An Economic Outlook

The State of the Economy in Florida

Orlando, FLAugust 12th, 2011

U.S. Economic Outlook 2nd Quarter 2009 Forecast

U.S. Forecast

Labor market, Stock Market and Recession?

Recovery Showing Some Cracks

Fiscal and Monetary Policy Stimulus

What now?

U.S. Forecast Tectonic Forces Impacting

Consumers:

Pent-up Demand, Rising Incomes

An upward force on consumer spending

Lost Wealth, Labor Market

Downward force on spending

U.S. Household Wealth(Trillions of $)

2005 2006 2007 2008 2009 Q1

2011 Q1

Total Assets 71.6 77.5 78.5 65.5 62.8 71.9

Financial Assets 43.3 47.9 50.6 41.2 39.6 48.8

Home Equity 13.2 12.8 10.3 6.9 6.1 6.1

Net Worth 59.5 64.0 64.2 51.3 48.7 58.1

U.S. Economic Outlook

2010Q4

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

GDP% Change, Annual Rate 2.3 0.4 1.3 1.2 1.5 2.4

Consumer Price Index% Change, Annual Rate 2.6 5.2 4.1 2.0 0.8 1.4

Consumer Sentiment 71.3 73.1 71.9 61.2 64.1 67.4

Consumption% Change, Annual Rate 3.6 2.1 0.1 1.3 1.3 2.3

141312111009080706050403020100999897

11.0

10.0

9.0

8.0

7.0

6.0

5.0

4.0

Automobile and Light Truck Sales(Millions Vehicles)

Auto SalesLight Truck Sales

U.S. Forecast

U.S. Forecast

Will the debt downgrade put an end to Sky Mall™ Policies in Washington?

Sky Mall™ Policy:

An Expensive Policy that Fails to Achieve its Stated Outcome

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. ForecastSky Mall™ Policies:

T.A.R.P.Foreclosure Prevention Act 2009ARRA of 2009

Shovel ready projects?Making work pay tax breaks

Health Care ReformHIRE Act 2010

Two Slippery Subjects Greece and Oil

Greece Contagion concerns (PIIGS) abated? Financial market fear returned Euro facing greatest threat since

inception

Is the U.S. “going Greek?”

Debt Downgrade Proof?

141312111009080706050403020100999897

500.0

0.0

-500.0

-1000.0

-1500.0

Federal Budget Surplus(Billions of Dollars)

Federal Budget Surplus

U.S. Forecast

141210080604020098969492908886848280

120%

100%

80%

60%

40%

20%

U.S. Debt to GDP RatioNot Quite Greece...yet.

Greek Debt to GDP Ratio: 115%

U.S. National Debt to GDP Ratio

U.S. Forecast

141210080604020098969492908886848280

5%

1%

-3%

-8%

-12%

-16%

U.S. Deficit to GDP RatioNot quite Greece

Greek Budget Defict to GDP Ratio: -15%

U.S. Deficit to GDP Ratio

U.S. Forecast

Capital Flows into the U.S.

• Foreign countries have purchased U.S. government bonds at record levels.

• Will this continue as the U.S. runs deficits that are measured in the trillions of dollars?

• Could we see a return to crowding out?

Foreign Ownership of US Treasury BondsBillions of Dollars

Dec. 1984

Jun. 2005

Jun. 2006

Jun. 2008

Jun. 2009

Jun.2010

Total outstanding

1515 3093 3321 3621 4591 6302

Foreign-owned

333 1599 1727 2211 2604 3343

Percent foreign-owned

22.0 51.7 52.0 61.1 56.7 53.0

Percent foreignofficial

56.0 67.5 70.2 76.2 78.9 78.3

U.S. Forecast

The Arithmetic of Higher(Lower) Oil Prices:

Each $1 increase in the price of a barrel of oil will:

Increase price of gallon of gas 2.5 cents Push consumer gasoline bills up $3 billion Raise the CPI 0.03% Lower real disposable income 0.25%

U.S. Forecast The Economics of Higher

(Lower) Oil Prices:

Each permanent $10 increase in the price of a barrel of oil will:

Lower forecast real GDP growth 0.2% in 1st year,

0.5% in the 2nd

Lower forecast of payroll employment 110,000 in 1st year and 390,000 in 2nd

Psychic Impact of $3 or $4 of $5 per gallon gasoline

141312111009080706050403020100999897

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

120

110

100

90

80

70

60

50

Oil and Consumer ConfidenceOil ($ Per Barrel) - Left Axis

Price of Oil WTI Consumer Sentiment

U.S. Forecast

141312111009080706050403020100999897

140.0

135.0

130.0

125.0

120.0

Total Nonfarm Payroll Employment(Millions)

Total Nonfarm Employment

U.S. Forecast

141312111009080706050403020100999897

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

Civilian Unemployment Rate(%)

Unemployment Rate

U.S. Forecast

Chang and Eng Bunker

Florida Economic Outlook

Florida’s Siamese Twins:

The Labor Market

The Housing Market

Florida’s Housing Market

Foreclosure Moratorium Delayed Recovery

Housing market still struggling to find the bottom for prices

Housing Market is a War

Policy has NOT been battlefield triage.

A look at the housing data:

January 1994–June 2011

Florida Forecast Florida’s economy like a jumbo jet

In 2010, we finished some repairs, loaded up and pushed back from the gate and slowly taxied to the runway.

Florida Forecast

Florida Forecast

14131211100908070605040302010099

8%

6%

4%

2%

0%

-2%

-4%

-6%

-8%

Florida Real Gross State Product(% change year ago)

Florida Forecast

14131211100908070605040302010099

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

Florida & U.S. Unemployment Rate(%)

FL Unemployment RateU.S. Unemployment Rate

Florida Forecast

14131211100908070605040302010099

8200.0

8000.0

7800.0

7600.0

7400.0

7200.0

7000.0

6800.0

6600.0

Florida Employment(Thousands)

Wage & Salary Employment

Florida Forecast

14131211100908070605040302010099

700.0

600.0

500.0

400.0

300.0

Florida Construction Employment(Thousands)

Florida Forecast

14131211100908070605040302010099

1300.0

1200.0

1100.0

1000.0

900.0

800.0

Florida Professional & Business Services Employment

(Thousands)

Florida Forecast

14131211100908070605040302010099

300.0

250.0

200.0

150.0

100.0

50.0

0.0

9%

8%

7%

6%

5%

4%

Florida Housing Starts(thousands)

Total Private Housing Starts30 year Mortgage Rates

Florida Forecast

14131211100908070605040302010099

1200.0

1150.0

1100.0

1050.0

1000.0

950.0

900.0

850.0

800.0

750.0

Florida Education & Health Services Employment

(Thousands)

Florida Forecast

14131211100908070605040302010099

1000.0

950.0

900.0

850.0

800.0

Florida State & Local Government Employment

(Thousands)

Florida Forecast

RegionPopulation Growth

Average % Chg Rank

Florida 1.4 ---Deltona 1.0 6

Gainesville 1.0 6Jacksonville 1.4 3

Lakeland 1.9 2Miami 1.3 4Naples 1.9 2Ocala 2.1 1

Orlando 1.9 2Palm Bay 1.2 5Pensacola 0.9 7

Tallahassee 1.3 4Tampa 1.4 3

2011-2014 Averages;Q2 2011 Forecast

RegionEmployment Growth

Average % Chg Rank

Florida 2.0 ---Deltona 1.8 6

Gainesville 1.2 8Jacksonville 2.2 3

Lakeland 1.9 5Miami 1.8 6Naples 2.6 1Ocala 2.0 4

Orlando 2.5 2Palm Bay 1.0 10Pensacola 1.5 7

Tallahassee 1.1 9Tampa 2.0 4

2011-2014 Averages;Q2 2011 Forecast

Sean M. SnaithSean M. Snaith, Ph.D.

Director Director

Institute for Economic CompetitivenessInstitute for Economic Competitiveness

(407) 823-1453(407) 823-1453

Sean@SeanSnaith.comSean@SeanSnaith.com

WWW.IEC.UCF.EDUWWW.IEC.UCF.EDU

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Thank you