Texas Economy 'expanding at a solid pace,' says Dallas Fed cconomist

For Immediate Release: June 19, 2018

DALLAS—Texas economic growth continues to advance, according to the Federal Reserve Bank of Dallas’ latest Texas Economic Update.

“The Texas economy is expanding at a solid pace,” Dallas Fed Economic Policy Advisor and Senior Economist Anil Kumar said in a video accompanying the release. “The Texas Business Outlook Surveys indicate that economic activity accelerated in May, with most key indexes hitting multiyear highs.”

Year to date, state employment has grown at a 3.6 percent annualized rate, driven by job gains in the goods-producing sector, according to the report. That growth has been broad based across Texas’ major metro areas, with Houston leading the way and Austin and Dallas–Fort Worth also showing solid gains.

The Texas unemployment rate rose in April to 4.1 percent but remained flat in May. This is “mainly due to strong labor force growth,” Kumar said. In other words, more workers were seeking jobs in an already tight labor market. This tightness has shown up in reports of widespread labor shortages among the Dallas Fed’s Beige Book and outlook survey contacts.

“Tight labor markets are also feeding into wage growth,” Kumar said. “The wage indexes from the Texas Business Outlook Surveys are well above their long-term averages. Although payroll survey data indicate that wage pressures may still be moderate overall, there are strong signs of pickup in certain sectors, such as construction and leisure and hospitality.”

The Texas Employment Forecast for 2018 was revised down slightly to 3.3 percent in June from 3.6 percent in May but remains well above 2017’s growth of 1.9 percent. Kumar pointed to some risks in the forecast.

“Amid this broader economic strength, I do, however, see some downside risks: rising interest rates, labor supply constraints, recently announced tariffs and significant remaining uncertainty regarding trade policy and NAFTA [the North American Free Trade Agreement],” he said.

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Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org