The Short‑Term Forecast for the Texas Economy
By: Dr. M. Ray Perryman
Published in syndication August 05, 2020
The last two (May and June) Texas jobs reports were encouraging, reflecting the fact that, as businesses began to reopen, what was essentially a sound economy before the pandemic responded relatively quickly. However, even with these gains, Texas is nonetheless almost 700,000 jobs below a year ago and about 900,000 below the level just before the outbreak began.
On the downside, the June estimates are based on surveys completed in mid-June, before a surge in cases, hospitalizations, and deaths gripped Texas. Subsequent measures to control the pandemic (in particular, closing bars again and pulling back on restaurants) will impact the numbers going forward. Initial unemployment claims also remain elevated.
Comparing Texas performance to other areas is complicated by differences in timing of virus outbreaks and variations in responses. Even so, we can get a general feel for how states are weathering the virus storm. The largest percentage declines in the level of employment between June 2019 and June 2020 occurred in hard-hit northeastern states such as New York, New Jersey, and Massachusetts. Tourism-driven areas also saw major disruptions, including Hawaii (with the largest percentage drop over the year at -16%). Other states with -10% or greater decreases in the level of employment include Alaska, California, Connecticut, Delaware, Maine, Michigan, Nevada, New Hampshire, Pennsylvania, Rhode Island, and Vermont. Even with the blow to the oil energy sector, Texas experienced a drop over the year of -5.4%; only nine states performed as well or better. All states saw some improvement between May 2020 and June 2020.
Looking ahead for Texas, our latest forecasts indicate that the state's real gross product is likely to diminish by -5.12% on a year-over-year basis, with 6.11% expansion in 2021. Employment is projected to fall -5.42% through 2020, with recovery of 4.13% next year. Our current estimates of Texas losses for this year are slightly lower than what we were projecting last quarter as businesses began to reopen, but we're expecting slower recovery next year than we were before because progress toward dealing with the virus has been slow. On a positive note, the recovery in oil prices is beginning to be reflected in new activity, although the industry still faces some challenges ahead.
The COVID-19 health crisis is far from solved, and the future remains highly uncertain. There are signs as I am writing of a flat or even downward trend in deaths, hospitalizations, and emergency room visits. Great care must be taken, however, particularly with vulnerable populations, to avoid another widespread surge. If recent moderating trends continue and drastic actions to curtail the virus can be avoided, the Texas economy should continue to improve through the remainder of this year and into 2021.