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Economist: State's Road Rocky

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By MICHAEL SASSO

The Tampa Tribune

Published: June 26, 2008

TAMPA - It isn't easy being an economist nowadays. Everyone wants a rosy report on the economy, but all Bob Allsbrook can offer - at least for now - is more pain for Florida housing and its economy.

In true kill-the-messenger fashion, people who hear the Regions Bank chief economist speak sometimes claim he is helping to drag down the economy by giving his honest impressions. He counters that without accurate information people can't take the appropriate actions.

Based in Regions' headquarters in Birmingham, Ala., Allsbrook was in the Bay area this week to speak to the Greater Tampa Chamber of Commerce and two private audiences. The Tampa Tribune spoke with him Tuesday in downtown Tampa about his views of the state and national economy.

On a positive note, he thinks that some economists who are predicting the next Great Depression are off base. Conditions aren't right for a depression, and the Federal Reserve has learned much since the 1930s. However, he thinks the U.S. economy is in a recession and won't return to average growth of 3 percent until 2010. Florida, meanwhile, can expect a significant drop in tourism until that time, he said.

Here are excerpts from the discussion:

Q. Are we in a recession, and does it really matter if we're technically in a recession?

A. That's a big debate, and I think people are wasting their time on it. Whatever we call it, it's a lousy economy. What I say we're in is a period of 'stagflation,' stagnant unacceptable growth combined with above-average inflation. I think that's been in place since last fall and will continue well into next spring.

I do think we're in an official recession which started in February. There are 10 criteria that the National Bureau of Economic Research uses to determine a recession, and only four of them are fixed. All four look just like they did in the previous recession: consumer spending is one, personal income is another, industrial production and employment.

The irony of all this is, if we use the alternative definition of two back-to-back gross domestic product declines, then the 2001 official recession was not a recession. We did not have two consecutive declines in GDP.

Q. Some people are claiming that we may fall into a depression. Are signs at all lining up for a really deep recession or depression?

A. You know the analogy of the broken clock? It's right twice a day. If you keep saying it day after day after day, twice a day, you're going to be right. I think that analogy fits.

There are economists that have made a living for 40 years by saying, 'Panic, buy gold, the world's coming to an end.'

I'm very much a student of economic history, and Federal Reserve Chairman Bernanke is the best in the country. He is the world's best student of the financial problems of the last depression. Thank goodness he's on the job, because he's taken very wise, educated steps to prevent that from happening. I don't like the word depression even being mentioned because it just doesn't fit the conditions that are out there today.

What happened to cause the Great Depression is we had a 30 to 50 percent rise in tariffs. We're not doing that now. We have unemployment insurance now, we didn't then. We had the Federal Reserve then tightening the money supply. That's certainly not what's happening now.

Never before in history have we acted this rapidly with both massive Federal Reserve stimulus and budget stimulus tax rebates at the same time. That's powerful. And people say, 'Where is it, where is it?' Well the budget stimulus just hit in May and showed up in retail sales and strength at Wal-Mart sales, which nobody expected. And we're likely to have another stimulus package by the end of the year, by the time the election is over. I think they'll finally do something for business.

Q. Is demand for Florida real estate starting to catch up with supply?

A. There are real estate markets within Florida that are very different. The Miami market is very different from Northwest Florida or Jacksonville or Orlando or Tampa. You put them together and get an average, but when is an average ever representative of the whole?

But what I'm hearing on the ground all the time is that we still have another round of price cuts to go to clear the inventory. The housing inventory is massive out there, identifiable, and a lot of inventory that's not counted as for sale but has been held out of the market and put up for rent.

Q. If $4-a-gallon gas sticks around or gets worse, how might that affect Florida?

A. National consumer behavior shows up in Florida tourism. What I've been saying all this time since last August with the credit squeeze, is, 'Look out for discretionary spending.'

What that means is consumers are going to have to spend more on things they must spend on, rather than what they want to. One of the first things that goes is the big extended vacation in Florida.

I've been criticized by a number of folks in Florida, some reporters and some tourist people, who say, 'What are you talking about, it's not in the numbers, it's not in the numbers?' Yeah, but most of the bookings in Florida by people out of state are made three and six months ahead. Just wait, it's coming. And I don't say that with any joy. But I believe strongly that we are going to see further weakness in domestic tourist spending in Florida. Florida's disproportionately dependent on consumer spending.

Reporter Michael Sasso can be reached at msasso@tampatrib.com. or (813) 259-7865.

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