Waco’s economy didn’t seem to get the message in August that a recession was looming.
Spending topped $453 million, unemployment fell to 3.7%, and permits for construction of commercial and industrial buildings hit $170 million, the highest monthly total since Amazon built its fulfillment center.
But all is not rosy, says Karr Ingham, a West Texas economist who compiles a monthly snapshot of trends using data dating back to 2000. Its Greater Waco Economic Index, sponsored by the First National Bank of Central Texas and Tribune-Herald, was released this week. Greater Waco Chamber of Commerce Vice President Kris Collins presented the findings to business leaders on Thursday.
In his summary, Ingham said that “recession storm clouds are gathering” but that there is no indisputable evidence of a sustained downturn in the statewide or statewide economies.
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“Economic uncertainty remains in the broader economy with inflation worries, weak GDP numbers and the like,” Ingham wrote. “Any recession in the Waco metro area economy would likely be predicted by a sustained downturn in the broader Texas and US economies.”
That being said, Ingham reported that the GWEI raw score hit 151.0 in August, a record after slipping slightly in July. He called July an “anomaly” and said the Waco metro area continues to ride a 19-month wave of growth.
Retail spending through August reached nearly $3.4 billion, up 7% from the first eight months of last year. Construction permits for commercial and industrial buildings reached $170 million in August, up 265% from August last year. Collins said announcements last year that new companies had chosen Waco are bearing fruit as permits are issued to fulfill those promises.
The local unemployment rate fell to 3.7% in August from 4.8% a year earlier. Ingham said 130,700 people were at work in August, up from 125,300 a year earlier. These numbers reflect employment in the Waco Metropolitan Statistical Area, which includes Falls and McLennan counties.
But Ingham offered a caveat, saying seasonally adjusted monthly estimates suggest employment fell in July and August. He said these results don’t necessarily mean job growth has ended, that volatility might explain them. But he said the fact remains that year-on-year job growth through June was 6.7%, while that through August was lower at 4.3%.
In response to a question, Collins said an unemployed person is defined as someone who is not working but is actively looking for a job. She said some experts believe a municipality has reached full employment when the unemployment rate fluctuates between 3% and 4%. Organizations may view such a designation negatively when considering a community to expand.
Collins said she doesn’t believe Waco has achieved full employment, that the available workforce is growing, either because people outside of Waco are looking for opportunities or those on the sidelines have renewed their search.
Ingham said the unemployment rate is nearing pre-pandemic levels at 3.7%. He said the unemployment rate was 3.6% in August 2019.
Elsewhere, the GWEI wobbled in August. Vehicle spending fell to $87 million from $90 million a year earlier. Ingham said these numbers don’t paint a complete picture of inflation wreaking havoc.
“Automobile sales tax levied in August … is up nearly 14%, reflecting the amount spent buying new and used automobiles,” he said. “However, when the inflation adjustment is applied, real auto spending for the month is actually down 3% compared to August last year. That’s what inflation is doing in these various components of the Greater Waco Economic Index, a phenomenon not seen in an index based on January 2000 until this year.”
The same thing is happening in the lodging industry, Ingham said. Spending on hotel stays fell nearly 8% year over year to $7.4 million in August.
“Raw housing tax revenue for the City of Waco increased 11% year over year in August,” Ingham wrote. “However, real spending on hotels/motels fell by almost 8% compared to August last year thanks to persistently high inflation rates.”
Housing-related categories generally took a hit in August.
Permits for the construction of new houses amounted to 36 compared to 59 in the previous year. But the 503 permits issued through August surpassed the 461 last year.
“One of our biggest challenges is keeping houses affordable. $200,000 new homes are gone and $300,000 homes are few and far between,” said Jonathan Barrow, founder and CEO of BAM Builders.
He listed several building materials that continue to rise in price.
“It’s amazing how quickly people can be evicted from their homes,” Barrow said.
He said many buyers he meets locally have sold their homes elsewhere, often outside of Texas, and used the proceeds to build in Waco.
Ingham said the median home selling price in August was $341,235, according to the Waco Multiple Listing Service. That’s up 24% from the norm of $274,691 in August last year. So far this year, homes have not been a bargain, averaging $312,501 through August, up 14% year over year.
Existing home sales in August mirrored those of the previous year, with 329 homes changing hands in both months. Through August, home sales have reached 2,449, about 4% up from the 2,351 through August last year.
“The US economy is unlikely to be in recession at this point in 2022. However, some signs are increasingly pointing to that possibility,” reported Ingham. “First, the Federal Reserve is raising interest rates to curb economic activity, which they think is causing inflation. Second, inflation remains an annoying feature of the US economy, causing wages to shrink relative to what they can buy.
“Also, the Conference Board, longtime publisher of the usually very reliable Index of Leading Economic Indicators, has declined for six straight months through August and that could be the icing on the cake.”
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