Is the Texas Economy Headed Towards a Recession?

The drop in oil prices – while easier on your wallet – has some ripple effects.

By Rhonda FanningMay 1, 2015 8:25 am| ,

When a leading economist warned Texas that it should brace for a recession, the Dallas Federal Reserve Bank wasn’t rattled. Then-President Richard Fisher said, if anything, the state might experience a downturn in economic growth. But, here we are on the first day in May – after months of negative workforce and economic data. Dan Zehr with the Austin American-Statesman spoke with the Texas Standard to answer the question: Is the Texas economy in the middle of a recession?

A recession is defined as about six months – or two consecutive quarters – of negative economic growth. Zehr says the idea behind a potential Texas recession came from Michael Feroli, Chief U.S. Economist at J.P. Morgan. He saw the effect sharply dropping oil prices had within the state.

“Everyone knows that Texas is an energy state and when oil prices go down, growth can go down once it hits a certain point,” Zehr says.

Oil and gas make up about two percent of employment, but 13 percent of the economic output, a fairly significant portion of Texas’ economy.

“While we may in fact see a recession in Texas, it doesn’t look like it will have major impact on employment in terms of slowing down the state’s massive employment growth,” Zehr says. “But how far that really goes, how deep it really goes, no one seems to think it’s gonna go too far because Texas is exhibiting so much strength in other areas.”

The bottom line: we might start to see a slight decline but the long-term outlook for the Texas economy is still quite positive.