It hardly feels like news anymore that North Texas’ economy is churning.
The state has been adding tens of thousands of jobs every month. Dallas-Fort Worth’s unemployment rate has been below 4 percent for nearly a year and a half. Employers are struggling to fill open jobs, competing against one another for top talent.
All of which has left economists trying to figure out the answer to an increasingly looming question: When will it end?
Steve Cochrane, managing director at Moody’s Analytics, and his colleagues have been tracking different metros’ progress through the business cycle — from recession to recovery, to mid- and then late expansion.
Cochrane explained that the designation is tied to an index that takes into account four factors: employment, industrial production, house prices and homebuilding activity. Each one serves as a kind of stand-in for some part of the overall economy.
“Employment, because it’s the most recent current data we have on the regional economy,” he said. Industrial production gets at the manufacturing health, house prices are a proxy for personal wealth because that’s where people build most of their equity, and homebuilding serves as an indicator of investment spending.
You can probably guess where Dallas has been in the progression for roughly the past year
Without those resources, growth starts to flatten out — and that’s exactly what Dallas-area real estate experts have been observing in the region’s housing market, especially.
What’s particularly notable in recent data, Cochrane said, is that in February and March — the two most recent months of data — every major metro area along Texas’ Interstate 35 corridor is in late expansion, except Fort Worth.
“That’s surprising for Texas,” he said. “Texas almost always has room to grow.”
Still, Cochrane said he’s waiting for other regions of the country to start kicking into economic overdrive before he really gets worried.
At the moment, the Southeast includes some metro areas, like in the Carolinas, that are still in mid-expansion territory — as are some metros in the Midwest.
“If those two areas start to get more green on the map, so to speak,” he said, “that would be an indication we’re getting an ever increasing amount of tightness throughout the region.”
If California’s non-coastal metro areas start to hit late expansion, too, he said could be a sign that things are getting stretched.
And that’s when recession will likely hit.
Cochrane said that growing consensus among economists and other observers is that the U.S. won’t see a downturn for another year or so.
“Sometime in 2020 seems to be a period where the risks may be at a peak,” he said.
Business spending is expected to continue into next year, thanks in part to the federal tax overhaul, Cochrane said. And the job market is projected to remain strong.
However, he said, some of that spending might trail off, and uncertainty about the country’s trade relationships could take a toll. Meanwhile, inflation is expected to rise, which could prompt an increase in short-term interest rates.
And this time, Cochrane said, Dallas and its suburbs could be harder hit by a recession, since the region has worked to bring in a wider variety of corporations. The region’s financial sector has grown, especially.
Auto loans and mortgages have a particularly large presence, he noted — and, he said, those are the industries that could be hurt if there was a nationwide consumer downturn.
Nevertheless, Cochrane said, “we don’t know what will cause the next recession.” But whatever it is will determine which areas are hit hardest.