Entering the ninth year of the business cycle expansion, Texas' economic activity remained strong. Payroll employment grew at a steady pace, and unemployment remained historically low. Headline wage numbers, however, were sluggish despite labor-market tightness and decreased inflationary pressure. Low interest rates and job growth supported commercial investments and pushed housing sales to a record high. Total commodity exports stalled in the first quarter and could continue to struggle amid the ongoing U.S.-China trade spat. Political tension, trade uncertainty, and a slowdown in the global economy present the greatest challenges to extending the current expansion. For additional commentary and statistics, see Outlook for the Texas Economy at recenter.tamu.edu.
The Texas Nonresidential Construction Coincident Index, which measures current construction activity, indicates growth. However, the Texas Nonresidential Construction Leading Indicator, which measures potential future construction activity, suggests growth may slow going forward due to a decline in construction values even though commercial loans register growth as interest rates have fallen (see Figures 1-5).
The outlook for the rest of 2019 appears to be positive for the major Texas MSAs due to the strength of the U.S. and Texas economies. Interest rates should continue to remain low as inflation pressure remains subdued combined with low future growth expectations. On the negative side, a declining trade environment and a slowing world economy are the greatest headwinds to the Texas economy, challenging some of the state's most productive industries like oil and manufacturing. The U.S. economy is already showing signs of slowing in 2019 to its expected growth potential of around 2 percent.
Austin's overall economic activity improved in 2Q2019 from the first quarter as job growth continued its upward trend, and the unemployment rate continued to fall. Employment continued to climb in Dallas-Fort Worth (DFW) with both the goods and services sectors registering strong job growth. In Houston, the overall outlook remains positive, supported by a strong U.S. economy, although less so than during the oil boom. San Antonio's job growth continued strong in 2Q2019.
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