Economic Development

Florida Economist Bullish

He tells an Economic Development Corporation of Sarasota County luncheon that better times are coming.

By David Hackett May 5, 2017

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Economist Sean Snaith

In June, the United States will mark eight years of economic growth since the Great Recession, the third longest expansion since World War II. The Dow has more than doubled, standing near a record 2,100 points. The jobless rate has fallen to 4.4 percent, which many economists say is at or close to full employment.

But judging by the most significant data point -- economic growth -- this has been the weakest recovery on record, with the nation's Gross Domestic Product growing at just 2 percent, far below the historical average of 3.4 percent.

That is about to change, predicts economist Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. In a bullish forecast at the Sarasota County Economic Development Corporation's 2017 Economic Outlook luncheon Friday at Hyatt Regency Sarasota, Snaith said that the policies of President Donald Trump will provide a "jolt" that will knock the economy out of its "low-altitude orbit."

Snaith forecasts GDP will rise 2.7 percent this year and then accelerate to 3.3 percent growth next year and reach 3.7 percent in 2019. His outlook for Florida was even rosier, predicting strong job and population growth, rising home prices and significantly more construction.

The main jolt, Snaith says, will come from a "double-barrel stimulus" of tax cuts and a $1 trillion surge in spending for roads, bridges and other infrastructure. Both plans have been near the top of Trump's agenda, but still must get through Congress.

Other factors that will break the economy out of its low-growth orbit include trimming back many of the regulations imposed during the Obama administration such as the Dodd Frank Act, which Snaith says has smothered banks and other financial services organizations under 2,700 pages of regulations. He also expects Congress to simplify the nation's tax code. He says the average American now spends 31 hours preparing his or her taxes, time that saps the nation's overall productivity.

Cutting taxes and boosting spending has it drawbacks. Snaith urged members of the audience fearful about the national debt to "go buy a large bottle of Mylanta" because the federal government's lack of fiscal responsibility will be even harder to digest. Specifically, he predicts the deficit widening to $1 trillion annually and the debt reaching $25 trillion by the end of Trump's first term.

Another reason for concern, he says, is that Trump could spark a trade war, torpedoing the nation into recession. But Snaith says Trump's threats on trade appear to the kind of bluster New Yorkers can be known for, especially titans of commercial real estate. When Trump starts agitating, Snaith says he puts cheesecloth over his ears to filter him out. He predicts Trump's actions will not match his rhetoric.

On Florida, Snaith says that the surge in housing prices -- including a 12.5 percent increase in 2016 -- do not portend a bubble. One reason is that the easy financing that stoked the last housing collapse is absent today. Another reason is that inventory remains tight -- just 4.2 months, compared to the eight or nine months typical in a balanced marker. "It's still a seller's market," he says.

Also driving the state's economy is a return to population growth, with the state adding 1,000 people a day. The boom in the stock market has increased the wealth of baby boomers, who are again moving to Florida in waves. In addition, births are now exceeding deaths in the state.

"The megatrends all favor Florida," Snaith says, predicting strong job growth will continue, led by professional services, construction, healthcare and tourism.

Snaith kept the audience engaged by sprinkling his talk with witty asides that would have held up at Les McCurdy's Comedy Theatre. He riffed on his high hopes and bitter disappointments of products from SkyMall, the now bankrupt company whose catalogues were fixtures on airflights. Snaith lamented buying a portable clothes steamer that left his clothes wrinkled but soaked. He was fascinated by a weed-control device that used propane to scorch its target like a flamethrower.

"I'm told the attorney John Morgan has it and loves it," Snaith says. "But, then again, he has been a long time proponent of burning weed."

Snaith told the audience he was in such a good mood because he did not have to rush back to Orlando and was instead spending the weekend in Sarasota. "I'm smiling like a butcher's dog," he said. 

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