Dallas Fed Sees Strong Texas Economy, Robust Job Growth in 2018

The Chief Economist for the Federal Reserve Bank of Dallas says Texas should continue to see robust growth for the rest of 2018, driving by higher oil prices, increasing exports and a strong national economy, but Dr. Keith Phillips told the Service Corps of Retired Executives that there are some headwinds on the horizon, News Radio 1200 WOAI reports.

Phillips predicted Texas will see 3.4% job growth when the books are closed on 2018, that is far stronger than the nationwide average of 2.1%.  Phillips says San Antonio metro should see job growth in the 2-3 percent range.  He says the metro is experiencing 'steady growth,' but due to the prevalence of non cyclical employers like health care and the military, San Antonio frequently doesn't see the sharp highs and strong turndowns seen in other markets.

One area which has begun to cause concern in San Antonio is housing costs.  

Phillips says rising housing costs are always a worry, especially in a city and a state which has leveraged its low cost of living into explosive economic growth over the past forty years, but he says Texas housing prices are still moderate compared to many big cities, on the east and west coasts, and even Midwestern cities like Chicago.

"Housing has become more expensive, particularly in areas like Dallas, and we are losing some of our edge, we still have a large amount of affordability, especially compared with other areas around the country," he said.

For example, the Dallas Fed says 59% of homes which are on the market at any given time are affordable by a family making the median San Antonio household income. While that is down from 64% before the Great Recession, that is still positive compared with San Francisco, where only 6% of homes are affordable, even considering higher median household incomes in the Bay Area.

Continued population growth in Texas is also an advantage, as Texas continues gaining population both by immigration from other states and from other countries.

"Texas has a younger median age of the population," he said. "Texas has a median age of 34, compared to 37 as a median age nationally."

In fact, Phillips warned that efforts to reduce immigration is one of the headwinds potentially cutting into Texas' economic growth.  He says with the state's unemployment rate at or near historic lows, if employers cannot find workers in Texas, today it is far easier to simply move operations to the places where the people are, costing the state jobs in the long term.

"We are at historically tight labor markets, and typically when that has occurred in the past, Texas has been able to draw people from other states," he said. "But now we have historically low unemployment throughout the country, so it is being harder to attract workers."

One other worry Phillips expressed going forward is tariffs or the end of treaties that might restrict trade. He says Texas has always been a strong exporting state, but that edge has grown in recent years, due largely to new federal laws allowing the export of crude oil. He says petroleum products and agriculture make Texas by far the leading exporter in the United States and one of the largest in the world, and any moves that would curb those exports would be damaging.

"Texas is really dependent on exports, so what happens this year going forward in terms of trade wars or restrictions on trade will have a pretty important impact on the state of Texas," he said.

But Phillips says $60 plus oil can resolve a lot of problems with the Texas economy.  He cites the fact that the Houston economy is booming after the devistation of Hurricane Harvey as an example of how rising oil prices can positively impact all sectors of the state's economy.

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