The President of the Federal Reserve Bank of Dallas told students at Texas A&M University last night that he is bullish on the Texas economy, and said the state has emerged from the crash in oil prices stronger than ever, thanks to its amazingly diverse economy, News Radio 1200 WOAI reports.
"We expect job growth in Texas in 2017, our Dallas Fed official estimate, is in exces of 2 1/4%, Robert Kaplan told students. He said that is the strongest job growth estimate for Texas in three years, and one of the stronges in the entire USA in 2017.
Kaplan said the fracking industry in Texas is efficient enough to be able to produce oil and make a profit with the world oil price under $50 a barrel, which will short circuit any attempts by OPEC to cut production to try to raise prices.
"The energy business may not be a tailwind, but at least its not a headwind any more," he said. "It is neutral, and is in the process of becoming a tailwind."
Kaplan says economic growth nationwide will remain more sluggish than it was in the 1990s and 2000s, but it will be strong enough to absorb workforce growth, and he says it will be strong enough to support 'gradual and patient' interest rate increases.
Kaplan says the challenges for the U.S. economy do not come from globalization and immigration as much as they come from technological change. He says the consumer economy has still not absorbed the challenges of the Internet, which enables consumers to have more power over their purchasing decisions than ever before, by being able to check a wide variety of prices, and make the decision whether to buy on line or from a traditional retailer.
He also said many of the challenges in manufacturing and other core industries which Donald Trump and his supporters blamed on immigration and globalization were really caused by increased automation of manufacturing processes, and he says the answer to that is more robust skills training.
Kaplan says another challenge that will loom for the American economy in the coming years is increasingly large chunks of the adult work force being out of the employment economy, due to the retirement of the huge Baby Boomer generation. He says the workforce participation rate, which was above 80% in the 1990s, may fall below 60%, providing challenges for everyone from governments reliant on income taxes to the Medicare program.
He rejected claims that the current economic situation is a 'bubble' similar to the one that caused the Great Recesion of 2008. Kaplan said one of the problems with the economy over the last several years has been that homeowners and families have been 'rapidly deleveraging,' and paying down debt at a healthy rate. He says that leaves the country in a good position for a 'consumer driven' economic upturn.