Dallas Fed 'Downshifting' Growth Projections as New Challenges Loom

The Federal Reserve Bank of Dallas is 'downshifting' its predictions for economic growth in the state, as a number of headwinds have blunted earlier projections, News Radio 1200 WOAI reports.

Rather than the 2.5% to 2.7& job growth the state experienced in the second half of 2018, Dallas Fed Senior Economist Emily Kerr says the best guess now is for no better than 1% to 2% job growth throughout the year.

"This range of 1 to 2 percent, if realized, would be slower than what we have recently realized in Texas," she said. "Typically we have seen about 2% job growth per year."

Kerr says there are a number of headwinds which are affecting economic growth in the state.

"Lower oil prices, a strong dollar, tariffs, labor constraints, higher interest rates, and pretty high levels of uncertainty."

She says in addition to those challenges, she says manufacturers and retailers are finding themselves caught in a cost benefit bind.

"While they are seeing increased costs, they are not able to pass those costs along to customers, and this naturally puts a squeeze on their margins," she said.

She says the revised, 'downshifted' projects come following comprehensive surveys of employers in a wide range of fields.

“Texas businesses expect wage and price growth to moderate somewhat in 2019 but still remain elevated. In fact, they expect that their selling price growth won’t be able to keep pace with the growth they’re seeing in wages and other input costs,” Kerr said. “We asked a supplemental question on this in our December Texas Business Outlook Surveys and we found that the vast majority of contacts, although they were seeing increased costs, weren’t able to fully pass those costs on to customers, and this naturally puts a squeeze on their margins.”

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