U.S. policymakers should take their cues from the classic rock band Foghat as the economic recovery unfolds, says University of Central Florida economist Sean Snaith.
Echoing the lyrics of the band’s popular 1975 refrain, “Slow ride, take it easy,” Snaith says “these five words tell us everything we need to know about this economic recovery and what policymakers’ response should be going forward.”
In his latest national forecast released this morning, Snaith predicts that housing values will fall through the rest of the year and that payrolls will not reach pre-recession levels until the fourth quarter of 2013.
“We have a lot of economic damage that’s going to take a long time to repair,” says Snaith, the director of UCF’s Institute for Economic Competitiveness. “But continuing to throw more piecemeal stimulus money at the problem isn’t the answer.”
In the wake of today’s released GDP figures that show economic growth at 1.7 percent, Snaith adds that even the Federal Reserve is torn as to “what the appropriate response to such tepid economic growth should be.”
Snaith also forecasts weak consumer confidence and spending through the upcoming holiday season. Although consumers’ spending has increased since the recession officially ended in 2009, the rate at which people are buying continues to be slow, he said.
In spite of all the bad economic news, Snaith still believes the country will avoid a double-dip recession — especially if policymakers dust off their vinyl records and listen to Foghat.
“The recovery is unfortunately going to remain a ‘slow ride,’ and policymakers would be well advised to ‘take it easy,'” Snaith said.
Snaith’s full U.S. forecast is available on his website at http://www.iec.ucf.edu.
Highlights of his report include:
— The level of real GDP in the economy during 2010 will be about 2.6 percent higher than in 2009, and real GDP growth will slow to 2 percent in 2011 as consumers keep struggling with ravaged balance sheets and the “little labor market that couldn’t.”
— Unemployment, a lagging indicator of the business cycle, will remain at least 9 percent through the rest of the year before falling gradually to 8.2 percent by the end of 2013.
— The U.S. dollar is expected to oscillate vis-à-vis major trading partners, ending 2013 at about the same level that it started in 2010. The financial crisis in the European Union appears to have been stemmed, and the Euro has been rescued from oblivion.
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 is also a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of 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, Bloomberg U.S. Economic Indicator 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.