The Texas economy is likely to cool down during the second half of the year as export growth slows and wage pressures rise, according to a new report by the Federal Reserve Bank of Dallas.
The slowdown comes at a time when the Texas economy has been adding jobs at a “blistering” 3.6 percent annualized rate during the first six months of the year, making Texas the No. 1 state for job growth. Last year, Texas was No. 9.
Unemployment in Texas dipped in June to 4 percent, near its record low of 3.9 percent in November, which means that people who want to work are generally working. Any slack in the labor market has been largely absorbed, according to the Federal Reserve Bank, which is putting pressure on companies to raise wages. The bank is receiving anecdotal reports of worker shortages across industries and skills.
“A historically tight labor market, uncertainty surrounding U.S. trade policy, including NAFTA, and an unexpected downturn in oil prices remain key downside risks to the outlook,” said Dallas Fed senior business economist Laila Assanie.
The Houston economy is also expected to slow as Hurricane Harvey-induced business activity fades. Houston makes up 25 percent of the state’s jobs.
Despite predictions of slower growth ahead, the Federal Reserve Bank expects Texas to continue to grow faster than other states during the second half of the year.