Temple’s economy weathered recent economic storms thanks to its military and medical sectors, but the United States isn’t likely to see strong growth until the health care picture clears, Waco economist Dr. Ray Perryman said Wednesday in Temple.
“The truth of the matter is we are growing, but we are growing slowly and not fast enough for the economy to recover as fast as it should,” Perryman said during a program for businesses hosted by the Temple Economic Development Corp. at the Frank W. Mayborn Civic and Convention Center.
“You have an economic base that is composed of things that aren’t quite as cyclical and have growth attached to them,” Perryman said of the military and health care sectors.
Growth is likely to continue as health and bioscience industry develops in Temple, Dallas and Austin, he said.
However, health care is behind companies’ reluctance to hire new workers, he said.
“The reason they are not doing it right now is they are nervous and the biggest source of uncertainty is what will health care cost?” Perryman said, noting the Senate’s bill leaves many details undefined and requires 250,000 pages of regulations.
Once costs are defined “at the end of this year (or) the beginning of next, you’re going to see a big spurt in economic growth,” he said. “We’re going to have a very strong growth period, but we’re going to have to wait a while.”
Recent job growth has been encouraging, but hasn’t been enough, he said. The U.S. economy requires 110,000 new jobs each month to maintain status quo. Twice that many were created in April but the unemployment rate stayed at 9 percent.
“When things begin to look better, then people come back and look for jobs so you’ve got to create even more,” he said. “Last month more than 250,000 folks on the sidelines came back in … It’s going to be an interesting, dicey time for the next couple of years.”
Perhaps most of all for political incumbents, who could expect to receive tickets home if the unemployment rate remains over 8 percent next summer, Perryman said. More than half of voters in the last election cast ballots based on dissatisfaction with the nation’s jobless rate.
Nationally, 1.5 million of 8.5 million lost jobs have been restored. Texas has reclaimed 300,000 of its lost positions, he said.
“When you lose 400,000 jobs, that’s a recession and it hurts, but relative to the rest of the country, we did pretty well,” he said.
While American corporations wait for health care costs to be clarified, they have more than tripled their cash reserves, Perryman said. Companies are sitting on $2.4 trillion in cash, 3½ times the $700 billion they held before the recession.
When cash is loosened and spent on new projects, about half will be on foreign soil and half in the United States, he said.
“The good news is when we have it, we’re going to have a barn burner for a while,” he said.
Though Texas is considered to have been the “last in and first out” of the recession, the state faces additional problems if it does not reform its tax system, he said.
“Structurally it’s messed up right now, and we’ve got to fix it,” Perryman said. Though sales tax went up all but one year from 1961 to 2003, sales tax revenues have been up and down since then due to factors like increased Internet purchases, numerous exemptions and sales tax holidays.
The pressure caused by falling tax revenues is amplified by the number of new residents using the state’s highway, health care and educational systems. Some 1,20people have moved here every day for the last 10 years.
“We need a broad-based tax and that doesn’t have to be an income tax. It could be a broad-based sales tax or activity tax,” Perryman said. “Our one big source of revenue is not producing enough revenue. You can’t grow the economy fast enough. Structurally we don’t have the capability.”
Temple, Texas is a community with a diverse economic base that includes healthcare, distribution and warehousing, and manufacturing as the foundation. Within 180 miles of a population of 17.8 million, Temple is in a strategic location that is central within the southwest U.S. marketplace.