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Imminent recession? UCF economic forecast says not yet

But not all Florida economists agree.
A quarterly economic forecast by the University of Central Florida said that a number of factors used to evaluate the national economy point in a positive direction. But other economists have reservations about being too optimistic. Pictured are job seekers at a Tampa job fair in June. [OCTAVIO JONES   |   Times] [JONES  |  Tampa Bay Times]
A quarterly economic forecast by the University of Central Florida said that a number of factors used to evaluate the national economy point in a positive direction. But other economists have reservations about being too optimistic. Pictured are job seekers at a Tampa job fair in June. [OCTAVIO JONES | Times] [JONES | Tampa Bay Times]
Published Sep. 11, 2019

The looming recession gaining traction in headlines may not be as close as expected. A quarterly economic forecast by the University of Central Florida said that a number of factors used to evaluate the national economy point in a positive direction. But other economists have reservations about being too optimistic.

Many fears stem from a particular measure: long-term interest rates dipping below short-term interest rates. This can foreshadow an impending recession, University of Central Florida economist Sean Snaith said, but “it is not a perfect predictor."

“It really comes down to U.S. consumers and the position that they’re in right now,” Snaith said.

RELATED STORY: A recession can’t start with unemployment so low? Yes it can.

That position, the report said, is fairly strong. National unemployment was 3.7 percent in July and 3.3 percent in Florida that month; Snaith predicts it will drop to about 2.9 percent nationally by the end of next year. Wage growth is finally catching up after years of little movement, the report said, which means consumers on average also have more disposable incomes right now. Consumer spending is expected to increase by 2.6 percent this year and jump to 3.9 percent by 2022.

And consumers appear to be fairly confident about their job prospects. According to the U.S. Bureau of Labor Statistics, the number of workers who quit their jobs in July (1.8 million) was higher than in June. In December of last year, workers were quitting at the highest rate since 2001. Those are good signs, Snaith said.

“Workers don’t voluntarily leave their job unless they’ve got another one lined up or they’re pretty confident they can find one quickly,” he said.

Gross domestic product, Snaith’s report said, is expected to slow to 2.9 percent next year through 2022. That means a recession wouldn’t happen for at least two years by his measure.

Scott Brown, chief economist at Raymond James, is slightly less optimistic. He considers long-term interest rates compared to short-term interest rates, known as the “yield curve,” as “by far the best predictor of recession.” By that measure, there’s a 40 percent chance of a recession within the next 12 months.

“It’s a little too high (of a percentage) for comfort,” he said.

One of the indicators to watch will be businesses. If businesses pre-emptively lay off employees, consumers could become concerned about their ability to find or retain employment.

“If consumers are worried about losing their job, they’ll put off something like buying a car,” Brown said. Lower consumer spending, then, would contribute to slowing the economy.

“There’s a lot of uncertainty,” he said. “We don’t know what’s going to happen.”

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