Our latest forecast update indicates significant declines in economic activity through 2020, despite a notable comeback from the dark days of spring, but a return to growth next year.
In addition to the staggering and tragic human costs, the pandemic continues to curtail business activity. Even so, the economy, which was healthy going into the COVID-19 crisis, is signaling resilience and recovery potential.
The U.S. job market continues to improve, but the pace of hiring is slowing. Total nonfarm payroll employment rose by 661,000 in September, and the unemployment rate fell modestly to 7.9 percent. These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed. Notable job gains occurred in leisure and hospitality, in retail trade, in health care and social assistance, and in professional and business services.
Recent output numbers also indicate resilience in the economy. Real gross domestic product increased at an annualized rate of 33.1 percent in the third quarter of 2020 according to the “advance” estimate released by the Bureau of Economic Analysis, a significant rebound after falling dramatically in the second quarter.
Our latest projections indicate real gross product losses of -3.17 percent this year on a year-over-year basis, with +3.44 percent growth in 2021. Job losses are projected to be -8.3 million through 2020, with a recovery of +6.8 million jobs next year. The prior peak job levels will likely reoccur in early 2022.
Texas is projected to retrench a little more than the nation this year, but recover a little faster next year, due in part to the fact that the state’s largest export sector (oil and gas) has been hit particularly hard.
We are expecting Texas real gross product to decline by -4.27 percent this year on a year-over-year basis, with +4.04 percent growth in 2021. Job losses are projected to be nearly -549,000 through 2020, with a recovery of +315,400 jobs next year. For Texas’ largest metropolitan areas, the decline in employment on a year-over-year basis for 2020 is projected to range from 3.34 percent in the Dallas-Plano-Irving area to 4.23 percent in the Houston-The Woodlands-Sugar Land area. Recovery in 2021 is expected to be strongest in the Austin-Round Rock-Georgetown, Dallas-Plano-Irving and San Antonio-New Braunfels areas.
As I have said repeatedly since the pandemic began, the economic crisis is driven by a health crisis. The recovery is going to be uneven, and a “new normal” won’t fully materialize until effective vaccines and/or treatments are widely available.
As a result, there is far more uncertainty than unusual surrounding our projections. If the recent surge in cases around the country compels significant interruptions in business activity, the recovery will be slower. In any case, Texas continues to be well positioned for long-term expansion. Stay safe!