Texas economy

Texas economy on course for post-pandemic recovery

Several economic indicators, including employment rates, indicate the state’s economy is starting to rebound from the pandemic, according to a report from the Texas Real Estate Center.

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Texas’ economy initially suffered more economic losses from the COVID-19 pandemic than from any previous crisis, according to Luis B. Torres, research economist at Texas A&M’s Texas Real Estate Research Center.

One of the main reasons is the downturn in the oil industry that happened at the same time as the pandemic.

“It was a double whammy,” he said. “For example, between March 14 and April 4 of last year, the number of Texans laid off from their jobs rose from 18,445 to 314,239. That was far more than we had seen in any recession. previous history, including the financial crisis of 2008-2009. »

Now, however, Torres said the Texas economy appears to be getting back on track. He bases his optimism on data produced in recent weeks by the index he developed to measure the effects of COVID-19 on the state’s economy.

“It uses leading economic indicators — things like jobless claims and new business apps — to tell us what’s happening right now and where the economy might be heading,” he said.

Torres compiles his findings into weekly reports available online and to subscribers. For each report, it analyzes data from Texas’ weekly leading indicator, which covers new trade applications, initial jobless claims, and inflation-adjusted oil prices and interest rates.

It also looks at continuing weekly jobless claims and the number of new COVID-19 cases to determine how the economy is recovering from the pandemic.

“The news in these categories is good,” Torres said. “First, oil prices are above $60 a barrel, and demand for oil and natural gas is expected to recover this year as economies around the world rebound from the pandemic.”

Additionally, Torres said that as of May 22, the state has seen eight straight weeks of declines in initial jobless claims — the lowest level since before the pandemic.

“It’s progress, but we still need to add almost 446,000 jobs before we reach the number of jobs we had before the pandemic,” he said.

Finally, Torres noted the actual 10-year Treasury bill rate and the actual West Texas Intermediate oil price.

“Treasuries are a good indicator of the cost of capital in the market,” he said. “Although their real rate has come down slightly in recent weeks, we expect that to turn around as interest rates continue to climb during the economic recovery.”

Similarly, Torres said oil prices have fallen slightly in recent weeks but are expected to continue to rise.

Torres noted several factors that could frustrate the upward trajectory of the Texas economy.

“There are reasons to be optimistic, but there are also reasons to be cautious in making such predictions,” he said.

As an example, he noted that while leading indicators show the direction of economic change, they do not measure the magnitude of change. Additionally, economists gain a better and more accurate understanding of the relationships between these variables when they have many business cycles to analyze. The pandemic is just one business cycle.

Additionally, Torres said that if more people are vaccinated against COVID-19 and the number of new cases continues to decline, any new wave of infections will almost certainly derail the state’s economic progress.

“But for now, at least, the data shows that the Texas economy is gaining momentum with the prospect of higher future economic activity,” he said.