1. U.S. & Florida Economic Update Orlando, FL March 14 th, 2013

2. U.S. Forecast

3.  A Pall of Uncertainty Hangs Over the Economy  Health Care Reform  Impact on labor market  Dodd-Frank Financial Regulatory Reform  Impact on credit flows  Fiscal Cliff  Tax cuts  Sequester  Euro

4. U.S. Forecast  A recent paper has created an index that quantifies economic policy uncertainty and analyzes its economic impact:  Measuring Economic Policy Uncertainty By Scott R. Baker Nicholas Bloom, and Steven J. Davis

5. U.S. Forecast  The index has three components: 1.Newspaper coverage of policy- related economic uncertainty. 2.Number of federal tax code provisions set to expire in future years 3.Disagreement among economic forecasters (Survey of Professional Forecasters)

6. U.S. Forecast  The economic impact of economic policy uncertainty The results of the statistical analysis in the paper show that higher policy uncertainty causes: 1.Lower private investment 2.Lower industrial production 3.Much lower employment

7. Economic Policy Uncertainty Index

8. U.S. Forecast  Sky Mall™ Policy:  An Expensive Policy that Fails to Achieve its Desired Outcome

9. U.S. Forecast  Sky Mall™ Policies:  American Reinvestment and Recovery Act of 2009  Aka Stimulus Act

10. Why Didn’t the Stimulus Act Work?

11.  The Nun  The Nobel Prize Winner  Non-starter Stimulus Why Didn’t the Stimulus Act Work?

12. U.S. Forecast  Depleted Housing Wealth  Still Weak Labor Market  A continuing ballast on consumer spending

13. U.S. Household Wealth (Trillions of $) 2005200620072008 2009 Q1* 2012 Q3 Total Assets 71.378.679.566.6 62.8 78.2 Financial Assets 42.949.051.442.2 39.6 53.6 Home Equity 13.212.810.37.0 6.1 7.7 Net Worth 59.165.1 52.4 48.7 64.8

14. U.S. Forecast

17. U.S. Economic Outlook 2012 Q3 2012 Q4 2013 Q1 2013 Q2 20132014 GDP % Change, Annual Rate 3.10.11.32.01.92.5 Consumer Price Index % Change, Annual Rate 2.10.20.41.31.51.8 Consumer Sentiment 75.079.477.881.180.183.1 Consumption % Change, Annual Rate 1.62.11.62.01.82.5

18.  Monetary Policy  Fed Funds rate unchanged until unemployment rate hits 6.5%  QE III  Open ended purchase of mortgage backed securities  Is inflation a worry? U.S. Forecast

19. Will Monetary Policy Lead to Inflation? Equation of Exchange: M*V = P*Y M = total amount of money in circulation V = the velocity of money, that is the average frequency with which a unit of money is spent. P is the price level Y is real GDP (P*Y = Nominal GDP)

20. Will Monetary Policy Lead to Inflation? Equation of Exchange: M*V = P*Y If Velocity (money demand) is constant and Y is at full potential Change in M = Change in P “Inflation is always and everywhere a monetary phenomenon”

21.  Money Supply Process  Federal Reserve Balance Sheet  Key Liabilities:  Money in Circulation  Bank Reserves The sum of the two = monetary base (aka high powered money) U.S. Forecast

22.  Money Supply Process  Money Supply = mm*MB Where: MB = Monetary Base mm = Money Multiplier U.S. Forecast

27. A Slippery Subject  Greece and the Euro  Greek bailouts, haircut & the election stays of execution and not pardons  Contagion concerns (PIIGS)  Euro still facing greatest threat since inception  Two possible outcomes for the Euro zone in the long run.

28. The Euro and the Tacoma Narrows Bridge A Slippery Subject

29. U.S. Forecast

31. National Housing Market  Foreclosure Moratorium Delayed Recovery  Housing market bounced of a bottom prices  Housing Market is a key battle in recovery  Policy has NOT been battlefield triage.

32. U.S. Forecast

33. Florida’s Housing Market  Housing market showing signs of life  Has housing market found a solid bottom for prices?  A Tale of Two Markets  Distressed vs. Traditional  Investor role in distressed market

34. Florida Forecast

37.  In 2010 the economic recovery began Real GSP growth 1.4% that year In 2011 the economy limped further along 1.3% Real GSP growth  In 2012 we expect 1.6% growth  Job growth has limped alongside but only starting late in 2010.

38. Florida Forecast  Economic and job growth doesn’t gain significant altitude until 2014 and 2015  Real GSP growth:  2014 = 3.3%  2015 = 4.0%

39. Florida Forecast

46. Region Population Growth Average % ChgRank Florida 1.6--- Deltona 1.47 Gainesville 0.912 Jacksonville 1.56 Lakeland 1.38 Miami 1.55 Naples 2.41 Ocala 1.93 Orlando 2.12 Palm Bay 1.39 Pensacola 0.911 Tallahassee 1.210 Tampa 1.64 2013-2016 Averages; Q4 2012 Forecast

47. Region Employment Growth Average % ChgRank Florida 2.4--- Deltona 2.36 Gainesville 1.212 Jacksonville 2.44 Lakeland 2.28 Miami 2.27 Naples 3.11 Ocala 2.92 Orlando 2.73 Palm Bay 2.29 Pensacola 1.810 Tallahassee 1.411 Tampa 2.45 2013-2016 Averages; Q4 2012 Forecast

48. Florida Sector % Average Annual Growth Construction6.1 Professional & Business Services 5.6 Trade, Transportation & Utilities 3.0 Education-Health Services2.4 Information1.7 Manufacturing1.2 Financial0.8 Leisure & Hospitality0.8 State & Local Government0.5 Federal Government-1.9

49. Sean M. Snaith Sean M. Snaith, Ph.D.Director Institute for Economic Competitiveness (407) 823-1453 Sean@SeanSnaith.comWWW.IEC.UCF.EDUwww.facebook.com/seansnaith Twitter: @seansnaith Thank you