On the Horizon
By Ray Perryman
With nearly one in 10 of those willing to work not being able to find a job, frequent headlines about bankruptcy and mortgage failures and other bad news, the pace of the recovery is on the front burner of interest. The massive deficit and growing debt the U.S. has been accumulating also remains to be adequately addressed.
No one, of course, has a crystal ball that can predict every detail of the future, but there are some clear indications that the road, although still anticipated to be long, will likely not have as many bumps and turns as we continue down the path toward full recovery.
For more than three decades, I have been producing short-term five-year forecasts at this time of the year.
My study this year has not produced any major surprises, but it has given me confidence that American resiliency is still alive and well.
The data has also imbued me with greater confidence that tomorrow will be much better than yesterday. Despite the myriad challenges, I am truly optimistic about the future of our country and state.
Over the next five years, the U.S. real gross domestic product is projected to increase by nearly $2.36 trillion, representing a per-annum growth rate of 3.33 percent. For this same period, the Lone Star State's output of goods and services is predicted to achieve a compound annual growth rate of 4.36 percent, which reflects an expansion of almost $256.53 billion.
Consumer sentiment is on the rise. Confidence does not always translate into spending, which is actually more closely correlated to income. Still, the Commerce Department recently reported that sales have been increasing at a rapid pace.
From 2010 to 2015, almost 9.92 million workers are forecast to be added across the U.S., with 1.30 million expected to be in Texas, yearly expansion rates of 1.48 percent and 2.29 percent, respectively. As the pace of job creation accelerates at a moderate rate over the coming months, no major drops in the unemployment rate are anticipated because of the natural growth in the workforce and the return of many discouraged job seekers who will be counted among the unemployed.
Of the new jobs forecast to be created in Texas over the next five years, some 54.5 percent will likely be in the services industries. An additional quarter of the jobs are anticipated to be in the trade (13.35 percent) and government (11.43 percent) sectors. The unemployment rate in Texas is projected to remain significantly lower than the nation as a whole.
Across the nation, the fourth quarter of last year saw homebuyers rushing to close deals in order to take advantage of a federal tax credit. Subsequently, the credit was extended through April; since that time, housing activity has slumped.
With the recent creeping upward of mortgage interest rates, many people looking for new living quarters are beginning to reconsider their plans.
By the end of this year, the U.S. real estate market may hit a $1.7 trillion decline in value. Along with the drop in the worth of homes, tightened lending standards have the potential to depress sales.
In Texas, however, over the years from 2010 to 2015, the population is forecast to expand on the average of about 1,200 per day (including migration and domestic births). Just slightly below the pace of the past five years. With this influx, the need for housing will likely be an opportunity boom for the real estate and construction sectors since Texas is far less burdened by a current oversupply than many areas.
While full recovery from the recession is clearly not proceeding at the pace desired by most people, the direction of progress is definitely positive. The preponderance of evidence clearly points to better, if not booming, days ahead.
Dr. M. Ray Perryman is president and chief executive officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.