Yesterday the AAS covered the new report from the Dallas Federal Reserve, Recession has landed full force in Texas. Here’s the link the the report, Recession Arrives in Texas: A Rougher Ride in 2009. According to the report, the recession had spared Texas, compared with the rest of the country. However, our good fortune may be near an end.
Through much of 2008, the Texas economy continued to expand while the nation fell into recession. Growth in the energy and high-tech sectors and rising home prices were key factors in making Texas’ economy one of the nation’s strongest.
In the last half of the year, however, the state’s economic conditions deteriorated rapidly. The weakening was primarily due to the deepening global financial crisis and sharp declines in energy prices, high-tech activity and exports.
This employment graph shows our rapid slide into recession.
Of Texas’ metro areas, Austin and Dallas are feeling the most pain. This confirms what we reported last week from the sales tax numbers the Comptroller’s office released last week.
According to the Dallas Fed’s business-cycle indexes for Texas’ major metro areas, the Austin and Dallas economies have slowed the most in recent months, while Houston has continued to grow.
In 2009, all the major metro areas in Texas will likely experience recessions. Their relative performance depends upon their industrial structures as well as local firms’ competitiveness.
Dallas has larger shares of jobs in the finance and insurance and real estate industries, which are at risk in the downturn (Table 1). It also has large shares in such cyclically sensitive industries as wholesale trade, information, and professional and business services. Dallas has small shares in noncyclical industries such as health, leisure and government. Austin has large shares in such cyclically sensitive industries as construction, wholesale trade and information.
Based on Beige Book comments, past cyclical swings and the location quotients, Dallas and Austin will probably be hurt the most this year. If energy prices drop much further, then Houston, with its heavy share of activity in natural resources and mining, will likely decline sharply as well.
Looking forward to the rest of 2009, the news doesn’t improve.
For all of 2009, the forecast is for employment to fall 2.8 percent, the equivalent of 296,000 jobs. Based on historical observation, this job loss is consistent with a rise in the unemployment rate to about 8 percent.
In sum, 2009 will be a difficult year in Texas as the state deals with the repercussions of the deep financial crisis plaguing the national and global economies.
Energy prices are hard to predict, and big movements could change the state’s short-term outlook. At the same time, improvements in world financial markets and overall economic growth would enhance the state’s growth prospects, particularly in the second half of the year.
While the short-term Texas outlook is weak, longer-term prospects remain healthy. Job growth, low business and living costs, and a young, fast-growing labor force remain positives that will help in recovery.
With those kind of job loss numbers, unemployment insurance (UI) factors ever larger in Texas’ economic future. The whining of those on the radical right is Hooverism re-cast for a new century. The macropocalypse is upon us. Gov. Rick Perry’s political posturing is not only bad for the businesses on whose behalf Perry claims to be advocating, but by missing out on the jobless benefits’ calming effect, it threatens to make our situation even worse. Economists agree that bad times are coming, even if only for a short time, and that UI is one of the best ways to stimulate the economy in a recession.
For more on what’s going on with the federal stimulus in Texas be sure and check out TxStimulusFund.com.