Is the Texas Economy Headed Towards a Recession?

May 1, 2015

From Texas Standard:

When a leading economist warned Texas that it should brace for a recession, the Dallas Federal Reserve Bank wasn’t rattled. Then-President Richard Fisher said, if anything, the state might experience a downturn in economic growth. But here we are on the first day of May – after months of negative workforce and economic data. Dan Zehr with the Austin-American Statesman spoke with the Texas Standard to answer the question: Is the Texas economy in the middle of a recession?

U.S. Census Bureau

Texas has one of the nation's lowest rates of people on welfare, according to a new report from the U.S. Census Bureau. It says 1.8 percent of Texas households received benefits through the Temporary Assistance to Needy Families (TANF) program in 2012. 

Only Wyoming (1.7 percent), South Carolina (1.6 percent), North Dakota (1.5 percent) and Louisiana (1.5 percent) had lower welfare rates than Texas. The United States average is 2.9 percent. The tally did not include food stamps or Social Security benefits. 

National Association of Realtors

Austin is the best city in the United States for aspiring homebuyers between 20 and 34 years old, according to the National Association of Realtors (NAR). It said even though housing prices in Austin have shot up in the last few years, the city's median home value of $252,520 is still about half of what it is in Boston and a third of what it is in San Francisco.

"Which is the reason why we still place Austin as reasonably affordable," NAR chief economist Lawrence Yun says. "This is where the millennial generations are moving into and [where] the job opportunities are available."

ChinLin Pan/KUT

According to, since 2001 tech firms like Apple, Google, and Facebook have expanded employment by 41 percent. This has lead to Austin resembling a smaller Silicon Valley – and Texas as a whole altering the face of its economy.

In keeping with Austin's renowned music scene, many of the region's exports are less about tangible services and more about entertainment and innovative ideas and applications. Economist and author Richard Florida christened such a move to a arts and knowledge-based economy as "The Rise of the Creative Class."

The global boom in energy production driven by fracking and horizontal drilling is leading to a shortage of skilled workers. A new report by the human resources firm Mercer says two-thirds of oil and gas companies are now poaching employees from their competitors.

"The industry seems inclined when an individual is trained and developed by a competitor to, especially in the first five years of employment, go after that key talent, as opposed to training and developing their own,"  says Philip Tenenbaum, a senior partner at Mercer. 

He says in some cases, the practice has become quite overt.  

KUT News

These days restaurants are spending obscene amounts of money on limes. Think about what that means for Mexican food alone: limes are used in practically everything, from margaritas to ceviche to guacamole.

Last week, the rising price of limes became personal for this reporter.

I stopped by La Moreliana, a small eatery in southeast Austin that serves up authentic tacos. The food was great – but the tacos were missing the citrusy, acidic bite only lime juice can add. 

"The website of major bitcoin exchange Mt. Gox was offline Tuesday amid reports it suffered a debilitating theft, a new setback for efforts to gain legitimacy for the virtual currency," The Associated Press reports.

Also Tuesday, all the posts had been erased from the Mt. Gox Twitter account.

Update: Dropbox and Websense will receive economic incentives to expand in Austin.

The Austin City Council voted 5-2 today to offer the two tech companies approximately $700,000 in incentives. The money comes on top of $6 million from the Texas Enterprise Fund. 

Filipa Rodrigues for KUT News

Last night the Austin City Council approved a deal that offers nearly $680,000 dollars in incentives for athenahealth to expand in Austin. The grant will be offered in addition to a $5 million subsidy from Gov. Rick Perry's Texas Enterprise Fund.

But not everyone is happy with the deal. Some council members argue that the city’s booming economy doesn’t need to offer subsidies to bring business to Austin. (The deal passed on a 5-2 vote, with city council members Laura Morrison and Kathie Tovo voting no.)

Austin Monitor publisher Michael Kanin says that this debate is heating up as council members become increasingly divided on the issue of business incentives.

KUT News

Another national report card is out, and Texas households are still struggling to beef up their savings. 

Almost half of Texas households don’t have enough savings to pay for basic expenses for three months, which means most families aren’t prepared in the event of a job loss or health emergency.

According to the Corporation for Enterprise Development’s 2014 Assets and Opportunity Scorecard, the state’s policies are also not helping residents achieve financial security.

I-Hwa Cheng for KUT News

Austin’s facing a familiar question: whether to approve economic incentives luring new jobs to town.

Today, the Austin City Council was briefed on a proposal for incentives for health IT company Athenahealth.

Massachusetts-based Athenahealth – which currently employs 36 Austinites in offices at The Domain – is promising a new research and development center. Located inside the former Sealholm Power Plant in downtown Austin, the company says it would create 607 new jobs over 10 years.

Dallas Federal Reserve Bank

For the nation's economy,  2013 is a story of a continued comeback following a devastating recession. 

And for Texas?  Well, the story's slightly different.  

Keith Phillips, analyst with the Dallas Federal Reserve Bank says there's no question 2013 was a good year for the Texas economy with growth in most sectors.

Phillips says the low cost of living, in addition to the low cost of doing business in Texas has helped the Lone Star State maintain a job growth rate a full percentage point higher than the national average in 2013.  But the energy exploration boom that's been fueling an expansion of jobs, construction and exports appears to be tapering off.

Jorge Sanhueza-Lyon, KUT News

Austinites got a taste of California yesterday with the opening of the city’s first In-N-Out Burger at 45th and Airport. The drive thru is known for made-to-order burgers and an ordering system that allows you to micromanage your meal. (Want your bun extra toasted? Just ask.) 

In-N-Out Burger has no freezers. No microwaves. No heat lamps. And In-N-Out has been quietly going against another trend in the low-wage, low-benefit fast food industry: they're paying their employees much more than the industry standard. 

President Obama tried Wednesday to turn the conversation back to the economy, calling the growing income gap the "defining challenge of our time."

Think of Detroit, and you likely think of a city past its prime.

But while Detroit faces an uphill climb since filing for bankruptcy in July, Heath Carr, CEO of Dallas-based Bedrock Manufacturing, has taken a decidedly bullish perspective on the city: His group is the parent company of Shinola, a company manufacturing American-made watches, bicycles, leather goods and more in the Motor City.

“If you come to Detroit, you spend time there, you get to know the people," Carr says. "The people that care about moving it forward, it's an energy you want to be part of.”

Listen to Carr speak with KUT's David Brown:

This year, economists in Mexico are predicting an anemic growth rate for the country of 1.7 percent. Some say the number could be closer to 1.4 percent. However, longtime Mexico watchers, including Brookings analyst Joseph Parilla, say that’s not the big story.  

“In the Mexican case, they had robust growth last year and if you look past 2013, projections are still relatively good,” Parilla says. “Growth rates are between 3.5 and 4 percent over the next five years. I think the general consensus is while 2013 will prove a difficult year for the Mexican economy, there should be a pretty quick rebound after."

Luke Quinton for KUT News

The Army announced recently that it plans to eliminate combat brigades at 12 military bases. That’s a total of 80,000 soldiers. The cutbacks come as communities are already dealing with government furloughs. But military towns are trying to keep the old boom and bust economy a thing of the past.

Fort Hood is like a city. When it became a base in the 1940s, it cleared out 1,200 farms. Now it’s home to more than 40,000 assigned soldiers and tens of thousands of civilian workers. The base brings $25 billion to the Texas economy each year.

More homes sold in the Austin-area last month than in any May on record, according to a report by the Austin Board of Realtors. Their analysis of MLS Listings shows 2,991 homes were sold in May, an increase of 29 percent over the same month last year.

The increased demand sent the median home price up by eight percent to $231,500. The average home is sitting on the market for just 44 days, which is 19 days less than May last year, according to the report.

Filipa Rodrigues for KUT News

This week Congress will take up what some say is a long overdue reform of national immigration policy. The U.S. has been slow to recover from the recession, and U.S. Secretary of Labor Seth Harris says this overhaul could be a boon for the economy. 

The Consumer Financial Protection Bureau is looking at how overdraft fees affect consumers in a detailed report released Tuesday.

One of the stunning finds: "Overdraft and non-sufficient funds fees accounted for 61 percent of total consumer deposit account service charges in 2011 among the banks in the CFPB report."