Business owners in Texas face the same issues as employers in other states, including the rising cost of labor and supply chain disruption, according to the Texas Business Outlook Surveys conducted by the Federal Reserve Bank of Dallas.
"Supply chain disruptions continue to pose challenges for North Texas companies," said Mandy Austin, Dallas market president for Bank of Texas. "Many of our clients are experiencing record growth, but their sales potential has been stifled by the availability of needed parts and inventory."
But there's also good news in the Lone Star State. Texas is one of only four states where employment has exceeded pre-pandemic levels, with the Dallas-Fort Worth Metroplex and the city of Austin leading the way.
That trend is expected to continue as the Dallas Fed's 2022 job forecast anticipates growth around 3% for the state. "The combination of organic growth and corporate relocations into our area have boosted population growth and our overall economy," said Austin.
In the midst of the pandemic (Q1 2020 to Q2 2021) when many people were hunkered down, Texas experienced a significant in-migration with more than 173,000 new residents compared to 109,000 the previous five quarters pre-pandemic. Many of those transplants came from coastal locations.
According to the Dallas Fed report, "pull factors include plentiful job opportunities, an accommodative business environment and a relatively low cost of living."
Source: Federal Reserve Bank of Dallas
"One of our biggest challenges in North Texas is keeping up with the demand for housing," said Mark Nurdin, Fort Worth market CEO for Bank of Texas. "The incredible in-migration we are experiencing is bringing benefit to our economy, but our infrastructure is feeling the strain, and many of those trying to find a new home are really in a pinch right now."
That population boom is likely contributing to the significant increase in spending in the DFW region. According to Opportunity Insights analysis provided by the Dallas Regional Chamber, consumer spending was up 37.1% in Dallas and 32.2% in Fort Worth over pre-pandemic levels as of November 2021.
Regional variations in employer industry segments are reflected in how different cities have rebounded from the pandemic.
The fast-growing tech section is one area experiencing significant labor shortages, Austin said. "The technology industry has been expanding in this region for several years, and the shift to needing a robust digital presence during the pandemic has increased demand even more over the last two years."
Houston employment numbers lagged behind Dallas numbers last year, according to the Greater Houston Partnership. But, 2021 will still go down as the city's best year on record for job growth with 151,800 jobs created.
The Partnership reports four sectors haven't fully recovered, but are showing recent improvement as of February: energy, construction, manufacturing and wholesale trade. If that growth trajectory continues, Houston is expected to return to pre-pandemic employment levels by mid-year.
"Houston has diversified a lot over the past few decades, but we're still heavily dependent on the oil patch," said Randy Walker, Houston market executive for Bank of Texas. "The recent rise in the price of commodities has really helped our entire economic outlook for the region."
The industrial sector is also thriving in Texas, he said.
"Warehousing and data centers are in significant demand right now as companies continue to build infrastructure to support the elevated demand for online retailing and delivery services. Our commercial real estate group is among the busiest they've ever been trying to help clients address industrial needs and multifamily housing to meet the demand for housing as the population continues to expand."
If we continue to see the growth we're currently experiencing, it will bode well for our local economy, Nurdin added. "But we'll continue to watch issues related to the supply chain, housing prices and, of course, changes in interest rates in the year ahead."