Texas this week: Economist Ray Perryman wonders if the United States is headed for recession
Perryman said he believes job growth across the country is keeping the United States from entering a recession.
AUSTIN, Texas— In this week’s edition of Texas This Week, Central Texas economist Ray Perryman, Ph.D., looks at the state of the economy and whether the United States is headed for a recession.
Three things to know about Texas politics
1. Texas abortion ban goes into effect August 25
Texas law banning nearly all abortions will go into effect August 25. On Tuesday, the United States Supreme Court released its judgment in Dobbs v. Jackson, the Mississippi case voiding a woman’s right to access abortion-related health care by remanding the decision. to the states. The judgment kicked off the 30-day deadline for the Texas law to take effect. From August 25, performing an abortion will be a first degree felony unless a woman’s life is in danger. The law makes no exceptions for cases of rape, incest, severe fetal abnormalities, or women who express intent to self-harm. In an advisory, Texas Attorney General Ken Paxton said his office stands ready to assist any local prosecutor in pursuing criminal charges according to law.
2. Elementary School Principal Robb Has Been Reinstated
As families in Uvalde continue to demand accountability after a gunman shot and killed 19 students and two teachers at Robb Elementary School, the school principal was furloughed and then reinstated this week. Mandy Gutierrez was placed on paid administrative leave on Monday. Gutierrez came under scrutiny after a House committee report detailing the shooting found that Robb Elementary staff had a culture of complacency when it came to security and that broken locks were not repaired. Gutierrez refuted those claims in a letter to the committee, writing that a guard checked all the classroom locks every night. The next day, her attorney shared a letter from the superintendent saying she could return to her duties as principal. Meanwhile, the Uvalde School Board and City Council have both voted to send resolutions to Governor Greg Abbott asking him to call a special session to raise the purchase age for an assault rifle from 18. at 21 years old. In an interview with KVUE’s sister station in Houston, Governor Abbott would not say whether or not he will call a special session.
3. Lieutenant Governor Dan Patrick tests negative for COVID-19
Lieutenant Governor Dan Patrick no longer tested positive for COVID-19. According to his campaign, he tested positive last Saturday and had mild symptoms. On Friday, the campaign shared by Patrick tested negative and has no symptoms.
Economist Ray Perryman, Ph.D.: The United States is not in a recession
This week GDP, gross domestic product, fell for the second quarter in a row. By the standard definition, this negative growth in the US economy signals a recession. But some economists say that is not the case for the United States right now.
Ray Perryman, Ph.D., economist, president and CEO of economic research and analysis firm The Perryman Group, joined KVUE to explain why.
Ashley Goudeau: There’s been a lot of talk about the big R-word this week. The head of the Federal Reserve says the United States is not in a recession, at least not yet. The White House has echoed this message that we are not in a recession, but some Republican politicians, including Governor Greg Abbott, say we are. You are an expert with over 40 years of experience in this field. What are you saying?
Ray Perryman, Ph.D.: “I really don’t think we are. We saw the numbers this morning. Gross domestic product is now, has now declined two straight quarters, which is a definition that people sometimes use. But the previous quarter was mainly due to the unloading of some boats. We brought our imports up and solved some supply chain problems. You really are not in a recession when you gain 400,000 jobs a month. And so I think we definitely have a lot of headwinds in the economy. There are a lot of challenges right now. From an individual point of view in your own life, it doesn’t matter whether you call it a recession or not. But we we’re not seeing the kind of things you typically see in a recessionary economy at this point.”
Ashley Goudeau: You know, one of the things you said is one of the main reasons the Fed says we’re not in a recession is the labor market, right? The unemployment rate in the United States is near its lowest level in 50 years. Wages are rising, companies are hiring. So what is the role of job growth in the recession equation?
Ray Perryman, Ph.D.: “Well, that’s very important because the fundamental question in a recession is whether you’re growing or not? If the economy continues to hire many, many hundreds of thousands of people each month, it’s still growing. Now we’re facing many headwinds: inflation challenges, supply chain challenges, and more. Households need to do in the face of these things. But underneath all of that, there are also indicators that we continue to grow.”
Ashley Goudeau: Yes. However, many economists still warn that a recession is likely to occur later this year or in 2023. In your opinion, tell us what would really signal a recession.
Ray Perryman, Ph.D.: “Well, for me what we would see is some of the things that we are seeing now in addition to some weakness in the labor market. consumption. It’s still going up modestly right now. There would be basically a confluence of things all going down at once, spreading across a wide range of industries. And we just don’t see that at this point. We I may or may not see the future. Personally, I think we will avoid a recession, we will certainly avoid a severe recession. But we are currently facing many economic challenges that are causing difficulties for many people.
Ashley Goudeau: Earlier this week the Fed decided to raise interest rates again in an attempt to combat our record high inflation. Now, rising interest rates are supposed to deter people from borrowing money, slowing demand so those prices go down. But in Texas, we’re still seeing record spending, so much so that the Comptroller had to revise its revenue estimate, increasing it by $14 billion. So explain to us again, make it make sense, Dr. Perryman, how does the rate increase help?
Ray Perryman, Ph.D.: “Sure. Well, raising rates basically increases the cost of borrowing money initially, just in some cases, in a fairly limited area where the Federal Reserve controls. But beyond that, it affects mortgage rates to some degree. It makes its way into credit card rates. The bank prime rate, it affects lending rates for a lot of businesses. A lot of people. “other loans are tied to the prime rate. So it’s having a lot of impact there. What we’re seeing in Texas is a lot of underlying strength in our economy, but also a lot of the increase in controller revenue, which is very welcome for Texas, is what’s happening in the oil and gas industry because it generates a tremendous amount of utility tax revenue, sales tax revenue, many other types of income that come into play, tax income from francs hise. All of this is fueled by real underlying strength in the oil and gas sector, which allows Texas a bit of a cushion that some states don’t have.”
Ashley Goudeau: People feel it at home. And so whether you say we’re in a recession or not, whether we’re heading into a recession or not, people back home say, “I have to pay, you know, almost double for some stuff.” Will this be corrected?
Ray Perryman, Ph.D.: “Well, again, to some extent it will. I think by the end of the year you’ll see inflation being much lower in the States States right now. In some cases you’re seeing prices drop from the levels we’ve seen recently. Things like used cars that were terribly inflated by the situation where we couldn’t get tokens for make new cars, that kind of stuff, I think you’ll see a lot better inflation situation in a few months than what you’re seeing right now. And I think for most people right now, I mean, as you pointed out we’re pretty close to full employment most people who want a job have a job wages are going up the real thing that’s hitting people right now isn’t the traditional things you have in a recession, but it’s the blow of inflation . It’s the fact that the things you buy each month cost more. And therefore, it forces you to make decisions that you wouldn’t have to make otherwise. I think that’s the question that probably confuses most households and consumers more than the underlying economy about whether or not we’re in a recession. »
Ashley Goudeau: In your opinion, what is the real state of our economy, both for Texas and for the United States right now?
Ray Perryman, Ph.D.: “Well, at this point, again, I think there are underlying factors that seem solid, like we can move forward productively. Growth [is] slow down, of course, but [we’re] not see a big decline in jobs or anything of that nature. Texas is doing a bit better than the country as a whole, but the US economy and the Texas economy are facing headwinds. The inflation that we are experiencing is very significant. Now, an important distinction that people have to make is that everyone wants to compare this to the 70s and 80s, I was actually an economist even then. And this is not structural. In other words, we have not institutionalized this inflation as we did then. It’s one that’s bound by a crazy set of circumstances that come into play all at once: coming out of a pandemic, lots of extra money in people’s pockets, supply chain challenges trying to get going, the war in Ukraine disrupting things, China shutdown lowers production again. I mean, we’ve really had a perfect storm of things that are generating this inflation, but it’s all sorts of things that sort themselves out over time without having to make big structural changes in the economy.”
Click here to learn more about Perryman and find a link to his latest publications.
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