SMU Cox School Dean: ‘This is the Worst Economy Of Our Lifetime In Terms of a Slow Recovery’

'Once we get out of this bubble we're living in, it is really depressing,' says SMU Cox School of Business Dean Al Niemi Jr.
‘Once we get out of this bubble we’re living in, it is really depressing,’ says SMU Cox School of Business Dean Al Niemi Jr.

Thanks to population growth, the shale/fracking boom, and strong real estate fundamentals, Dallas-Fort Worth and Texas continue to be islands of prosperity in the midst of a U.S. economy that’s lackluster—or worse. That was the message today at the sixth annual SMU Cox Economic Outlook Panel, presided over on the Southern Methodist University campus by Al Niemi Jr., dean of the university’s Cox School of Business.

“This is the worst economy of our lifetime in terms of a slow recovery,” Niemi said bluntly of the big picture in the United States, kicking off forecasts for 2014 by seven Cox School experts. Recovery from the Great Recession, he said, is the slowest of any rebound from a downturn since the 1950s. The current one has been marked by weak consumer spending, a fragile housing market, and an unemployment rate that’s likely to stay above 7 percent next year, Niemi said.

The only reason U.S. unemployment has been ticking down at all, he added, is because people keep dropping out of the work force. That’s pushed the labor-force participation rate down to 62.8 percent, its lowest point ever, he said. If the participation rate had held constant, Niemi said, the jobless rate would be 11.8 percent.

For 2014, the dean predicted modest improvement in real GDP, with growth hitting 2.4 percent, up from 1.7 percent this year.

But, “Once we get out of this bubble we’re living in, it is really depressing,” Niemi said, contrasting DFW and Texas with the rest of the country. “We are in the catbird seat. … We are living in a world that no one else is privileged to live in.”

One big reason for the state’s prosperity is the “shale revolution,” said Bruce Bullock, director of the Maguire Energy Institute at SMU Cox. With the use of cutting-edge technologies like hydraulic fracturing and horizontal drilling in shale formations such as the Eagle Ford and the Permian Basin, Texas is producing as much oil today as it did during the mid-1980s boom, Bullock said.

The resulting abundance of cheaper energy has contributed to a reduction in U.S. manufacturing costs, he added, making the U.S. much more competitive with other countries including China.

The U.S. stock market also has been a positive, rising by 27 percent this year, bolstering pension and retirement funds and widening corporate profits, said Don Shelly, a professor in the Cox School finance department. In fact, he said, while corporations typically enjoy profit margins of 6.1 percent, that figure has climbed now to 9 percent—”very high.”

Although he would stop short of calling the current market rise “a bubble,” Shelly did say, “We’re at ‘frothy’ levels by historical standards.”

One of Shelly’s colleagues in the Cox finance department, Harvey Rosenblum, said that monetary policy—i.e., low interest rates—has depressed business confidence and hampered spending by consumers. Many people fear their incomes are going to be permanently lower in the future, Rosenblum said.

A brighter outlook, at least for DFW, came near the end of the panel’s discussion. That’s when Chuck Dannis, an adjunct lecturer in the SMU Cox finance department, surveyed the North Texas real estate market. Dannis said that in terms of new construction in commercial real estate among major metros, DFW ranked No. 2 in the country in the industrial sector, No. 2 in retail, No. 3 in apartment building, and No. 5 in offices.

The area also ranked No. 1 in the country in both the retail and the office sectors in terms of absorption, or consumption of space, Dannis said. With a median home price of $170,000 here, he added, the North Texas housing market is on track to sell $28 billion worth of existing homes in 2013.

Bottom-line message of the day: In America next year, DFW and Texas are the places to be.

7 comments on “SMU Cox School Dean: ‘This is the Worst Economy Of Our Lifetime In Terms of a Slow Recovery’

  1. In ’08, we first heard the term “Great Recession.” When Obama took office, Jan. 20, ’09, America shed seven million jobs that very month. Extraordinary, and it had been that way throughout George W’s final months. And all of those workers lost health care with those jobs, too. Great recession, indeed. It was much more than a so-called “normal” economic cycle. I heard Democrats and Republicans throughout ’08, as the recession worsened, say privately that whoever lost the White House would be better off because the winner would inherit a mess that would take many years to recover. No kidding. This current national environment, with Texas on top, is the polar opposite of the situation during the “Reagan recovery” of the mid to late ’80s. At that time, it was the country at large ascending while we were in the toilet. Bond houses and investment bankers all over NY had the bumper sticker “Don’t Mess With Texas” prominently displayed in their offices…and they weren’t referencing litter! For them the words had real meaning.

  2. OMG….too freaking easy. SMU/Bush LIE-Berry/Glenn Hunter/D Mag……..OF course it is the worst economy we need to start another useless war so some local war mongers for profit can make some mega bucks off the deaths of other peoples children. I mean this economy is never going to work without a wealthy dumb as dirt Texas ahole at the helm and he must be white and he must be Christian. Right Glenn Hunter? Right? Of course right.

  3. Such a tired line, but typical because for someone to believe different they must be in need of drugs, right? Is that the point of the put down? Yet you know it is only the reality in a small D bubble. Look outside your D window and see how a majority of the world feels about the squander of money, limbs, life, treasure and human life wasted, WASTED, during the Bush years. You want to have a serious discussion about medications? How about the fact that our Iraq & Afghan vets will be on meds (as most of their family members, or those who stay together) for the rest of their lives. Of course they are NOT the children of D staffers or D readers as they wouldn’t remotely consider sending THEIR kids. It is “other people’s kids”. So attempt to remember when reading the right wing Hunter BS here, that it is geared for a small segment of bubble people. The world and History has a different view of Bush and to spew little bumper sticker snarky snide out is so 1990-Karl Rove.

  4. Those who opposed the liberation of 50 million people will never see anything but the cost.

  5. Maybe America should have voted for someone who had a knowledge of how a market economy works.

  6. The Republican party is dead while the media continues pretending to the contrary reporting on it as if it s still a viable party. So, there is no alternative to the lying, treasonous president we have in office. While on one day it will leak out that he is second coming of Adolph Hitler, the next those editors way up in the global elite will have the media reporting on him smiling, kissing a baby, or ushering out sweetly his favorite catchphrase of “Hope and change!”
    Once again, there is no Republican party. This means, concerning our present predicament, there is nothing that we need to do other than come to grips with this truth.