Dallas Federal Reserve predicts Texas soft landing in 2023

(AP Photo/David J. Phillip, file)

The Federal Reserve Bank of Dallas predicts in its Economic Outlook that job growth in Texas will slow significantly in 2023.

Pia Orrenius is Vice President and Senior Economist at the Federal Reserve Bank of Dallas. She said the slowdown does not necessarily hurt the Texas economy.

“Last year we grew by 3.5%, this year we expect growth by 1.4%. This is consistent with a soft landing for Texas. We are not predicting a recession,” Orrenius said.

Orrenius said a potential recession remains the main concern for businesses this year, followed by higher labor costs. From the reserve’s data, they concluded that about 200,000 jobs will be added in Texas this year.

Orrenius also noted that offices in Houston and Texas are still more empty than usual. As the number of home-based jobs has increased, office vacancies have become more common.

Orrenius said employees can avoid returning to the office after working from home during the pandemic.

“Probably employers are trying to bring people back, and people are resisting. It will take a while to resolve itself, but my guess is that in the end the employers will win and we will all have to go back to the office.”

Office vacancies in Houston have been steadily rising even before the pandemic. Federal Reserve data shows that Houston had the highest percentage of vacancies in Texas since the mid-2010s. In 2022, Houston had an office vacancy rate of about 25%.

However, overall, various cities in Texas have seen slight declines in office vacancies over the past year.

Orrenius also concluded based on Fed data overall that while signs of a slowdown are spreading, energy and labor markets are strong and healthy.

“If there is a very moderate recession in the US, then we may not follow it,” Orrenius said. “Had the US plunged into a deep recession, the story would have been different. We would definitely follow her.”