Not as cloudy with a chance of meatballs: UCF Economist update on the pasta bowl recession
We're either in or on the brink of a pasta bowl recession in the United States, which means we would gradually enter into and gradually come out of a recession. That’s the sentiment of Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida, who recently released his latest quarterly Florida and Metro forecast.
Listen to the fuller conversation in the player above.
Sunshine State Economy
Florida won’t be able to escape a national recession, according to Sean Snaith.
"Like the national economy, it's going to be a particularly mild recession in Florida, when it does hit. So in some sectors, and for some people, it's not really going to be all that perceptible."
Snaith said Florida will see a few quarters of relatively low growth.
"Maybe slightly negative in terms of state GDP, some impact on the labor market with a lag. That should begin to show up, we think, as the year progresses,
He said the labor market is stronger in Florida compared to the rest of the country.
That labor market data shows that Florida's economy is holding pace, according to Snaith, but that data can be skewed because it's based on a survey.
"When it comes with the data about the broader economy, we're always looking in the sideview mirror," he said. "Because the little message there that 'objects in the mirror appear closer than they are?' Well, the objects, the data that we're seeing through this mirror is a bit distorted."
Inflation and Recession
Stagflation is a combination of stagnation and inflation.
In August 2022, Snaith said the economy was in a period of stagflation where the economy was slightly contracting and inflation was high.
Today, Snaith said were still dealing with the inflation part.
"We just saw some recent data, there had been a monthly decline in the consumer price index inflation in December that more than reversed itself in this latest January data."
The cost of living, food, and transportation remains high taking up the majority of many people's budgets.
"These things are still well above the headline, rate of inflation, which came in for January at 6.4%."
A recession doesn't sound like a good thing, but Snaith said there could be some silver linings to one.
A recession could help the Federal Reserve bring down inflation, according to Snaith.
He also said it could help with supply chain issues as the economy slows down.
"Slower demand that happens during a recession might allow that situation to rectify itself somewhat," he said. "A lot of the things that we've been dealing with prior, with the supply chain, with labor market shortages, with high oil and gasoline prices, with high overall inflation will be partially alleviated by a slowing economy."
What it means for you
The Federal Reserve plans to raise interest rates again this year, in an effort to reduce inflation.
Snaith said that could bring long-term interest rates down.
"Long term interest rates reflect expectations of what future short term interest rates will look like, what future economic growth may look like, but also what future inflation is expected to be," said Snaith.
He said we're already seeing rates ease a bit.
"For example, mortgage rates had gotten up to 7% range for the 30 year mortgage. That's back down a little bit since that peak. And if the Fed continues to make progress on bringing inflation down, that's going to bring down those longer term interest rates that mortgages are more closely tied to."
But, Snaith said his latest quarterly report shows that we're not in the clear.
During the recession due to the pandemic in 2020, many blue collar workers, like those in hospitality, lost their job.
"You can't zoom somebody an old fashioned, but those that were able to zoom, were largely economically not impacted by the recession," said Snaith.
However with this year's recession, he thinks it will be the opposite and cites layoffs at Big Tech companies as the proof.
"I think that this in terms of labor market impacts will be skewed more towards these white collar professions. Because what I'm seeing in the data is consumers are slowing their spending, but they're slowing their spending more on tangible things on goods, than they are services/experiences."