Perryman: Economic Recovery Will Be Slow By BRIAN PEARSON, Business Editor   |   Jan 15, 2010

The recovery from the worst economic meltdown since The Great Depression will be slow, marked by ups and downs, the troughs growing shallower by year's end, Waco-based economist Dr. Ray Perryman predicted Thursday in his annual economic-forecast event in Tyler.

In Tyler, employment, home construction, the filling of office space and manufacturing will see steady improvement, but it could take until year's end for the economic snowball to pick up speed, Perryman said.

"We're a lot better off than we were last year," Perryman told a sold-out audience of 400 at the 26th-annual event, held at the Ornelas Activity Center.

Perryman said the key to Tyler's economic future lies in the hands of the education community, an asset he called "the knowledge economy."

Institutions such as Tyler Junior College, The University of Texas at Tyler and UT's health science center here helped keep the recession from digging too deeply into the community.

Banks and the medical community did their part, as well, and will continue to do so.

During a news conference before the event, Perryman said Tyler has the potential to be a hotbed for technology and biotechnology. Tourism and retirees could provide further economic seasoning, he said.

Looking locally at the gross domestic product, Perryman said he expects output to grow 4 percent a year for the next five years, with employment growing 2 percent each of those years.

"We're already seeing a little employment growth in Texas," he said.

He said the construction industry here was hit hard because of the Tyler area being overbuilt, but that should pick up this year thanks to slowly declining inventory attributed to a spark in the real estate market during the last few months of 2009.

"The housing market was a little overbuilt, but it wasn't as overbuilt as some of the other parts of the country," Perryman emphasized. "I think you'll see the housing starts start picking up."

With commercial vacancies increasing last year, office-space construction could remain slow until those spaces fill up, he added.

Factory orders have picked up in the Tyler area, as has product inventory, which means hiring will follow, Perryman said.

The Tyler area in recent years has lost 3,000 manufacturing jobs, with Crane, Trane and Tyler Pipe all reporting layoffs.

Perryman told the lunch crowd that competition makes it tough for a community to position itself as a technological hotbed.

"Tyler isn't the only city that woke up one day and said, 'hey, let's be a tech center," he said.
However, Tyler -- having the strong education and medical communities, not to mention being a "pleasant place to live" -- is a strong candidate for technology.

Perryman said the federal stimulus efforts, including last year's Cash for Clunkers car-buying program, helped boost the economy. Another stimulus package would provide further help as long as it resulted in short-term job creation.

However, the health care bill on the congressional table would create problems that the country would spend the next four or five years having to fix, he said.

"It's a bad bill," Perryman said. "This particular policy there has gotten way off track."

Because unemployment statistics don't include those who have given up looking for work as well as the underemployed and part-timers, the employment picture is worse than it appears. The nation's unemployment rate is about 10 percent, but it's 17.3 percent when factoring in those not looking for work or those working jobs well below their skill levels.

Positive economic signs include an increase in home sales, imports, exports and factory inventories.
"It's going to take a while for the momentum to build up," he added. "People have a long way to go before they start doing a lot of hiring."

On a side note, East Texas eventually will be boosted by a revival in the natural gas industry.
Perryman predicted natural gas, now hovering around $5.70 per million Btu, to rise to about $7.50 in three years and hit double digits within 10 years.

Dr. Kirk Calhoun, the UT-Tyler health science center's president, said after the lunch that his institution will do all that it can to fortify the education community here.

"America's future is not in making cheap gadgets," Calhoun said. "It is in a knowledge economy, and it's key that we prepare the young people for that economy."

Lonny Uzzell, Southside Bank executive vice president, said he was flattered to hear Perryman assert that the stable banking community here helped the Tyler area from slipping deeper into the recession.

"His recommendation is that we continue what we're doing, and, of course, that's our plan," Uzzell said.

Tom Mullins, Tyler Economic Development Council president and CEO, said Perryman once again injected positive energy into his annual economic forecast.

"He's a glass-is-half-full kind of personality," Mullins said. "Even when the economy is in bad shape, he finds positive indicators to emphasize."