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Who says every economist has two opinions on everything? "On the one hand ... but on the other hand." A survey out today finds that 195 economists reached a telling consensus on the biggest short- and longer-term risks to the U.S. economy.
Terrorism, it turns out, again tops the short-term concerns of the nation's top economists, according to the semiannual survey by the National Association of Business Economists.
Thirty-four percent of the economists surveyed said it was the No. 1 risk to the U.S. economy, up from 26 percent in March. A year ago, energy prices briefly pushed aside terrorism as the top-ranked risk. Two years ago, 40 percent of economists polled said terrorism was the big short-term risk.
This look at the bigger picture seems timely. Florida is wrestling with its own set of short- and longer-term risks. Yes, the state economy is producing lots of jobs amid a growing population and an unemployment rate that is the nation's envy. But the state economy is also mired in a stubborn property insurance crisis that's beginning to undermine the state's housing and construction industry. And belated steps to bolster Florida's low-ranked educational system, the state's comparative lack of higher-paying jobs and a rising cost of living here are raising red flags about the ability to compete economically in the coming decade.
But there's more going on out there. You may picture the National Association of Business Economists as a gaggle of ivory-towered, out-of-touch geeks. You'd be wrong. On the morning of Sept. 11, 2001, I doubt you were at the Marriott Hotel at 3 World Trade Center, sandwiched between the World Trade towers in lower Manhattan. That's where this group happened to be holding its annual meeting as hijacked planes struck the towers. When debris began to fall on the hotel, the economists left behind their belongings and fled. They survived but the hotel was smothered under the falling towers.
So let's give these economists at least a little street cred.
Right behind the threat of terrorism, the NABE survey shows that energy prices have jumped in the past two years from a modest-risk, short-term concern to the No. 2 spot (29 percent). The two issues are increasingly intertwined.
Oil prices are high, but they are not soaring at the moment. The price of a barrel of crude hovered around $72 late Friday, while the national average for a gallon of regular unleaded was $2.891 a gallon. Last September, it hit a national record $3.057. In the Tampa Bay area, gas averaged $2.855 Friday, still under the record $2.997 of last September, according to AAA's daily fuel gauge report.
Still, bad dreams of higher oil prices haunt economists. This group says prices over $100 per barrel - no longer an absurd notion - would cause a U.S. recession. They doubt we're headed that way, though more saber-rattling with Iran has prompted talk of $110-a-barrel prices should there be open conflict.
"NABE members don't believe oil prices will go that high," says PNC Financial economist Stuart Hoffman, current head of the association. On the other hand, the same economists "see little prospect of significant substitution of other technologies for oil in the next decade."
After terrorism and energy prices, the survey found short-term economic risks declined. At No. 3, inflation was cited by only 12 percent of the economists, followed by "current account deficit" (econo-speak for the country's lopsided balance of payments from too many imports and too few exports) at 11 percent, excessive debt (personal and corporate) at 5 percent, the federal deficit (a big worry two years ago) now at a mere 2 percent, and unemployment (Tampa Bay's was a puny 3.4 percent last month) at a rock-bottom 1 percent.
That's the short-term outlook.
Longer-term, according to the survey, economists warn the risks to the U.S. economy are different and more entrenched. Concerns about the health care system have declined from early this year, but economists are more upset about the nation's inadequate educational system and rising energy prices. Still the No. 1 risk longer-term, economists insist, remains the potential for the federal deficit to grow too big and undermine the economy.
Two years ago, the deficit was almost an afterthought among more pressing longer-term risks. Top of the list in the summer of 2004 - an issue surely spurred on by President Bush's push for Social Security reform - was the growth of the elderly population and the lack of younger people to support them. At No. 2 was health care.
The latest survey shows that after the deficit (23 percent), the longer-term risks are now identified as education (21 percent), growth of the elderly (17 percent), health care (16 percent), energy issues (13 percent) and, finally, competitiveness at 4 percent.
Among both short-term and longer-term risks, energy prices have risen most dramatically in the past two years, the survey found.
A few other highlights:
- Most economists surveyed believe the Middle East violence will not result in "major" disruptions to oil supplies.
- Only 35 percent thought the war would expand.
- The median price of oil next summer was estimated at $75, little changed from today.
- Almost half the economists believe the world has sufficient oil but that the United States needs to reduce its Middle East dependence.
The survey was not just a worrywart list. Economists also were asked to name the U.S. economy's greatest strengths. Top of the chart (39 percent) was "flexible labor markets" which also was ranked No. 1 two years ago. At No. 2 in the latest survey was "productivity/technology" with 27 percent, although that's down 8 percentage points from 2004. Coming in third in economic strengths was "deep capital markets" (18 percent). That's nearly double the 10 percent draw in 2004 - one of the more positive signs that economists still hold faith in the days ahead.
Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.
Greatest economic risks?
In the short term, what most worries the nation's economists? It's still terrorism, but energy's rising fast.
Aug. 2004 Aug. 2006
Terrorism 40 34
Energy Prices 6 29
Federal Deficit 23 2
Longer term, the deficit is still No. 1, but once again energy issues are climbing.
Aug. 2004 Aug. 2006
Federal deficit 17 23
Education 19 21
Energy 6 13