Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Research on past recessions shows that downturns that are caused by financial crises tend to be more severe, longer lasting, and with more gradual recoveries than a typical recession. The current recovery is playing out largely as anticipated. The economy is improving, although the labor market remains weak. That should be no surprise to anyone. Monetary and fiscal policy efforts have helped minimize the downside, but have not – and could not – result in an immediate return to prosperity. The road to recovery will be long. It will take years to generate the number of jobs lost in the recession. Carping against those leading us out of this mess does not do anyone any good.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

The economic data have been mixed in recent weeks. That’s something that typically happens in the early stages of a recovery, but it’s a big problem for the stock market. In equities, it’s all or nothing. Either the economy is booming or it’s falling apart completely. There’s no middle ground – but that’s where we are now. We did learn a few new things last week about the state of the labor market and what the Fed will be considering as its endgame approaches.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Over the last year or so, policy actions by the Federal Reserve and the U.S. government have generated some concerns about the exchange rate of the dollar. Will exceptionally accommodative monetary policy fuel inflation and weaken the dollar? Will large budget deficits lead foreigners to abandon U.S. assets? Who speaks for the dollar? Will it fall further and can anything be done to prevent it weakening?

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

By historical standards, the composition of 1Q09 GDP growth was bizarre. Consumer spending rose (not a surprise, but more than anticipated), while business fixed investment (structures, equipment and software) and residential fixed investment (homebuilding) tanked. A faster reduction in inventories accounted for nearly half of the decline in overall GDP. Exports plunged, subtracting a lot from GDP. However, imports also sank sharply adding back even more (note that falling imports are a sign of weakness, but imports have a negative sign in the GDP calculation). Government spending and investment also contracted – this was mostly in defense (which tends to be choppy) and state & local government (a consequence of severe revenue shortfalls).

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

On Wednesday, the government will release its initial look at real GDP growth for the first quarter. The headline figure is expected to be poor, but not as bad as the -6.3% annual rate reported in the final estimate for 4Q08. While the financial markets will be focused on the headline growth figure, the meat is the details. The components tell the economic story of the first quarter. However, we should be able to glean something about where we’re heading in the near term. The longer-term outlook; which includes further financial strains, a possible bottom in the second half, and a very gradual recovery; remains in place.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Following the Fed’s March 18 announcement of more aggressive policy action, the dollar fell and commodity prices rose. Indeed, cries went up almost immediately that the Fed’s actions will boost inflation in the years ahead. Are such fears warranted?

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Nonfarm payrolls fell another 663,000 in March, while the unemployment rate rose to 8.5%. Since the recession began (in December 2007), the economy has lost 5.1 million jobs, with 3.3 million of that in the last five months alone. What’s worse, these figures understate the weakness in the labor market. Adding discouraged workers (those who have given up looking for a job and not officially counted as “unemployed”) and those that are working part time but would prefer full-time employment, the unemployment rate would be 15.6% (vs. 8.7% when the recession began). Granted the unemployment rate is a lagging indicator. Job losses will continue even as the economy begins to recover. However, we need to see some moderation in the pace of job losses to have hope that a recovery is near.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Inflation, as Milton Friedman told us, “is always and everywhere a monetary phenomenon.” However, money supply measures actually tell us little about the threat of inflation. The Fed watches for inflation pressures through resource utilization. There is currently a huge amount of slack in the U.S. and global economies. In the labor market, nearly 12.5 million people were reported to be unemployed in February and another 5.6 million would take a job but aren’t officially counted as unemployed. This pool of available workers is rising sharply. Labor cost pressures, the widest channel for inflation pressures, ought to remain relatively subdued in this environment. In manufacturing, capacity utilization fell to the lowest level since the Fed started keeping records in 1948. Production constraints aren’t going to fuel inflation anytime soon.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

As Fed Chairman Bernanke has repeatedly indicated, “until we stabilize the financial system, a sustainable economic recovery will remain out of reach.” On Tuesday, Bernanke laid a groundwork for financial sector reform. He called for greater regulation, but also suggested that pro-cyclical accounting rules might be bent in extraordinary times. Congress appears to be on board with this idea, and will move quickly to modify the mark-to-market rule. The devil will be in the details.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

The February Employment Report reinforced the view that the economy is still contracting at a sharp pace. There has been no moderation in the pace of job losses. However, consumer spending appears to be falling at a slower rate than in the fourth quarter.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

The U.S. economy will recover. Monetary policy and fiscal stimulus should help support growth by the second half of the year. Financial stabilization efforts will be necessary to ensure a lasting recovery – and those are on the way. However, the major wildcard in the economic outlook is the personal savings rate. A higher savings rate is good in the long run. It will provide a better foundation for economic growth. However, in the short-term, increased savings will make the current downturn more severe and longer lasting.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

The incoming economic data have continued to paint a bleak picture. Massive job losses, sharp declines in factory output, further declines in residential construction activity – there’s been no sign that the pace of decline is even slowing, let alone that a bottom is near. When will the recovery arrive? Not for a while.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

The headline GDP figure was boosted by an increase in inventories in the fourth quarter. To refresh your memory from Econ 1, inventories are a stock and GDP is a flow. The change in inventories is a component of the level of GDP (both are flows). Therefore, it’s the change in the change in inventories that contributes to GDP growth. Inflation-adjusted inventories fell at a $29.6 billion annual rate in 3Q08 and rose at a $6.2 billion pace in 4Q08 – the difference added 1.3 percentage points to the headline GDP figure.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

The year 2008 was a tough year for the economy and a punishing year for investors. Looking back, it seems like a bad dream. Who could have imagined all the major institutions that have failed, been bought out, or were taken over by the government? We appear to be in the worst recession in more than a quarter century. Indeed, the current downturn has already exceeded the average length of recessions experienced since World War II. There’s hope for improvement in 2009, but the economic outlook is very much uncertain.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

The Federal Open Market Committee began the current easing cycle in September 2007, when the Fed funds target rate was 5.25% – not especially high by historical standards. The Fed cut rates by 100 basis points by the end of last year and another 225 basis points by the spring. According to Fed Chairman Bernanke, “by way of historical comparison, this policy response stands out as exceptionally rapid and proactive.” However, financial instability increased in September and the FOMC cut by another 100 basis points in October (the October 8 move was an unprecedented coordinated cut with five other central banks). With inflation looking like a credible threat, some criticized the Fed’s rate cuts. However, in hindsight, the Fed’s action seems well-timed. Inflation did advance into the summer months, but has begun retreating, due largely to falling energy prices.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Deflation refers to a general decline in the price level of goods and services (as opposed to disinflation, which is a decline in the inflation rate). There is big difference between short-term deflation (a brief decline in prices) and long-term deflation (a sustained rate of decline in the overall price level). The U.S. economy has experienced deflation in the past, but not in a very long time. When we speak of “deflation,” we are usually talking about the long-term variety, such as occurred in Japan in the 1990s or in the Great Depression. Currently, the deflation we see appears to be the short-term variety, fed by an unwinding of the prices of energy and other commodities. Nevertheless, there is fear that the weakening global economy could generate a more severe and longer-lasting decline in the price level. The odds of a more significant deflation are still low, but are somewhat higher than a few months ago.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

It doesn’t look good for the consumer. Inflation is coming down sharply, but real wages are still lower than a year ago. The loss in housing and stock market wealth will restrain spending, all else equal. Tight credit isn’t helping. The weak job market is not good. Beyond these impacts, consumer spending habits may be undergoing a sea change as they begin to save more.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

There was a lot of misunderstanding and misrepresentation of the Treasury’s draft proposal. The primary goal is not to bail out “Bush’s friends” or “Paulson’s golfing buddies.” Some individuals and companies will benefit (for example, Warren Buffet, following his investment in Goldman Sachs). Rather, the bailout plan is meant to prevent the economy from weakening a lot more. Critics of the Bush Administration have had a lot to quibble about over the years, but Treasury Secretary Paulson’s heart is in the right place on this one. He is focused on the greater good.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

First, let’s take a step back and think about what got us to this point. The root cause was excessive lending in the mortgage market. With a political bent, some have placed the start of the problems with the Community Reinvestment Act of 1977, which was meant to provide credit to undeserved populations, improving home ownership in inner cities and providing loans to small businesses. However, the CRA impact, while typically seen as a drag on business earnings, is tiny compared to the recent expansion of mortgage debt. Subprime mortgage lending had a small, but justified niche in the credit markets. For example, a recent MBA grad with a limited credit history and starting a family might not qualify for a prime mortgage loan, but would after a few years of working. The subprime mortgage market provided such people an opportunity for home ownership sooner rather than later. The excesses came as subprime lending expanded well beyond its scope. Mortgage originators, interested only in a fee, had little incentive to make sure that the borrower would be able to pay if, for example, adjustable-rate mortgages were to reset at higher levels. Easy credit, fueled partly by a global savings glut, and lax supervision in the industry helped create the bubble. Speculators played a part too, especially toward the end of the housing boom.

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Last week, the Congressional Budget Office released its latest projections of the federal budget deficit. The CBO is now looking for a 2.3 trillion deficit over the next 10 years. The CBO’s outlook assumes current law (the Bush tax cuts sunset as scheduled at the end of 2010), but does not include additional costs from Fannie Mae and Freddie Mac. CBO Director Peter Orszag said that “the nation is on an unsustainable long-term fiscal course.” Neither of the two presidential candidates is proposing that we get the federal budget deficit back on track.