Kasper & Associates Market Update

The following excerpt from Economist Ray Perryman’s “The Perryman Report & Texas Letter” provides a long-term projection for the Texas economy.  He concludes that Texas will remain one of the strongest states for job creation and economic growth.

The start of a new year is typically a time when business owners contemplate moving ahead with the process of selling their businesses.  The M&A Specialists at Kasper & Associates are more than happy to meet with owners and their advisors to discuss options and current market conditions.

Best wishes for continued blessings in 2019,

Layne Kasper, K&A Managing Partner

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 The Long-Term Outlook for the Texas Economy

M. Ray Perryman, Ph.D.

The Texas economy has been among the fastest growing in the nation for a number of years. With more major corporate relocations and expansions than any other state, Texas is expected to continue to outperform most areas. A younger population will provide workforce advantages over time assuming appropri­ate preparation, and the energy sector will remain an important source of jobs and economic stimulus for the state. This issue of The Perryman Report & Texas Letter summarizes The Perryman Group’s latest long-term projec­tions for the Texas economy.

For purposes of comparison, The Perryman Group’s latest long-term forecast for the nation as a whole indicates moderate growth. During the 2017 to 2045 period, US real gross product is projected to expand from an estimated $16.8 trillion to $35.3 trillion, a 2.69% annual rate of growth. Employment is forecast to reach 212.1 million by 2045, up from 146.4 million in 2017. This 1.33% annual rate of growth in US employment will result in the addition of some 65.6 million jobs.

International Trade

As a major exporting state, international trade is integral to economic performance. The United States is currently in the process of negotiating or rene­gotiating trade agreements with several major trading partners. The more successful these nego­tiations are and the fewer im­pediments to trade, the better the Texas economy will perform. The US-Mexico-Canada Agreement (USMCA) is particularly crucial to the state.

For Texas, nearly 37% of ex­ports go to Mexico, with another almost 9% to Canada, which is the state’s second-largest export market. On the import side, 34% of Texas imports are from Mexico and almost 7% are from Canada, the third largest. (The state’s sec­ond largest source of imports is China, with over 16%.) Move­ment toward agreements with these key trading partners enhances growth prospects for the Texas economy. About $1 of every $6 of US trade is from Texas; the future of trade and the future of Texas are inextricably linked.

Energy

The energy sector has long been an important component of the Texas economy. Oil and natural gas exploration and production is currently a source of significant growth with rig counts well over 500, almost double the level of two years ago. Although histori­cally a cyclical industry, with substantial changes in activ­ity levels in response to price parameters, the long-term expectation is for some calm­ing (though not elimination) of cycles.

Long-Term Outlook

The Perryman Group’s long-term forecast for the Texas economy indicates growth in real gross product at a 3.21% annual pace, lead­ing to an in­crease from almost $1.7 trillion in 2017 to over $4.0 trillion in 2045.

Business cycles are inevi­table and the state is facing challenges such as a need for additional infrastructure and education investment. Even so, Texas is likely to remain among the strongest states for job creation and economic growth for the foreseeable future.