Texas Economy ‘Resilient’ Post-Harvey, but Headwinds Remain, Says Dallas Fed Economist
For Immediate Release: November 10, 2017
DALLAS—The Texas economy appears to be shrugging off the negative effects of Hurricane Harvey, according to the Federal Reserve Bank of Dallas’ latest Texas Economic Update.
“The Texas economy has been resilient to the effects from Hurricane Harvey with fewer- than-expected job losses in September and indications that activity rebounded quickly,” said Dallas Fed Assistant Economist Amy Jordan in a video accompanying the release.
Before Harvey, Texas job growth had decelerated in July and August after growing at a robust pace in the first half of the year, she said. Slower growth, combined with hurricane-related job losses in September, pulled third-quarter employment gains down to 0.7 percent. The state’s leisure and hospitality sector was hit the hardest, with restaurants accounting for the bulk of job losses.
Despite the hurricane’s impact, year-to-date Texas job growth stands at an annualized 2.2 percent, well ahead of the state’s 1.2 percent growth in 2016, according to the Update. Other indicators also point toward a rapid recovery from the storm, Jordan said.
“The Dallas Fed’s Texas Business Outlook Surveys remained strong in September and October, suggesting that the impact from Hurricane Harvey was both temporary and not large enough to offset continued business growth,” she said.
Jordan pointed to the most recent Texas Manufacturing Outlook Survey, which showed the production index climbing to 25.6 in October—its highest level since April 2014. The Texas Service Sector Outlook Survey revenue index increased in October to its highest level this year. Texas retailers also noted a strong month in September, with auto sales driving growth, particularly in the Gulf Coast region, where Houston new-car sales roughly doubled in September from August.
While the Texas economic outlook remains positive, some cyclical and structural headwinds remain, Jordan said.
“Labor markets have grown significantly tighter this year,” she said, noting that the Texas unemployment rate stood at 4 percent in September—a level last observed in December 2000.“There is some slack remaining in Houston but not much, which could hamper recovery efforts,” Jordan said. “And given Texas is highly dependent on trade with Mexico, uncertainty surrounding ongoing trade negotiations is another headwind. However, the Texas employment forecast for 2017 remains at 2.6 percent, well ahead of job growth in 2016.”
Federal Reserve Bank of Dallas
Phone: (214) 922-6748