|Tyler County Booster - Local News
Stories Added - May 2009
Copyright 2008 - Polk County Publishing Company
Tyler County Booster - May 2009
The Texas Economic Outlook: As most people are well aware, the national economy is in recession and has been for more than a year. Texas has escaped the worst of the national recession to date. It never had the problems with subprime lending meltdown that other states, like California and Florida, have had, and it was buoyed during the end of 2008 by high oil and gas prices. The situation is changing, though. Over the three months ending in December, the Texas leading Index developed by the Dallas Federal Reserve Bank experienced its sharpest decline since its inception in January 1981. In addition, the Dallas Fed now believes that Texas likely entered a recession sometime in the second half of 2008. You can see the problems developing in jobs in the state. The trend isn’t as stark as for the national economy, but it shows a downward trend. In December the unemployment rate reached 6 percent, up 1.9 percentage points from its bottom in April 2008. Given the sharp fall in the Texas leading index and other factors in the economy, further increases in the unemployment rate should be expected. Oil prices, which had skyrocketed, have fallen back to earth. Drilling activity has followed the downward trend. The real problem for many Americans, and certainly for local governments that depend on property tax, is the decline in home values. It has been sharp nationally. The Texas housing market continues to weaken, although home inventories and rates of mortgage delinquencies and foreclosures show that the market remains in better shape than the national average. A growing concern is that commercial construction will drop sharply due to restricted financing available to the industry. While residential construction values have been in decline for some time now, nonresidential construction values are yet to show a significant drop off. Partly this is due to public sector activity. Private construction of hotels, stores, offices and restaurants began to decline in the closing months of 2008. Most of the major metropolitan areas are showing signs of economic slowing. Of the states major metres, Austin and Dallas have been hit the hardest in recent months, while Houston has fared the best. However, the decline in energy prices may start to act as a drag on that area as well. On the whole, none of this is of course, good news for Texas. We can take whatever comfort is available in the recognition that other states have it much worse. The current trends will have - are already having - a significant impact on state and local finances. The state is very likely to get through the current legislative session without too much problem, owing largely to the balances built up when the economy was strong and because of federal stimulus money. Local governments will also benefit from stimulus funds. The question is whether the situation will remain stable until the economy recovers. Weak national and international economies and the freezing of credit in financial markets will play a crucial role in the outlook for the Texas economy the next two years. The problems created by the national economy are certainly being felt in Texas. The only question now is for how long and how severely. The Comptroller’s office, in its most recent forecast, predicts some improvement in the state economy later in the year and a marked improvement in 2010 for both the state and the U.S. economy. However, it is probably too early to say with great certainty that that will be the case. Much depends on improvements in the credit markets and the effects of the massive federal stimulus efforts.