Slower job growth ahead for Texas, Dallas Fed says

The days of booming job growth in Texas may be ebbing, according to the Dallas Federal Reserve, which expects the state to return to more normal growth of 2% this year.

In their economic outlook for the Lone Star State released Friday, said 2023’s record-breaking temperatures in Texas likely reduced the state’s gross domestic product by 1 percentage point or about $24 billion as some companies had a harder time supplying goods and consumers spent less.

In an October rating report, S&P Global Ratings said: “Given Texas’ large geographic footprint and location along the U.S. Gulf Coast, we consider the state to have a higher exposure to acute physical risks within our credit rating analysis, including severe weather events, intermittent flooding, and extreme heat, as well as exposure to chronic physical risks, including sea-level rise and drought.”

The Texas Gulf Coast is awaiting federal funding for the massive “Ike Dike” project that includes sea gates to provide protection during major storms.

The Austin City Council will take up a resolution Thursday to create an environmental investment plan that could include a November bond election to address climate change.

“With this resolution, the city will kick off the process to put our money where our mouth is on climate action and resilience,” Council Member Paige Ellis said in a statement. “Now it’s time to strategically and comprehensively look at how we can fund an impactful environmental investment plan to reach our goals.”

The Texas office market, which has been stung with vacancies, is on the Dallas Fed’s radar screen, Orrenius said. 

Houston’s office market had the weakest performance in 2023’s second quarter among 14 cities examined by Moody’s Investors Service.  

Even if economic growth slows, robust revenue led to the buildup of huge reserves and allowed Texas to forego annual tax and revenue anticipation note sales with its last cash flow borrowing of $7.2 billion occurring in August 2020.

The state ended fiscal 2023 with a cash balance of $48.4 billion in its general revenue fund. 

After transfers to the state’s rainy-day and other funds, the available balance was $39.24 billion, which surpassed a January 2023 forecast of $32.7 billion, according to the comptroller’s office, which in October projected a surplus of only about $18.3 billion for the fiscal 2024-25 $176.28 billion general fund biennial budget. 

With an abundance of cash, state lawmakers placed billions of dollars in spending on the Nov. 7 ballot in the form of constitutional amendments to reduce school property taxes and fund higher education research, water supply projects, power plants, and broadband.

In December, Fitch Ratings said, while the majority of the amendments passed by voters involve one-time funding, the additional $13.3 billion of property tax cuts could pressure future state budgets.