Where’s the Economy Headed

  • Jun 20, 2016

By Chad Schieber, Director of Client Services

This post is part of an ongoing series inspired by insights from thought leaders in the communities where we work.  From time to time we’ll share creative approaches, ideas and insights from local, national and global leaders who inspire us to think about how we build better communities, cities and a better world.

Earlier this month I had the opportunity to attend an annual economic forecast briefing hosted by CoreNet Global North Texas and delivered by Dr.  Gaines, Chief Economist at the Real Estate Center at Texas A& M University.  With uncertainty in the Texas economy due to oil prices, and around the nation in anticipation of the election, Dr. Gaines outlined what we can expect in the near future for the global, US and Texas economies. Here are a few key takeaways that resonated with me:

Global economy:

The global economy is slowing down. Overseas investors are looking for places to invest their money and as a result there is a capital flight to the US, which makes it the most stable economy in the world.

U.S. economic growth:

Slow growth is the new norm. There is currently no large economic expansion driver in the U.S. economy. Healthcare could be that driver, but its impact has yet to be felt and Corporate America is sitting on a large amount of cash without concrete plans for investment. It’s likely that interest rates will rise slowly and then fall. According to Dr. Gaines. “The government is worried about raising rates, not wanting to impact current growth.”

Texas economy:

The oil bust has had an impact on the state to varying degrees. Texas accounts for half of U.S. energy production which is way down.

Houston, which relies more heavily on oil as a source of income, has been affected more heavily than Dallas, for example, where the economy is more diversified. Energy production’s effects are delayed and are just now hitting white collar jobs.

On a positive note, in 2015 four Texas metros added more people than any other state. As a result local growth issues have come to the forefront with a greater need for good infrastructure, including water and roads. Last year home sales also hit a record and housing inventory level is low for less expensive houses. Dallas-Fort Worth median home prices have increased by 12 percent in 2015.

In summary, uncertainty is the key word now. “The bloom is off the boom,” says Dr. Gaines. “Being in month 85 of a typical 63-month positive economic cycle, we are due for a cycle correction.”