05/30/2003: "US and Texas Economies to “See the Elephant”"
During the California gold rush, the universal hope of prospectors was to “see the elephant,” a common expression in those days for finding the shiny ore that would put them on “easy street.” Unfortunately, many of those seeking fortunes some hundred and fifty years ago never saw even the tail of the pachyderm.
Having recently completed a thorough analysis of the US and Texas economies in preparation for the publication of The Perryman Economic Forecast for the period from 2002 to 2030, I am convinced that in the long term, we most assuredly will see the elephant.
Over the past couple of years, our economy has experienced a roller-coaster ride. The slowdown, which officially started in March 2001, was exacerbated by the various events following the September 11 terrorist attacks.
There was a drop in consumer confidence, and numerous industries faced a variety of short-term difficulties. Subsequent activities associated with homeland security, the fight against terrorism, corporate scandals, and a war in Iraq, as well as financial difficulties faced by various countries in other parts of the world also caused our economy to fluctuate. Despite these facts, however, output has expanded consistently. Unfortunately, job growth has not accompanied this progress.
Even so, consumer confidence is now rising, the housing market continues on its upward path, investors are growing increasingly hopeful, and the health of the stock market has stabilized. The third-largest tax cut in the nation’s history that President Bush signed this week will provide many people with opportunities to improve earnings and to spend more, factors that can influence our economy positively and provide an impetus for continued expansion in the future. This picture is by no means perfect, but it will offer some near term stimulus and important long-range investments incentives.
There are numerous unknowns regarding what the US and Texas economies will face during the next three decades. However, based on my extensive research and more than a quarter century of economy modeling, I believe the key economic forces are in place to allow our economy to experience significant growth over this period.
During the 29 years from 2002 to 2030, the nation’s population is forecast to expand 24.7% to reach approximately 359.8 million. The number of residents in the Lone Star State is projected to rise by 53.9% and exceed 33.4 million in 2030.
The number of wage and salary workers in the US over the forecast horizon is predicted to grow by some 40.6%, reflecting a compound annual growth rate (CAGR) of 1.23%. The total number of jobs in Texas is projected to rise by 1.76% per annum, adding more than 6.3 million workers from 2002 to 2030.
The national Industrial Production Index is expected to achieve a compound annual growth rate of 3.15% over these years. Additionally, the Consumer Price Index (CPI) is anticipated to climb 2.30% annually, while the Producer Price Index (PPI) will likely increase at a CAGR of 1.88% in the long term.
Real Personal Income (RPI) in the US should rise in excess of 126% over the forecast horizon, with RPI in Texas experiencing a 147% hike from 2002 to 2030. State retail sales are projected to quadruple during this period and exceed $1.49 trillion in 2030.
US Real Gross Domestic Product (inflation adjusted) will likely expand by approximately 2.89% per annum, more than doubling the 2002 total of $9.44 trillion to reach $20.97 trillion in 2030. Real Gross Product in Texas is expected to triple during the 2002-2030 period, climbing to nearly $2.30 trillion.
All industries in Texas should see growth through the long term, with trade; services; and transportation, communications, and utilities as the three leading sectors in RGP and trade, services, and government as the top three employers.
While the interconnected nature of the economies of the nations around the world will remain important factors in the level of business activity in the US and Texas, the American capacity to innovate will enable our economy to achieve full recovery and substantial advancement over the next three decades.