new Moody's Investors Service analysis suggests that of the four most populated states — California, Texas, Florida and New York — Florida is second only to Texas in its economic resources to weather a recession in the next two years. (See sidebar, inside back page.)

That's a far cry from 2006 when Florida's fast-bloating housing bubble burst, cutting home values nearly in half and destroying billions of dollars in home equity savings of millions of Floridians. Two years later, the financial collapse and stock market plunge turned bad economic times into a historical debacle.

That's not likely to be repeated in the next recession, but then the global economy is getting a lot harder to anticipate.

But whatever comes won't be pain-free, no matter what Moody's says about Florida.

"Odds are significantly better than 50-50 that we will have a recession within the next three years," former Treasury Secretary Lawrence Summers told Bloomberg.

"We're seven years into this expansion, so at some point we're going to have a downturn," Wells Fargo senior economist Mark Vitner told a California audience this week. "My general sense is the tide is beginning to go out. It doesn't mean a recession is right around the corner."

But it may be a block or two away.

Contact Robert Trigaux at rtrigaux@tampabay.com. Follow @venturetampabay and 'Like' the Robert Trigaux page on Facebook.

Which of Big 4 states can best defy next recession?

In a fiscal stress-testing of the four most populous U.S. states, which one could best weather a potential recession in the next two years?

One answer comes from a recent Moody's Investors Service analysis that finds "Texas is better prepared than Florida, New York and California." The stress test examined each state's revenue volatility, ability of reserves to cover a potential first-year revenue shortfall, and greater revenue and spending flexibility. Then Moody's assigned a rating to each of the four states.

Texas tops the list with an "Aaa" stable rating, followed by Florida at "Aa1" (stable). New York was third but close behind at "Aa1" (stable). And California trailed at "Aa3" (stable) due to its revenue volatility, weak financial flexibility and lower reserve levels, says Moody's.

"The measures we assessed provide an indication of recession readiness of the most populous states during the next two years," Moody's senior credit officer Emily Raimes said.

Texas' reserve levels provide ample coverage for a major single year revenue decline, Moody's finds. Florida also has adequate reserves to cover a deficit. Both California and New York fall short.

"Historically, California has shown vulnerability as the center of the highly volatile tech industry and is reliant on personal income taxes, while Florida was the epicenter of the most recent housing slump," Raimes stated. Texas and New York have seen lesser declines amid lower oil prices and Wall Street downturns.

— Robert Trigaux, Times staff writer

Consumers get more picky in hunt for value

So far, the 2016 economy could use a vitamin B shot. The U.S. economy grew at its weakest quarterly pace — 0.5 percent on an annualized basis — in two years between the months of January and March, according to government data. Both consumers and businesses are more cautious with their spending.

We are seeing slowing growth broadly in the Tampa Bay area with major businesses here reporting it's tougher to convince consumers to take out their wallet or purse.

• At Tampa's Bloomin' Brands, parent of several major restaurant chains, the company recently reported lower U.S. sales in the first quarter at Outback Steakhouse, Carrabba's Italian Grill and Bonefish Grill, down 1.3, 2.0 and 2.7 percent, respectively.

• At St. Petersburg's HSN, first-quarter revenues fell 3 percent while net income dropped by 15 percent.

• Even Orlando theme park behemoths SeaWorld and Disney reported lower attendance so far in 2016.

Among the nation's major retailers, the digital revolution is wreaking havoc and causing plenty of ripples. Macy's kicked off retail earnings for the quarter with a sharply lower 7.4 percent decline in revenue, the latest blow to the department store chain and a signal of broad retail woes ahead.

How bad is it? On Thursday, retail analyst Jan Kniffen told CNBC that he thinks Macy's needs only about 500 of its nearly 800 stores and that as the company cuts back he expects a third of America's shopping malls to go under.

Wait a minute. This country is in a recovery, right? Florida's unemployment rate hovers around 5 percent. Why the draconian outlook for retail stores and malls?

"We're, frankly, scratching our heads. We see the same economic data you all see," Karen Hoguet, Macy's chief financial officer, said on a conference call to analysts.

Macy's has plenty of company. Shares of Nordstrom were rocked Thursday by sharply lower sales figures. And Kohl's reported lower sales and a crushing 87 percent drop in earnings for the first quarter. J.C. Penney, Dillard's and Sears? All down. You get the idea.

Real estate consultant Green Street Advisors argues department stores need to close 800 locations to regain the productivity they had a decade ago. Of those 800, 300 belong to Sears.

Critics say department stores and malls have simply become boring, pushing the same stuff at inflated prices and with little imagination. Wall Streeters say consumers are shunning chains because they lack a sense of value.

You might say a recession has already hit department stores.

Yet consumers are still spending. Elsewhere.

Amazon, of course, is chiefly to blame as it rapidly seems to be taking over major chunks of he economy — while offering same-day delivery (for a price) to more and more metro areas, including Tampa Bay. Wall Street firm Cowen and Company predicts Amazon will surpass Macy's as the top clothing store next year.

— Robert Trigaux, Times staff writer

Economists say recession threat looms for next president, whether it's Trump, Clinton or someone else 05/13/16 [Last modified: Friday, May 13, 2016 6:12pm]
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