According to the Perryman group, the United States will grow at a moderate pace over the next five years. The Texas economy will likely outpace the growth in most parts of the nation. And in Tyler, the economy calls for expansion at a notable pace over the next five years and beyond.
The 39th Annual Economic Outlook Conference was held on Thursday, January 12th at the Green Acres Baptist Church CrossWalk Conference Center. This luncheon was organized by the Tyler Area Chamber of Commerce. Dr. Ray Perryman delivered his keynote address after being introduced by Pat Stacey, the current Tyler Chamber Board Chair.
At a high level, Dr. Perryman stated that “a modest downturn in the economy is likely in the coming year, but a major recession is not anticipated.” Over next few years, Perryman said that the United States economy, as measured by gross product, is predicted to grow 2.8% while Texas will grow 3.6% and Tyler will grow 3.4%. Although Texas will slightly outperform Tyler on gross product growth due to the ongoing oil and gas activity in the Permian Basin, job growth in Tyler will outpace the state at 2% versus 1.8% for Texas as a whole.
Perryman summarized the overall effect of the Covid-19 pandemic on the United States economy, stating that, in terms of job growth, it took the country 27 months to get back to even while Texas and Tyler took 19 months and 18 months, respectively. He also highlighted that 70% of net new jobs created in the country have been in Texas since the pandemic. In addition, the U.S. has grown .7% in terms of job growth since before the start of the pandemic while Texas has grown 5.4% and Tyler has grown 5.6% This “speaks to the diversity and resilience of the area,” said Perryman, adding that the outstanding quality of life here in East Texas is also very beneficial.
Dr. Perryman maintained his usual good humor throughout the presentation and referred to himself as “an equal opportunity offender,” stating that his use of data to express his opinions often results in misalignment with both political parties on many issues that are making headlines today. To address these important matters, he organized his comments into three main categories: inflation, energy and climate.
Perryman began his discussion on inflation with a bit of good news. He stated that, month over month, the inflation rate is trending downward. He addressed the reasons for the recent inflation which he summarized into three main causes: supply chain issues, an influx of consumer spending, and disruption of the energy markets due to the invasion of Ukraine. As he described, “while in the midst of a supply chain crisis, we also saw pandemic stimulus packages putting thousands of dollars of
extra funds into the hands of American consumers.” Once the lockdowns and regulations of Covid-19 subsided, Americans went out and spent money rapidly. This was anticipated. He reminded the audience that this is the classic definition of inflation: “when too much money chases too few goods.”
Perryman stated that this inflation is not “structural” in nature like it was in the Carter and Reagan administrations and that he predicts that the rate will stabilize at around 3%; slightly higher than where it has been running at closer to 2%. He predicted that the Federal Reserve would raise interest rates a few more times, but that by the end of 2023 things will look substantially better.
ENERGY AND CLIMATE
Perryman’s opening comments regarding energy and climate left no room for doubt. “We have a climate crisis. The science is overwhelming. We have to deal with it,” Perryman said as he delved into this very controversial topic. “Three billion people in the world live on $3 or less a day. Seven hundred million people live on $1.90 a day or less. This is the kind of poverty that is unimaginable and the way to alleviate this is to grow a country’s economy. This cannot be done without energy. All of the energy demand in the future will be from the developing world.”
Perryman stated that this cannot be a battle between energy and the environment and that all involved parties must work together to find mutually beneficial solutions. Perryman cited a United States Department of Energy study which concluded that, in 2050, after renewables have grown 300%, we will still need 30% more oil and gas than we need today.
“It will happen because it has to happen,” Perryman stated as the first law of economics. “We have to do it so we will figure out a way to get it done. Billions of people will have a better life when we figure this out,” he said.
Workforce was the topic that captured more of Dr. Perryman’s remarks than any other. As Perryman stated, “Workers are the currency of the future.” He reminded the audience of the critical need to identify and train more workers in the United States. “The real problem,” he stated, “is that we are not making folks as fast as we used to. Baby boomers are retiring. Young people are entering the workforce later. The labor force participation rate is declining as well. It has been 50% for most of U.S. history, peaked at around 70% in the year 2000, and now is gradually going down. The pandemic didn’t impact this rate by much. 2020 is the year of the lowest birth rate in the history of the country.”
Perryman calls the current situation in the United States the “Great Reshuffling” as opposed to the “Great Resignation,” citing that more people are changing jobs than leaving the workforce. He stated that there are around 500,000 workers that left the workforce and have not come back since the pandemic. Out of 150 million people in the U.S. workforce, equating to .033%, this is a somewhat negligible number.
Technology, incentives, and immigration were the three main solutions that Perryman described in dealing with the workforce shortage. Over the long term, technology creates jobs. Continuing to focus on technological advances is critical. Providing more incentives for workers to return to a job is also a viable solution. Offering more training and better benefits such as childcare are examples of strategies that could prove effective.
Immigration is also something that Perryman believes that our country is “getting all wrong.” He believes that it is not rocket science, but yet no one seems to be able to make any progress. Perryman joked that this is “simple math.” He says that while we desperately need people, there are people that want to come to this country to work. Today, 10% of workers in Texas are undocumented. In some industries such as construction, agriculture, and hospitality, it is as much as 40%. “If we want to build anything, grow anything, or go anywhere, we need these workers because we don’t have anywhere else to get them. We need a system to get the workers here legally so we can match them to jobs that they can fill with no negative repercussions to the employer.” In addition, Perryman stated his concern over the reduction of legal immigration to this country. “25% of today’s doctors and healthcare workers in the United States and 24% of our scientists and engineers are immigrants.
The 2020 U.S. Census highlighted that there are one million fewer young people (those under age 18) in the country than there were in 2010. Perryman stated that Texas is somewhat of an exception to this because we do, in fact, have more young people. Texas gained 470,000 people in 2022 which equates to almost 1,300 a day. For most of the last twenty-five years, Tyler has been a little behind the state in population growth. But as of five years ago, Tyler outpaced the state and is predicted to maintain this for the foreseeable future.
Companies will not locate in a place that doesn’t have workers. “We have to find workers and educate these workers,” Perryman stated. Investments in education are critical to our future, he reminded the audience. The Texas Education Agency reports that two-thirds of the students in Texas public schools come from households that generate only 8% of the wealth of the state. In terms of access to extra educational opportunities or even necessities like high-speed internet, these students are at a severe disadvantage.
According to the Perryman Group, by 2035, if the quality of our schools in Texas stays exactly the same in the future, in terms of graduation and outcomes, the average Texan will have $6,000 less income than they have today. His hope is that our legislature will use some of its $32.7 billion surplus this year to meaningfully invest in education.
Dr. Ray Perryman, the founder and CEO of the Perryman Group, has guided clients, subscribers, and audiences through the complexities of economic life for more than 40 years. He holds a BS in Mathematics from Baylor University and a PhD in Economics from Rice University. He has held numerous academic positions and authored several books, more than 400 academic papers and 3,000 trade articles. Dr. Perryman has received hundreds of prestigious awards for his academic and professional efforts. Some of his most gratifying work is in the field of economic development and social policy, where he has played a role in the creation of hundreds of thousands of jobs, trillions of dollars in investments, and numerous initiatives to address pressing human needs.