Economist Ray Perryman, panel of county judges share predictions for area’s future at SETEDF event

The Southeast Texas Economic Development Foundation’s 2018 Economic Forecast Breakfast featured keynote speaker and renowned economist Dr. Ray Perryman of the Perryman Group, and an impressive panel of Jefferson County Judge Jeff Branick, Orange County Judge Brint Carlton and Hardin County Judge Wayne McDaniel.

Wednesday, Jan. 17, at the Event Centre in Beaumont, Perryman presented a forecast for 2018, broken down by national, state and local economies, while the panel of judges shared their perspective on the future of their counties’ economies as well.

Perryman has been called a “genius” by The Wall Street Journal, a “world class scholar” by Business Week, the “unofficial state economist” by The New York Times, “the most quoted man in Texas” by Texas Monthly, and “the state’s premiere barbecue connoisseur” by The Dallas Morning News.

Robert Bilnoski, spokesperson for Golden Pass LNG who introduced Perryman, shared a few lesser-known facts about the syndicated economist from Waco. Bilnoski said Perryman once sang the national anthem at a Chicago Cubs game at Wrigley Field, once spent the night in his car to play in a miniature golf tournament in Beaumont, once played the saxophone in Wilson Pickett’s band, and most impressively, led the team that located and captured Osama bin Laden’s money in 2002.

National economy

As far as the national economy goes, Perryman said he believes it will grow at a decent pace, and while the Tax Reform Bill will stimulate the economy, it  will most likely not live up to the hype that is being touted by its proponents.

“Is it the worst thing that ever happened or is it the best thing that ever happened? The answer is neither one,” Perryman said. “Yes, it will stimulate the economy … but no, it won’t pay for itself.

“We just had a $1.5 trillion tax cut,” Perryman explained. “We created the deficit over the next 10 years. Now the ones that make the speeches and say it’s going to be the greatest thing since sliced bread, say it’s going to increase economic growth about 1 percent a year … so it’s going to take our $20 trillion economy and it’s going to increase it 1 percent a year. That’s $200 billion a year for 10 years. …That’s roughly $2 trillion of new output if you get 1 percent growth. … Now, remember we just had a $1.5 trillion tax decrease. We’re going to generate $2 trillion if we’re optimistic in new gross product in the economy. That’s great. But unless you tax that $2 trillion at 75 percent, you can’t get 1.5 trillion back. … Ten years from now our national debt is going to be around $30 trillion without the tax bill and with the tax bill it’s going to be around $31 trillion. I’m not saying $1 trillion is trivial, but that’s not the tipping point to make the economy go off the rails.”

Texas economy

As far as Texas is concerned, Perryman says the state is hitting on all cylinders despite the oil downturn over the last three years. In fact, comparing the recent oil crisis to a similar oil crisis in the ‘80s, Perryman said he believes the state recovered remarkably.

“(It’s) amazing to me, if you go back to 1973-1984 when we had a big oil boom in Texas, and then we had the bust right after that, during that bust, the price of oil fell 75 percent and the rig count fell 80 percent,” Perryman said. “There were at least 305,000 people working in the oil industry at that time. It went down to about 175,000. When that happened the state of Texas lost over a quarter of a million jobs. The recession that we had in Texas was worse than 2008 and 2008 is the worst one the country’s had since the Great Depression, but what we had (in Texas) with the oil recession was much worse.”

Perryman said when the oil crisis happened in 2014, the numbers were eerily similar. Again, the price of oil fell 75 percent and the rig count fell 80 percent.

“Strangely enough the peak employment in the oil and gas sector was 305,000 people — same thing as it was in the ’80s exactly,” he said. “It fell to about the same thing it fell then too. Here’s the difference: In 2014, that very bad year in the oil industry, Texas gained 160,000 jobs, where we lost hundreds of thousands the last time. In 2016, we gained about 220,000 jobs. … Those two years combined we gained almost 400,000 jobs. … In 2017 we’ve gained over 300,000 a year. … So we’ve managed to endure a really bad oil cycle, just as bad as the last one, yet we continue to grow as a state.”

Perryman also pointed to growth in trade, the healthcare industry and the technology sector as positive factors on the Texas economy.

“Right now all the signals in Texas are very good,” he said.

Southeast Texas economy

As the epicenter of energy, Southeast Texas was also the epicenter of one of the worst storms in history.

“(Hurricane Harvey) was massive and it was terrible,” Perryman said. “We started looking at the economic impacts … there are big costs from this storm obviously … and costs that you won’t know about for years and years to come. It might have effects for a generation.”

There’s also a positive side to the storm’s destruction, believe it or not, according to Perryman.

“There’s the other side of it, it’s all the dollars that come in because you start rebuilding things,” he said. “From an economic perspective, I think the most important thing I can tell you is … you’ll have a very good year in housing, you’ll have a very good year in real estate. They’ll be a lot of building activity taking place, rebuilding, and all these kinds of things.”

Comparing Hurricane Harvey to Hurricanes Katrina and Sandy, Perryman said Southeast Texas’s economy is better positioned to recover than the economies of New Orleans or Jersey Shore.

“The single most important thing I can tell you about the storm from your long-term economic perspective is when Katrina hit New Orleans, it was already a declining area, and it kind of took it over the edge. When Sandy hit the Jersey Shore, it was already a declining area, and that kind of took it over the edge. When this storm hit here, it did not change the fundamentals that are leading to billions of dollars of investment in this area,” Perryman said. “It didn’t change the economics of refining. It didn’t change the economics of petrochemical. It didn’t change the economics of LNG. All of the things that are driving the billions and billions of dollars of investment here didn’t change. … It didn’t change the global economy’s demand for energy in the future. It didn’t change any of those things. … The human suffering is unbelievable and is beyond anything that you can hardly deal with, but the fundamental economics of this area were not changed. The growth that you were going to have, you’re still going to have.”

Perryman said despite the evolving alternative energy sources, 30 years from now there’s still going to be a huge demand for fossil fuels.

“There’s going to be a huge demand for our natural gas,” he said. “There’s going to be a huge demand for refined petroleum products. There’s going to a huge demand for crude petroleum products. These things are going to be very much in demand, moving forward, in the world. … You have been the epicenter of processing those resources here in this region for a century, and I think that bodes very well for your future.”

Jefferson County Judge Jeff Branick, Orange County Judge Brint Carlton and Hardin County Judge Wayne McDaniel weighed in on the economic outlooks for their respective counties during a panel discussion prior to Perryman’s presentation.

Jefferson County

“I’m very upbeat about the economic development prospects of Jefferson County,” Branick said. “We have all four of the major refineries, one of them the largest in the United States, 32 chemical plants, rubber plants. We have Golden Pass, which is looking in the next couple of months of making a final investment decision for a $10-billion-plus project. We’ve got Sempra Energy looking at a $10-billion-plus project. They’re in the permitting process right now. We’ve got expansions going on at the … ExxonMobil Chemical Plant on Highway 90. We’ve got Natgasoline that’s been underway for a couple of years now in the construction process. We’ve got Total doing an expansion and planned expansions at Motiva and at Valero as well as numerous other projects.”

Branick said it’s a testament to the area’s transportation infrastructure.

“Our pipelines, highways, rail are all critically important to attracting industry to the area as well about 65 percent of the water that flows into the Gulf of Mexico from the state of Texas comes from the Sabine-Neches Waterway,” he said.

At the same time, Branick said education and workforce training is vital to the future of the county flourishing.

“We are very upbeat, but also want to be realistic,” he said. “We have a baby boomer population that’s aging. They’re going to be retiring out at the plants. We’re going to need to replace a lot of operators, a lot of people that work in the plants.

“As compared with other counties, I’m … comparing demographic information and find that out of the similar sized counties, Jefferson County has the highest single-parent household rate out of those counties, and that’s not making any value judgments, it’s just saying it makes it more difficult for people who grow up in single-parent households. They’re more likely to drop out of school, less likely to engage in industrial training programs like LIT and more likely to have run-ins with the law. So we have our work cut out to ensure that we have an effective, well-trained workforce that can supply the needs of industry, and our schools are preparing our children to take their place in what can be a very booming economy.”

Orange County

Judge Brint Carlton explained that Orange County, in an initiative being spearheaded by EDC Executive Director Jessica Hill, is focusing on attracting new businesses to the area.

“A lot of our focus in the past has been primarily just on big petrochemical industry and trying to land that multi-billion-dollar project, which of course we’d love to still get, but we’ve also kind of expanded that more to look at quality-of-life issues that would help out our residents in Orange County such as restaurants, retail, and other entities that people would like to see,” Carlton said.

Because of the impact of Hurricane Harvey, residences and businesses are dreading the possibility of at a higher tax rate, and Carlton said it is not the way to grow the county’s economy.

“So many of our residences and businesses … don’t want a higher tax rate,” he said. “They don’t want to pay more money, but they still want the same services available to them. We still need good roads, we still need a jail, we still need a courthouse, we still need water and power, we still need our schools, and so it’s a balancing act that we’re going to have to struggle with coming up this year. … So to get through, we would try to focus on growing our economy — that’s the way to do it ... try to use this as an opportunity, as people are rebuilding and remodeling homes, to also try to recruit those businesses to come in and help out the overall quality of life of Orange County.”

Hardin County

Hardin County Judge McDaniel said the county has been growing steadily over the past several years.

“Our population is about 57,000 and that’s from the 2010 Census,” he said. “I suspect when the Census is conducted in 2020 that number will be quite a bit more.”

McDaniel said he thinks businesses are doing quite well in Hardin County.

“Most of those are restaurants. We’d like to see some more industrial businesses flourish and come to Hardin County,” he said. The county and EDCs in cities like Lumberton, Silsbee and Kountze will continue to work on attracting industry to the area, McDaniel said.

Photo by Kevin King - Ray Perryman said he believes Southeast Texas will bounce back from Harvey because of the area’s growing energy sector.

 

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