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There Wasn’t That Much Good News at SMU Economic Forecast Session

Lower oil prices to mean 'significant' Texas budget deficit, expert predicts.
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While the North Texas economy continues to be relatively healthy—especially in the real estate sector—the outlook is much bleaker for the country as a whole. That was the consensus of a group of business-school academics at today’s eighth annual SMU Cox Economic Outlook Panel at Southern Methodist University.

The panel’s tone was set by Albert W. Niemi Jr., dean of SMU’s Cox School of Business. Calling the current U.S. economic recovery the slowest since the 1930s, Niemi said consumers still are carrying a tremendous debt load. He put the nation’s “real unemployment rate” at 10.5 percent—roughly double the official rate—because so many discouraged workers have dropped out of the labor force. And, while the economies of 15 states including Texas are booming, he added, “35 are sideways or decelerating.”

“So, Merry Christmas!” Niemi said with a laugh. “The good news is … it’s great to be in Texas!”

Chuck Dannis, a real estate adjunct professor, echoed that. In terms of “net absorption,” Dannis said, Dallas-Fort Worth ranks among the top three U.S. metros in all four commercial real estate property types: industrial, office, retail and multifamily. In addition, houses are very affordable in North Texas and continue to play a big role in attracting companies like Toyota from other states, he said.

Bruce Bullock, director of SMU’s Maguire Energy Institute, was much less sanguine about the battered energy sector, where the price of West Texas Intermediate crude oil dropped today to $35.62. That was only a few dollars above its $32.40 low in 2008, during the financial crisis. And, Bullock expects to see another year of low oil prices. His best guess for 2016: “Somewhere between where we are now and $50 a barrel.”

“Doom and gloom” was the general theme of the outlook panel, experts in banking, the stock market, and entrepreneurship agreed. They pointed out that community banks are disappearing, corporate profits are declining, and Texas exports will be hurt by a stronger dollar and China’s slumping economy.

Bud Weinstein, an associate director of the Maguire Energy Institute, added to the panel’s sour mood by predicting that, due to tough times in the oil patch, severance and other Texas state tax revenues will fall, putting a crimp in state and local budgets including those for school districts.

When the 85th Texas Legislature convenes in 2017, Weinstein said, “We’re going to be looking at a significant budget deficit, and we never raise taxes in Texas. … The fiscal outlook for Texas is going to be ugly.”

All of which prompted Niemi to conclude the session with tongue planted firmly in cheek. “This has been a Merry Christmas party,” he said. “All this good news.”

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