A look at the Texas economy: ‘We’re kind of in a holding pattern’

Job growth showing healthy signs, but pessimism in the market persists.

By Sean SaldanaNovember 30, 2022 2:59 pm,

When it comes to assessing the state of the economy, there are a number of figures economists look at to get a sense for how things are going.

There are some of the obvious ones like gross domestic product (GDP) and inflation, which most people are feeling the pressures of right now.

But there are also a multitude of other, less obvious indicators that reveal important information about the state of the economy. 

Joshua Roberson is Lead Data Analyst at Texas Real Estate Research Center at Texas A&M who recently coauthored a report looking at the state of the Texas economy. He joined the Texas Standard to talk about some of his team’s findings. Listen to the story above or read the transcript below.

This transcript has been edited lightly for clarity.

Texas Standard: I understand you recently co-authored some research titled “Outlook for the Texas Economy.” Tell us what you were trying to accomplish there. Sort of get a broad overview of where we’re headed?

Joshua Roberson: Yeah, so we produce this report every month and we basically keep our eyes on what’s going on in the economy. Obviously, there’s a lot of changes going on right now. There’s a lot of interest in  where things are going to go. And so what we aimed at this past month is just taking a look at what was happening for that month. 

Well, let’s talk about some of the factors that you looked at. I think there’s one thing most folks know about, it’s that interest rates are high and they’ve been rising. How is this affecting Texans and what’s your forecast on the interest rate front? 

So, right now the most obvious impact is the housing market. The housing market was basically on fire late 2020 and into 2021, but there was a noticeable difference once interest rates started to rise. A lot of the price growth has slowed down and we’re kind of in a holding pattern in terms of what’s going to happen next with interest rates. I mean, the whole goal is to control inflation. And inflation has slowed down some, but we’re still at an elevated state. And really until we get that under control, it’s likely, at least according to Federal Reserve messaging, that rates will continue to increase. So it’s anyone’s guess in terms of what will happen to mortgage rates into the coming year. I think some of the numbers that I’ve heard – this kind of the 6% range maybe or 7% range, which is still a lot higher than what it’s been – but in the long scope of things, that used to be an average interest rate long, long time ago.

Oh, yeah. I remember the 19% interest rates and all that kind of craziness. Now, I want to look at something else a lot of people would think of as good news. Texas added 40,000 jobs in September with cities like Dallas and Houston adding more than 10,000 each. I said that sounds like good news, but how does that affect how you think about a possible recession future?

You know, that’s been a pleasant surprise. I mean, again, there’s a lot of uncertainty and it shows in sentiment. Right now, there’s still a lot of pessimism out there in the market. But for the time being, job growth has been pretty healthy. I think part of the concern has been who’s going to be the industry leader. Right now, throughout the pandemic, professional business services was a big growth factor. It’s still growing. It’s slowed down some, but it’s still doing pretty strong.

Well, but it’s not across the board, is it? I mean, your research shows car dealerships dismissed 1,400 workers or something due to concerns around inflation. We see how this is all interconnected, obviously.

Yeah, I mean, in certain sectors, there’s been a lot of volatility. Retail pay being one. I think a lot of it’s just kind of whatever the news is at the time, you know, depending on how open the economy is and just how much people are going to spend. So retail is one of those. It’s been kind of all over the place the past few years, but wholesale trade has done really well right now. And other sectors, I mean, Texas has benefited in the sense that most major sectors have recovered from the pandemic. So, yeah, for the time being, that looks pretty good.

Well, I mean, obviously, Texas has a reputation as a major energy state. I was surprised to read the U.K. now receives nearly 10% of Texas’s total crude oil exports. I presume that has to do with the war in Ukraine.

Yeah, there’s definitely all the shake ups in the global oil market which has led to some interesting statistics. Yeah, like you said, Europe taking in more of our oil. 

But good news for the Texas energy sector, I would imagine, or at least oil and gas. 

It’s good news, but there’s, again, a lot of uncertainty, particularly in the energy markets. So it’s going to be hard to see a lot of investment going in that direction with as much uncertainty. But yeah, in the short term, it’s good news.

You know, I’m picking up on a word you’re using quite a bit here: “Uncertainty.” Which brings us to a recent Bureau of Labor Statistics data report saying that Texas has a million job openings – or had a million job openings – at least in September. How are you thinking about these sorts of things? Would you call it a spike or a quirk or an anomaly or what?

Yeah. I mean, so job openings are still really high. Hiring is a little down according to that same data set. But yeah, that’s just one of the quirks that we have right now. And again, with this buzzword as much uncertainty there is, it’s really hard to forecast what’s going on.

Well, when you store all these numbers and concerns and uncertainties together, what are you thinking about the outlook for Texas, at least in the near term? 

That’s a great question. I mean, again, we’re kind of in a holding pattern, but if it’s anything like it was last, you know, ten years ago, I mean, Texas found its way to kind of outperform everyone else. I mean, we did have a lot of high income earners moved to the state. So we do have a pretty robust job force. And so we may find ourselves in that same spot where, you know, we may not be growing as fast by Texas standards, but maybe outperforming a lot of the other states.

I guess it depends on what your personal situation is, but should people be worried? Should they be conservative in terms of how they use their money, have a sort of a save-first approach when it comes to personal income? What would you advise an individual saying “well, I’m seeing all these signals where I’m not sure how to think about it”?

Yeah, I’m not sure they need me to tell them to keep an eye on it. I think they already are, really. Again that’s showing up in a lot of the consumer sentiment surveys. Until the inflation numbers get down, I think it’s going to take a while for people’s trust to feel confident again. 

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