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The Dallas Fed announced Friday that after years of strong job growth, Texas is likely to see a slowing in the pace of job additions in 2024.
The Dallas Fed predicts the state will add nearly 284,000 jobs this year, a 2% increase from 2023, but that pace is slowing as the state's economy continues to overheat due to the coronavirus outbreak. This is in line with the state's employment growth rate before it fell into a recession. By the end of the year, Texas is expected to have 14.4 million jobs.
In contrast, Texas added about 427,000 jobs at a 3.1% pace in 2022. This is the result of rapid growth in the workforce due to intense internal and external migration.
“We have the green light to return to our long-term trend growth rate,” Dallas Fed Vice President and Senior Economist Pia Olenius said Friday.
Still, Texas outperformed the nation in job growth last year, ranking fifth among U.S. states in job growth behind Wyoming, Idaho, South Dakota and Nevada. Each of her 25 metropolitan areas in the state experienced economic growth. The tech industry, which suffered massive layoffs last year, was the only industry in the state to lose jobs.
“Texas' 2023 job growth is stronger than expected, demonstrating the resilience of the labor market,” said Luis Torres, senior business economist at the Dallas Fed.
There are other bright spots in the state's economy, according to the Dallas Fed. Oil and gas production in Texas will surpass its pre-pandemic peak in 2023, Olenius said, and the sector continues to add jobs.
Despite high interest rates, construction of single-family homes remained above pre-pandemic levels in 2023, but the number of permits to build single-family homes fell by more than 5%. Home builders are building smaller homes to keep costs down and ultimately provide homebuyers with cheaper purchasing options, Olenius said.
Olenius said the slowdown in apartment rent growth in 2023 is a result of the pandemic-era apartment building boom, after years of steep asking rent increases in the state's major cities. Even in areas where rents were previously soaring, such as Austin and the Dallas-Fort Worth area, rents fell last year.
The state's job growth this year could be complicated by several headwinds. After months of decline, Texas' inflation rate began to rise gradually toward the end of 2023, causing a divergence from the rest of the country. Growth in state sales tax revenues has slowed, indicating that consumers are spending less. Olenius said that while concerns about a potential recession have waned among business owners, geopolitical and domestic uncertainties surrounding the 2024 presidential election have slowed their businesses and caused state Many said they were concerned it could have a negative impact on the economy.
Texas' office market also could be problematic for the state's overall economy. Despite Texas' largest metro having one of the highest return-to-office rates in the country, office vacancy rates are high, creating uncertainty in the commercial real estate market.
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