An Economic Forecast

Tampa, FLSeptember 1st, 2015

The Rules of the Game Matter

They change the way the players play the game.

They can change the outcome of the game itself.

Freeze tag

The Rules of the Game Matter

• Federal Regulation and Aggregate Economic Growth

by John W. Dawson and John J. Seater

• Journal of Economic Growth (2013) 18:137-177

Examined Economic Growth and Productivity 1949-2005

The Rules of the Game Matter

• Results:

• Regulations have reduced real GDP growth an average of 2% per year.

• Real GDP in 2005 would have been $53.9 trillion instead of the $15.1 trillion

The Rules of the Game Matter

• Results:

• Productivity is impacted by regulatory growth

• The conundrum of declining productivity in the 1970’s attributable to a doubling in the number of pages of regulation.

The Rules of the Game Matter

• 2013 CFR 175,000

• Dodd-Frank law 2,300 pages

– 22,296 pages of rules so far– Another 13,000 on the way

• Affordable Care Act

The Rules of the Game Matter

• Dan Gallagher, Commissioner of the SEC:

• “And really, to me, Bob, the burden isn’t necessarily as much as the regulations that came from Dodd-Frank. Some of them are just completely nonsensical. I mean, nothing to do with the financial crisis, aren’t really germane to the function of the SEC and that’s what happens when you get a runaway piece of legislation.”

18171615141312111009080706050403020100

150.0

145.0

140.0

135.0

130.0

125.0

Total Nonfarm Payroll Employment(Millions)

Total Nonfarm Employment

U.S. Forecast Payroll jobs to reach potential

18171615141312111009080706050403020100

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

Civilian Unemployment Rate(%)

Unemployment Rate

2015Q1

2015Q2

2015Q3

2015 2016 2017 2018

GDP% Change, Annual

Rate0.6 2.9 1.9 2.2 2.6 2.7 2.5

Consumer Price Index% Change, Annual

Rate-0.9 -3.1 -0.7 -0.3 2.1 2.4 2.6

Consumer Sentiment 95.5 94.2 92.2 94.1 92.6 92.3 92.6

Consumption% Change, Annual

Rate2.5 2.9 2.4 3.0 3.0 2.7 2.6

U.S. Forecast

Global Factors - Oil

The Arithmetic of Lower Oil Prices:

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

Decrease price of gallon of gas 2.5 cents Push consumer gasoline bills down $3

billion Lower the CPI 0.03% Raise real disposable income 0.25%

Global Factors - Oil The Economics of lower Oil

Prices:

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

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

0.5% in the 2nd

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

Psychic Impact

Domestic production impacts?

Greece and the Euro

All the Greek bailouts, haircut & the election are stays of execution and not pardons

Euro still facing greatest threat since inception

Two (long-run) possible outcomes for the Euro zone

Global Factors - Eurozone

Is the Chinese economy a pagoda of cards?

Economy slowing

Stock market plunge

Desperate attempts to stop the decline

Depreciation of the Yuan

Global Factors - China

IMF revised down 2015 world growth outlook: 3.3%

2016: 3.8%

Brazil – worst recession in 25 years

Latin America/Caribbean sub 2% outlook

Canadian recession 1st half 2015

Stronger U.S. Dollar

Global Factors - ROW

U.S. Forecast

Will the Bankruptcy of Sky Mall Put an End to Sky Mall™ Policies?

Sky Mall™ Policy:

An Expensive Policy that Fails to Achieve its Desired Outcome

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. Forecast

Florida Housing Market

Housing market recovery continues

Double-digit price appreciation has returned

Investors chasing shrinking pool of distressed properties

Housing finance still an issue

Housing MarketHousing Finance

Mortgage availability slowly improving

Mortgages have been restricted byDodd FrankCapital StandardsUnderwriting StandardsLimited Private SecuritizationDemise of Mortgage Brokering

U.S. Forecast

Florida Housing Market

Florida Housing Market

June 2015 June 2014Percent change

Closed Sales 27,729 23,181 19.6%

Median Sale Price

$203,500 $185,000 10.0%

Median Days on Market

47 57 -17.5%

Inventory(Months Supply)

4.6 5.6 -17.4%

Florida Housing Market

Florida Forecast

181716151413121110090807060504030201

300.0

250.0

200.0

150.0

100.0

50.0

0.0

8%

7%

6%

5%

4%

3%

Florida Housing Starts(thousands)

Total Private Housing Starts30 year Mortgage Rates

Florida Forecast

181716151413121110090807060504030201

22000.0

21000.0

20000.0

19000.0

18000.0

17000.0

16000.0

Florida Population(Thousands)

Florida Forecast

181716151413121110090807060504030201

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

181716151413121110090807060504030201

10%

5%

0%

-5%

-10%

Florida Real Gross State Product(% change year ago)

Florida Forecast

181716151413121110090807060504030201

8600.0

8400.0

8200.0

8000.0

7800.0

7600.0

7400.0

7200.0

7000.0

Florida Employment(Thousands)

Wage & Salary Employment

Florida Forecast

181716151413121110090807060504030201

700.0

600.0

500.0

400.0

300.0

Florida Construction Employment(Thousands)

Florida Forecast

181716151413121110090807060504030201

1400.0

1300.0

1200.0

1100.0

1000.0

900.0

Florida Professional & Business Services Employment

(Thousands)

Florida Forecast

181716151413121110090807060504030201

1200.0

1100.0

1000.0

900.0

800.0

Florida Leisure & Hospitality Employment

(Thousands)

2015-2018 Averages;Q2 2015 Forecast

Florida

Sector% Average Annual

Growth

Construction 7.9

Professional & Business Services 4.1

Trade, Transportation & Utilities 3.4

Education-Health Services 2.2

Leisure & Hospitality 1.9

State & Local Government 0.9

Information 0.7

Financial 0.5Manufacturing 0.4Federal Government -0.7

RegionPopulation Growth

Average % Chg Rank

Florida 1.5 ---

Deltona 1.2 7

Gainesville 0.8 12

Jacksonville 1.5 5

Lakeland 1.2 9

Miami 1.2 6

Naples 2.6 1

Ocala 1.7 3

Orlando 2.3 2

Palm Bay 1.2 7

Pensacola 0.9 11

Tallahassee 1.1 10

Tampa 1.6 4

2015-2018 Averages;Q2 2015 Forecast

RegionEmployment Growth

Average % Chg Rank

Florida 2.2 ---

Deltona 2.0 6

Gainesville 1.4 12

Jacksonville 1.8 9

Lakeland 1.8 8

Miami 2.0 5

Naples 3.3 1

Ocala 2.5 3

Orlando 3.0 2

Palm Bay 2.3 4

Pensacola 1.4 11

Tallahassee 1.5 10

Tampa 2.0 7

2015-2018 Averages;Q2 2015 Forecast

2015-2018 Averages;Q2 2015 Forecast

Orlando

Sector% Average Annual

Growth

Construction 7.9

Professional & Business Services 4.7

Trade, Transportation & Utilities 3.4

Leisure & Hospitality 2.6

Education-Health Services 2.6

Financial 1.2

Manufacturing 1.0

Information 1.0State & Local Government 0.4Federal Government -0.4

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