Economy to Be Constrained by Tight Labor, Low Oil

With the first quarter of 2019 almost concluded, the Federal Reserve Bank of Dallas’ overall forecast for the Texas economy is that of deceleration. Specifically, because of a decline in oil prices experienced in late 2018, combined with tighter labor markets, Dallas Fed analysts are forecasting an increase between 1%-2% for the year, versus the estimated 2.3% expansion in 2018.

The Dallas Fed’s Keith Phillips and Judy Teng wrote that the Texas economy began slowing in Q4 2018, with leading indicators and business outlooks weakening at the time. Even as firms scramble to hire qualified workers, uncertainty surrounding future trade policy and tariffs remains rampant.

Also construction starts have been weaker, partly due to high rainfall across the state during fall 2018. Furthermore, rising mortgage rates, combined with increased tariffs on imported building materials, likely also led to softness on the residential construction side.

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