The Texas economy is expected to make a “soft landing” this year, according to the Federal Reserve Bank of Dallas.
Job increases are slowing. The bank expects jobs to grow by 1.4 percent this year, significantly lower than last year’s 3.5 percent job growth and below the state’s annual 2 percent trend.
A recession in Texas is not predicted.
“The Texas economy is forecast to grow more slowly this year and likely below trend, but we’re not predicting it to contract,” Orrenius continued.
The U.S. Bureau of Labor Statistics reported 650,100 jobs were added in Texas last year. It is expected to revise the report after making seasonal adjustments.
The energy sector saw the highest gains at 12.7 percent, followed by leisure and hospitality at 7.1 percent and professional business services at 6.4 percent.
The Texas rig count has been trending up with oil prices, which is a positive for the state, but the increases are not as high as would have been expected five or 10 years ago, according to Orrenius.
“We can’t expect the boost from the energy sector today as we would have years ago in Texas,” Orrenius said.
Geographically, Austin outperformed the rest of the state with 4.2 percent job growth, although hiring slowed dramatically in the high-tech sector at the end of the year.
Houston followed Austin with the bulk of its growth in the energy sector.
Home Sales, Prices
Higher interest rates have cooled the Texas housing market, and home prices are dropping.On Feb. 1, the Fed hiked the interest rate by 0.25 percentage points, bumping the federal rates to a target range of 4.5 to 4.75 percent. It was the eighth consecutive increase since last March.
Austin has seen the greatest decline at about 9 percent from its peak, followed by Dallas.
“I think there is room for a continued normalization of housing markets,” Orrenius said, adding that the majority of homeowners still have a lot of equity in their homes.
Looking Ahead
The Fed’s rate hikes are meant to slow the economy in order to temper inflation.“The summary is that the Fed’s speed bumps are having the intended effect,” Orrenius explained. “Although again, with the caveat of the disappointing jobs report, perhaps.
“The speed bumps are working,” she added.