What a Difference a Year Made

By: Dr. M. Ray Perryman
Published in syndication June 23, 2021

A year ago, the economy had begun to stabilize after two months of cataclysmic decline due to COVID-19 and the massive response. Almost overnight, millions of jobs disappeared, and an economy in the midst of a record-shattering expansion suddenly went into freefall.

While some businesses managed to readily implement remote operations, thousands simply shut down. However, things began to improve fairly quickly as the path forward became clearer, with Texas adding jobs in 12 of the past 13 months. Since April 2020, the Texas economy has regained well over one million jobs (though employment remains significantly below pre-pandemic levels). All major industry groups have added employees, with the lone exception of Mining and Logging (which in Texas is essentially oil and gas).

The most recent data (May 2021) indicate that Texas added 34,400 total nonagricultural jobs, with unemployment dropping to 6.5%. With decreasing cases and hospitalizations and increasing numbers vaccinated, travel is picking up, and the Leisure and Hospitality industry (the hardest-hit during the pandemic) added 14,200 jobs in May. Professional and Business Services increased by 13,800. Manufacturing gained 3,200 jobs, a particularly positive signal for future growth, and residential real estate and construction is on fire.

Although not yet showing annual growth, a notably encouraging sign for Texas is the beginnings of a reemergence of the energy sector. Global demand plunged almost 30% last spring, and prices plummeted (even briefly below zero). Today, consumption is within 4% of its prior peak, prices are hovering around $70 per barrel, and production and rig counts are on the rise. It will be a while before the jobs return in large numbers, but the path is clear.

Around the state, cities are recovering at varying rates. Unemployment is particularly low in Abilene, Amarillo, Austin-Round Rock, College Station-Bryan, Lubbock, and Sherman-Denison. Large, stable industries such as higher education, health care, and state government are important in these areas. Cities in the Rio Grande Valley are recovering more slowly, as cross-border activity remains restricted. Energy-dependent areas are also lethargic but are likely to see a notable spike as conditions normalize. Some cities have regained all of the employment losses, while others lag well behind.

As we had been expecting from the outset, the comeback has been rapid compared to prior downturns (although the pandemic slowed things down longer than originally anticipated). In prior major recessions, there were issues precipitating the downturn which subsequently slowed the recovery. For example, the 2009 recession was driven by a mortgage crisis and financial meltdown, which took years to overcome. This time, there were no big speculative bubbles or structural issues, which has been pivotal. We're not there yet, but we can see it from here. Stay safe!