Fla. Economist: Lackluster Leadership Shackles U.S. Recovery

Fla. Economist: Lackluster Leadership Shackles U.S. Recovery

Bound by the restraints of political uncertainty and submissive to the European debt crisis, the United States’ economic recovery is wavering again, says Sean Snaith.

Indeed much of this pain is self-inflicted, says Snaith, whose latest U.S. quarterly forecast includes a tongue-and-cheek “econorotic” description of the recovery á la racy novel “Fifty Shades of Grey.”

“One of the key reasons the economy is wavering yet again has been the masochistic policies that have been implemented over the past several years,” explains Snaith, the director of the University of Central Florida’s Institute for Economic Competitiveness. “These policies have created a cloud of uncertainty that has restrained economic growth and shackled the private sector.”

Among the uncertainty are employers’ costs under the new health care reform act, new burdens on small business lending linked to failed financial regulatory legislation and up-in-the air payroll tax cuts and mandated spending cuts. None of these will be resolved before November’s presidential election because of feared political backlash, Snaith explains.

“This election is about a fork in the road and the path we’re going to take moving forward,” he added. “Businesses don’t know which direction we’re going, and they’re going to hold tight on hiring or expanding until they do.”

Add to this the “Greek tragedy” in Europe and possible collapse of the euro zone, and the U.S. economic recovery won’t be moving anywhere quickly, Snaith concludes.

Snaith’s entire forecast is available for download at http://iec.ucf.edu/file.axd?file=2012%2f7%2fus-forecast-jul-2012-s.pdf.

Other highlights from his report include:

– Inflation is expected to remain subdued through the end of 2015. This fact, and the deceleration of the recovery, will leave the door open for further intervention by the Federal Reserve. QEIII is looking more and more likely.

– The housing market will steadily improve through 2015. Housing starts will nearly double from 758,953 in 2012 to 1,517,898 in 2015.

– Payroll employment growth remains sluggish, and it will not reach pre-recession levels until the fourth quarter of 2014. Uncertainty is holding the labor market captive, weighing on the private sector where firms are still hesitant to hire new workers.

– Unemployment rates have dropped due in a large part to a shrinking labor force participation rate. Eventually, discouraged workers will return to the labor force, and this will put a floor beneath the unemployment rate. Thus, unemployment rates are expected to stay above 8 percent until 2014. Underemployment remains a serious problem, currently standing at 14.8 percent.

Snaith is a national expert in economics, forecasting,market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.

Snaith also is a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of leading economists, the Associated Press Economy Survey, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, the Livingston Survey, Bloomberg U.S. Economic Indicator Survey, Reuters U.S. Economy Survey and USA Today Economic Survey Panel.

The UCF Institute for Economic Competitiveness’ mission is to expand public understanding of the economy by convening business leaders, scholars, policy makers, civic groups and media to discuss critical issues.