The world economy may seem like a mess right now but that doesn’t necessarily mean the United States is headed for a recession, according to an internationally recognized Texas-based economist.
While the dive in the stock market has a lot of people worried, the U.S. “economy is in a pretty good place right now over all,” said Dr. Ray Perryman, president and CEO of The Perryman Group, an economic research and analysis firm based in Waco, Texas.
Speaking at the Joe Vincent Management Seminar hosted by the Independent Insurance Agents of Texas in Austin in January, Perryman said, “if you look at our economy, last year we gained almost as many jobs as we did in 2014. Those two years combined were the best job growth we’ve had since the ’90s, which was a very good time for the economy. The year ended with the housing market stronger than it has been since back before” the housing crisis and economic crash of 2008.
The recovery has been going on for almost 70 months and is the second longest peacetime recovery the U.S. has experienced. “The economy has a lot of momentum behind it right now. Now, we’re not in for spectacular growth, but good, solid, 2.5, 3 percent growth. We should continue to see that for several years,” Perryman said.
“Recoveries don’t die of old age,” he said. “What’s going to cause a recession — one of two things: a big impact from the outside, like 9/11 or the oil import embargo back in 1973. … Or we do something really stupid. … Sometimes it is the combination of the two.”
He added that while “some stupid stuff’ is happening with economic policy right now, he doesn’t see anything the country is doing that would cause a recession.
As to the global economy, Perryman said the biggest challenge right now is China, which is trying to restructure its currency.
China has enjoyed phenomenal growth over the past 30 years, rapidly moving from an agrarian society to an industrial one. It has grown at a compounded rate of 10 percent over the past three decades but the problem now is that the rate of growth has slowed to about 6 percent annually, he said.
Most of China’s growth “has come when they act like capitalists. … One of the ways they’ve grown is in enterprise zones where they’ve allowed capitalism … they’ve been pretty good capitalists in a lot of ways,” Perryman said.
While their economy has slowed, it will continue to expand. “There’s too much momentum. … They’re going to continue to grow but not nearly as rapidly as they did,” he said.
So now they’re trying to restructure their currency and “that will work for a while. But something very important happens … in October 2016,” Perryman said.
At that time, China’s currency becomes part of the accepted world trade currency as approved by the International Monetary Fund.
“What that means is, they can’t mess with it anymore. The currencies that makes up that list are dollars, yens, pounds and euros. A pretty solid list of folks that have had pretty stable currencies for a long time. Basically what that means is they have to start behaving. … It’s going to bring them into the world economy, give them less autonomy than they had before. They’re going to have to deal with some of these issues in a sensible way,” Perryman said.
Texas Then and Now
Between 1973 to 1981 the world experienced what is known as the energy crisis. But “in Texas we called it the oil boom. …. Because between 1973 and 1981, the price of oil went from about $3 a barrel to $36, $37 a barrel. There’s a basic rule of economics — if you’re selling something and the price increases 1,200 percent and people are still buying it, that’s good,” Perryman said.
Much has been said about the current “Texas miracle” and the state’s ability to create and retain jobs during the recent recession. However, there’s “no comparison to what happened from 1978 to 1981. During that four-year span Texas gained 800,000 jobs. Over the same four years … the other 49 states lost a million jobs. Texas almost made it all up,” Perryman said.