New data out from the Dallas Federal Reserve show a Texas economy in “tailspin.” Words like “plunged” and “decimated” pepper the report that paints a bleak picture of the state’s 2020 prospects.
The Texas economy went into hibernation in mid-march to combat COVID-19, and it precipitated mass layoffs hitting the arts and recreation sector hardest followed by accommodations. Mining and the energy sector have been slowly edging up since.
About 1.6 million Texans filed for unemployment from mid-March to late April, a number the Fed called an undercount caused by the unemployment system being overwhelmed technologically.
The unemployment rate rose more than a point to 4.7% — up from a near historic low of 3.5% — and will continue to grow as the Texas Workforce Commission tries to catch up.
“This historically large increase in claims suggests that the April unemployment rate may be near 12.4%, although several caveats exist,” said Keith Phillip, Assistant Vice President of the Dallas Federal Reserve bank in an April report.
Texas’ unemployment rate topped off at just over 8% at the height of the Great Recession.
The situation has grown so bad that the state requested what amounts to a line of credit from the federal government. Without — what are called — Title XII advance monies, Texas’ Unemployment Trust fund would run dry either the end of this month or early June, according to the TWC. The Trust had $1.7 billion in it prior to the outbreak, at the end of February.
TWC doesn’t release official April numbers until mid-May.
McAllen and Austin are the most affected cities so far. Mcallen saw much of its losses in a vulnerable home-healthcare sector and Austin saw jobs lost from tourism and the cancellation of South by Southwest.
“This was a little surprising, since Austin is a high tech city and they likely have a high share of workers that have a remote working option,” said Laila Assanie, author of Thursday’s report.
Output and revenue fell across the board, with near record lows in manufacturing, services and retail.
“Our expectation is that employment will fall sharply in the second quarter and rebound in the second half of 2020. But for the year, we will still be down 7.6% in terms of job growth,” said Laila Assanie author, senior business economist and author of the most recent report.
Texas will lose jobs in 2020, the first time the job growth has been negative and the economy has contracted since the great recession.
Housing, energy, manufacturing and essentially all industries are being affected as the economy struggles to come through. Wages and prices have fallen.
Texas’ oil and gas woes will keep it trailing the U.S. economy according to Thursday’s report.
And it's unclear what would happen if a potential second COVID-19 surge occurred.
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