Texas' economy remained healthy in the longest U.S. economic expansion on record. Payroll growth slowed, but unemployment rates hovered at historical lows. Average hourly earnings failed to make positive headway after adjusting for inflation; second-quarter real income per capita, however, increased. Retail sales improved, but overall perceptions were tainted by political and trade-related concerns. Energy prices remained low amid record-breaking production and lowered expectations of global demand in 2020. Escalating trade tensions, political uncertainty, and the slowing world economy continue to be the largest headwinds to the current business-cycle expansion. For additional commentary and statistics, see Outlook for the Texas Economy.
The Texas Nonresidential Construction Coincident Index, which measures current construction activity, indicates further expansion. However, the Texas Nonresidential Construction Leading Indicator, which measures potential future construction activity, suggests activity may slow going forward due to a decline in construction values even though commercial loans registered growth as interest rates have fallen.
Texas' nonfarm employment growth slowed to 2.6 percent seasonally adjusted annual rate (SAAR) during the third quarter, resulting in only 49,300 jobs added. The deceleration is unsurprising given the 112,000-job gain last quarter (almost double the post-recession average). Nonetheless, the Dallas Fed's annual employment growth projection slowed from 2.3 to 2.1 percent. Overall labor market conditions, however, remained strong. The unemployment rate posted 3.4 percent for the fourth consecutive month. The U.S. economy slowed in 2019, and growth is expected to be around 2.4 percent, back to its expected growth potential of around 2 percent. The U.S. economy is expected to slow in 2020 but still register positive growth, achieving a growth rate of around 2.1 percent.
Houston and Austin employment growth decelerated in the third quarter, resulting in a net 5,400 and 200 jobs, respectively. Houston's education/health and leisure/hospitality sectors dragged the three months ending in September, contributing to the third-quarter slowdown in overall employment growth compared with double-digit average monthly additions in the second quarter. Austin's primary detractors were education/health services and mining/ logging/construction. Dallas contributed to over half of Texas' payroll expansion, adding 24,900 new jobs in the third quarter. Much of the growth occurred in the mining/logging/construction and financial activities sectors. The GM strike started after the September employment survey and thus did not affect 3Q2019 numbers. San Antonio was the runner-up in terms of number of jobs created, expanding employment by 10,500. Hiring in education/health services accelerated, while leisure/hospitality recovered second-quarter losses. The same industries contributed to a gain of 3,700 positions in Fort Worth, offsetting contractions in retail trade and transportation/utilities. For additional commentary and statistics, see Outlook for the Texas Economy.
For an analysis of Austin's, DFW's, Houston's, and San Antonio's commercial markets (including tables and figures), download the full report.
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