University of Central Florida economist Sean Snaith said Greece’s financial crisis won’t bring down U.S. markets, but it’s a stark reminder of how fiscal and government policies can cripple a nation.
Snaith made these observations against the backdrop of his latest national forecast, which outlines how Europe’s debt crisis and the flailing Euro – along with the BP oil spill and still-weak labor markets – have riddled the U.S. economy’s recovery with uncertainties.
“While the U.S.’s fiscal straits may not be as dire as Greece’s, the crisis in the EU is a cautionary tale that unchecked government deficits and high national debt can lead to serious and painful consequences,” Snaith, the director of UCF’s Institute for Economic Competitiveness, said in a statement.
Avoiding Greece’s failings means backing off notions of a “nanny state” that can extend benefits for all without raising the money to pay for them, he adds.
Snaith, like many other economists, also predicted a slight increase in last Thursday’s (May 27th) revised reading on first quarter U.S. Gross Domestic Product (GDP). He believes that real GDP will decrease as the year goes on.
However, the U.S. Department of Commerce announced that real gross domestic product increased at an annual rate of 3.0 percent in the first quarter, lower than the advance estimate of 3.2 percent. The deceleration in real GDP reflected a slowing in private inventory investment and in exports, a downturn in residential fixed investment, a larger decrease in state and local government spending, and a deceleration in nonresidential fixed investment. imports.
Other highlights of Snaith’s report include:
- The expansion of the economy during 2010 will be about 2.8 percent as consumers are still struggling with the balance sheet fallout and labor market scar left over from this ‘great recession.’
- The road to asset bubbles and inflation is paved with good intentions: The Federal Reserve should not use the Greek crisis and labor market weakness as excuses for delaying interest rate hikes.
- Continuing foreclosures fed by persistent unemployment continue to add to housing inventory, feeding a surplus that continues to put downward pressure on prices, which are expected to fall throughout 2010.
- Unemployment, a lagging indicator of the business cycle, will remain near 10 percent throughout 2010 before gradually falling to 7.8 percent by the end of 2013.
- The U.S. economy had shed in excess of 8.3 million payroll jobs through the end of 2009. Payrolls will not reach their pre?recession levels, and those jobs will not be recovered, until mid?2013.
Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. He is also a member of several national forecasting panels, including The Wall Street Journal economic forecasting survey, the Associated Press economic survey, Western Blue Chip Economic Forecast panel, 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.
