Economist: No recession on the horizon, but 2017 may bring inflation


Economists don’t foresee a recession happening in 2017 or 2018, but inflation may prompt the Federal Reserve to raise interest rates in the coming year.

Those were a few of the economic assessments shared by Dr. Lawrence Yun at the St. Johns County Chamber of Commerce’s quarterly Economic Development Council breakfast last year. Yun – the chief economist and senior vice president of research for the National Association of Realtors – contended that the zero rate of inflation seen in recent years was actually the result of lower gas prices, which offset increases in the price of food, college tuition and other indicators to keep inflation at bay. He doesn’t see that continuing for much longer, however.

“In order to have another year with no inflation, gas would have to be $1 a gallon,” Yun said, predicting that the nation could see inflation of 3 to 4 percent, and prompting the Federal Reserve to raise interest rates.

In a presentation that reviewed a number of economic indicators – such as lifetime wealth, homeownership rates, new housing starts and increases in jobs – Yun noted that St. Johns County has bucked the trend of more significant declines in those areas seen in other parts of the country.

“The level of growth (in St. Johns County) is very unique – one of the bright stars in the whole country,” he said. “St. Johns County has been very immune.”

Election predictions

Noting that real estate data closely reflects the overall economy, Yun posited that President-elect Donald Trump’s election victory wouldn’t have come as such a big surprise to some media pundits had they put more faith in real estate data than political polls. For example, in Colorado, Yun said – where home prices and jobs have both increased in recent years – voters went for Clinton. “People there were saying, ‘We like the status quo.’”

In Pennsylvania, however, the data was in stark contrast to the political polls. “Every single poll had Pennsylvania going for Clinton,” Yun said. “But one look at the economic data clearly pointed to a large percentage of dissatisfied people in Pennsylvania.”

Moreover, while data shows that lifetime wealth is at an all-time high, a deeper dive into the numbers shows that most of those financial gains were experienced by the 10 percent of the population with money in the stock market; the remaining 90 percent of Americans haven’t benefited, he said.

“From the middle class point of view, for the past eight years there’s been no gains and you’re just spinning your wheels,” said Yun, adding that the U.S. homeownership rate is at its lowest point in 50 years, with those under 35 being particularly underrepresented. That dissatisfaction among young adults, he said, correlated to the support Socialist Bernie Sanders enjoyed among younger voters.

“People under 35 were saying, ‘What the heck, America? I am willing to try something completely different.,’” Yun said. “What does that say about future voting patterns?”

As the U.S. economy prepares for the uncertainty of a new president, Yun said, there is a chance that President-elect Trump’s pledge to lower taxes and cut regulation will prompt businesses to start spending and investing in their businesses again, triggering job creation and overall economic growth.

“Increased business spending could kick in and we could have sustained, positive economic activity,” he said. “But if it’s only a short-term measure, we’ll see a larger budget deficit that could drive higher interest rates.”

Chamber Award

A special highlight of the EDC breakfast was the presentation of the Fred Schroeder EDC Member of the Year Award to Flagler Hospital President Joe Gordy. The award was presented by Schroeder’s son, Dirk Schroeder, and Victor Raymos, chair of the chamber’s Economic Development Council.