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Dallas Fed President: Indecision Stymies Economy

The engine is primed to rev up the national economy, but businesses aren’t putting the pedal to the metal, Richard W. Fisher, the president and CEO of the Dallas Federal Reserve, said today.

President and CEO of the Federal Reserve Bank of Dallas speaks at the Greater Austin Chamber of Commerce annual Economic Forecast event at the Hilton Hotel in Austin, TX - Dec. 16, 2011

The engine is primed to rev up the national economy, but businesses aren’t putting the pedal to the metal, Richard W. Fisher, the president and CEO of the Dallas Federal Reserve, said today.

At an event hosted by the Austin Chamber of Commerce, Fisher issued his predictions about the direction of the national economy, saying businesses have the cash on their balance sheets to start creating jobs, but that a lack of capital investment and slow job creation are “the frightful consequences of indecision” on Capitol Hill.

“I don’t care if you’re a Republican or Democrat, they’ve screwed us,” he said, emphasizing both political parties are at fault for the rising costs of government, such as the unfunded liabilities of Medicare and Social Security.

Fisher said that when the national recession began, the fear of systematic inflation taking root caused businesses to focus on cost containment, and "unemployment skyrocketed." After three years of cutting jobs and pinching pennies, businesses are still cautious about investing significant capital and hiring new employees, he said.

But it's not because they lack the funds. The Central Reserve bank has flooded the market with “cheap, relatively available money,” and businesses now have cash on hand to start investing, he said.

“The engine is primed, but no one is engaging it,” because indecision by politicians has destroyed confidence in the market, he said. Investors won't invest until they know how much it will cost to run a business, how high taxation will be, how much employee health care coverage will cost under federal health care reform, and what the regulatory environment will be like, Fisher said. It's now up to federal lawmakers to decide through fiscal policy reforms, “how do you incent [businesses] to invest here in America and create more jobs?” 

In his predictions for Texas, Fisher said to expect moderate job growth in 2012 at roughly 1.5 to 2 percent. “It’s not because we haven’t done well," Fisher said. “Even though we’ve had some slowing, it’s because the rest the country has caught up.”

According to statistics released by the Texas Workforce Commission earlier today, national unemployment is falling toward Texas' unemployment rate. Over the last year, Texas’ unemployment rate has hovered above 8 percent, while the national unemployment rate has dropped from 9.8 percent to 8.6 percent.

Although most people believe oil and gas is the biggest driver of the Texas economy, exports also play a huge role, Fisher said, and therefore Texas has been more affected by the slowing of the world economy than other states.  “With the world slowing down, that hurts our economic growth,” Fisher said. According to the U.S. Census Bureau, 16.2 percent of U.S. exports shipped from Texas in 2010.

The biggest depressant on the Texas economy in 2012 will be government cutbacks, particularly to public education, Fisher said. In a report published by the Dallas Federal Reserve on Thursday, analysts said K-12 education has decreased by an annualized rate of 5.5 percent. That number would have been much higher — 9.8 percent —  but nearly half of those teachers found jobs at private schools.  

Federal government cutbacks will also affect the state economy, he said.

“Some people don’t like to talk about it — we do depend on the federal government for a lot of spending here,” Fisher said. He called this “both good and bad.” For example, troops coming home from wars abroad who are stationed in Fort Bliss, a mainstay of the El Paso economy, will aid the economy in the next year. But Texas will be “hit like everybody else” by cuts to federal programs, he said.


This graph shows the Texas Leading Index, as determined by the Federal Reserve Bank of Dallas, from January 1991 to October 2011. The index is a tool used to forecast the future of the state's economy using eight leading indicators, including the value of the dollar in Texas, the price of oil, the number of well permits, the Texas Stock Index, the number of claims for unemployment insurance, help-wanted advertising, average working hours in Texas manufacturing facilities and the Leading Index for the U.S. as a whole.  

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