Economic reports for May were disappointing, and some national analysts are wondering if the recovery has stalled or worse.
Local experts confirm there is a lot of uncertainty about where the economy is going in the next few months. Still, some say there is plenty of evidence the year will end strong.
“We’ve come back 80 percent from the fall,” said Brian Kahn at Jupiter Peak Financial. “That 80 percent would not have happened without Federal Reserve stimulus. If that doesn’t occur again and unemployment continues we could go down a lot.”
And because the increase came from a stimulus, it’s also possible things will simply stagnate. That scenario is also unpleasant, he said.
“Look at home prices, talk about jobs some sectors are better but a lot of things aren’t yet fixed,” Kahn said.
But like other financial experts, Kahn said he’s wary of predicting the future. His job is to advise clients on strategies and help them minimize their risks. That’s tough because slow economic times also present opportunities for investors.
His advice also changes depending on how close to retirement a client is, he said. Someone who cannot afford a lot of risk needs to play the market more defensively, he said.
People in his professional like volatility, he added. If the Federal Reserve tries to stimulate the market further, Kahn said he’ll try to take advantage of it. But if current factors continue, he said playing defense may be wisest.
Jeff Thredgold is based in Salt Lake City and calls himself an economic futurist. He provides free analysis through weekly and monthly newsletters sponsored by Zions Bank.
He said making predictions is impossible because of the current volatility. There are several factors causing investors worry right now. It will be a few months before some of them are resolved and predictions are possible again.
“Domestic and global issues are weighing on our mindsets as consumers,” he said. “They’re weighing on business people. There is anxiety.”
Whether to take advantage of recent economic growth to hire more talent and invest in new technology or hunker down is now the “$64,000 Question,” he said.
“Some people saying they’re being cautious, others are saying it’s never been a better time to grow,” Thredgold added.
What is causing the anxiety?
Nationally, far fewer jobs were created in May than predicted and the U.S. government must decide whether it will allow itself to go further into debt. Internationally, no one knows how the Libyan and Syrian conflicts will affect oil prices and the government of Greece may default on its debt.
The average American doesn’t really understand these complex issues and all they’re hearing is negativity, he said.
“It weighs on our collective minds enough to get us to sit on our collective hands for awhile,” he said. “Financial markets don’t like uncertainty and right now there’s a great deal of it.”
The Park City branch of UBS Financial pointed to their company’s “Weekly Guide” written by UBS Wealth Management Research.
It reads, “The recent economic releases suggest that the soft patch of the first quarter might last longer than we had anticipated, as Japan-related supply disruptions and delayed negative effects of the surge in inflation on real activity continue to weigh on growth.”
Yet its conclusion is positive.
“However, we continue to think that the underlying growth trend of the economy is closer to 3 percent and therefore kept our growth forecasts for the second half of 2011.”
It also suggested many of the destabilizing factors are temporary and predicts a stronger second half of 2011.
One way the economic uncertainty could affect Park City is that people will be more cautious about buying real estate.
If predictions of a strong third and fourth quarter are correct, the ski season is likely to be busy. Local Prudential Real Estate broker Steve Roney said he isn’t seeing any signs of caution in the housing market.
“We’ve got preliminary numbers for Park City through May clearly looking like we’re having a much better year than last,” he said. “Marketwide, gross dollar volume is up five percent. Unit buying is up 22 percent. The median price is up 13 percent. And the gross number of listings declined roughly 17 percent.”
The Park City Board of Realtors First Quarter Report summary indicates a large amount of real estate activity involved foreclosures and short sales. If the gross number of listings is decreasing, then foreclosures cannot be increasing, he said.
“There have been some small setbacks, and we have a media that is focused on negative news and not much on the positive side,” he said. “But the fundamentals suggest we’re not in a ‘double dip.'”
The economy may have stalled, but we’re on an upward climb, he added.