Texas, star of the recovery, begins slowdown

For all of 2011, it’s seemed one state has been immune to the negative headlines associated with the slowest recovery ever. Unfortunately, many economists and economic indicators alike point to this so-called recovery as being more and more dragged out. Some even suggest it will take at least another six years to get back on track. Yet, the Lone Star state has touted its micro-economy and sound municipal practices all along. But, now it appears Texas is not as divided from the nation as its governor has hoped it be. A report from the Federal Reserve Bank of Dallas shows the rate of jobs being added to the state’s economy is slowing rapidly. Texas gained only 3,800 jobs in May after adding 30,900 in April (chart below). That puts unemployment at around 8%, much less than the national average of 9.1%. Yet the alarming news surrounds housing. There is no expectation of a major slide in the Texas economy, but the state’s leaders should take note. The one indicator of economic vitality — if this recession/recovery teaches anything — is that housing is the greatest predictor of good or bad times ahead. “Texas housing market indicators showed weakness, with declines in construction and sales in May,” said the latest Dallas Fed report. The central bank reports existing-home sales fell 2.6% in Texas in May. Sales in Houston and Dallas were down from April levels, while sales in San Antonio rose (chart below). Single-family housing permits edged down 1.3% in May, and housing starts fell 14.5% after slipping 8.1% in April. Starts in May were down 13% from last year. Manufacturing in the state has slowed, as well, and exports are contracting marginally. Monthly real Texas exports rose 4.6% in April after increasing 5.5% in March. Nevertheless, the April level of real exports was 17% higher than a year earlier. However, all this may prove to be a blip on the radar, as the Dallas Fed is anticipating economic growth to continue across the state. Write to Jacob Gaffney. Follow him on Twitter @jacobgaffney.