For years, the local and state economies have outperformed the nation’s, and Dallas-Fort Worth and Texas stood up well in the early days of the pandemic. The recovery is a different story.
Job growth has been lagging national rates, unemployment claims remain stubbornly high and thousands have dropped out of the labor force. As COVID-19 cases spike again in Texas — and Congress continues to whiff on a relief plan — there are signs of growing distress.
Late payments are rising, many expect their incomes to fall, and food lines stretch for miles, including the 8,500 families who waited for food at Dallas’ Fair Park last weekend.
“People have sort of locked down on their own, even without a government mandate,” said Pia Orrenius, senior economist at the Federal Reserve Bank of Dallas. “We can’t really escape the effects of the virus, because we all pull back as consumers when the virus surges.”
The pandemic recession is different than most deep downturns, in part because the government stepped up quickly and dramatically in the spring. Extra unemployment benefits of $600 a week, stimulus checks and special support for small businesses and their workers made a real difference.
Low-income families were able to sustain their spending and some increased it. That led to a strong rebound in consumer spending after the national lockdown ended, even if it didn’t match pre-pandemic levels — and didn’t extend to every sector.
But much of the big relief ran out three months ago, and the virus is surging again — spreading pain and suffering, threatening to overwhelm health care workers and putting a damper on the economic recovery.
Many families and small companies have been hanging on, enduring through the summer and banking on the winter holidays to spur more business and activity. The resurgent virus is dashing many of those hopes.
The Dallas Fed expects Texas to end 2020 with over half a million fewer jobs than a year ago. Delinquency rates on credit cards, autos and other debts are ticking up, another sign of the growing financial strain.
“Every month that passes without additional assistance for these families and small businesses [brings them] one step closer to running out of savings and not being able to pay their bills,” Orrenius said. “They have less of a safety net and less savings to live on until this thing turns around.”
About 1 in 3 American adults are living in a household struggling to pay expenses during the pandemic, according to a Census Bureau pulse survey completed Nov. 9. The ratios are higher in Dallas-Fort Worth and Texas. In Houston, where the economy also was walloped by a deep oil-and-gas slump, an estimated 45% are having difficulty covering their bills.
A few weeks ago, the recovering economy was expected to keep growing through the fourth quarter. But the COVID-19 resurgence has been so strong that economic conditions could get “worse and worse and worse,” said Robert Kaplan, CEO of the Dallas Fed.
“Now we’re at an awkward period,” Kaplan said during an interview with KERA’s Krys Boyd. “I’m afraid to say this: We’re going to have a rough fourth quarter, and I think a very challenging first quarter.”
The good news is that vaccines are coming soon and should start being widely distributed by the middle of next year. “But we’re going to have to get through the next six months,” Kaplan said.
Many are fearful of falling income. One in 4 Americans expect someone in their household to have a loss in work income in the next four weeks, according to Census Bureau pulse surveys. In Texas and Houston, numbers are worse.
Kaplan also worries about a financial squeeze, especially among families that relied on earlier federal relief.
People are “starting to run out of their savings, and we can’t tell exactly when that’s going to happen,” Kaplan said. “But we’re nearing that.”
The Dallas Fed regularly surveys business executives in Texas, and they raised many concerns last month.
One executive cited the surge in COVID cases in El Paso, where community spread is rampant: “This impacts businesses, both from the customer side and from the manpower side,” the executive told the Dallas Fed. “We are hoping that in six months we can have a more stable environment.”
Another called out lawmakers in Washington for failing to act: “Lack of support coming from D.C. is severely impacting all areas of my business, from financial to my desire to remain in business to the depression of being unable to help/keep employees,” the executive said.
Another complained about the difficulty in recruiting workers: “Labor, labor, labor; we need people,” the exec said. “We are losing people and cannot find replacements.”
In early November, companies at a local hiring event had about 6,000 open positions, said Laurie Larrea, president of Workforce Solutions Greater Dallas, a nonprofit that manages government funding programs for workers in the region.
But even with high unemployment, those jobs are hard to fill: “People in the community are saying, ‘No, I’ve got too many responsibilities,’” Larrea said.
Some folks must take care of young families or an elderly parent. Others want flexible hours or accommodations to work from home.
“They’re looking for work, but they’re being highly selective,” Larrea said. “People are hesitant to put themselves at risk. There’s too much at stake.”
Texas is getting a lift from companies and individuals moving here, which has long been part of the region’s success. Kaplan said he’s fielding inquiries every couple of days, especially from California, New York and Illinois.
That bodes well for the state’s future and he expressed confidence in Texas’ business leaders.
“They don’t want lockdowns,” he said. “But they would love to hear … a clear, repetitive, relentless message about mask-wearing.”
It will be a while, Kaplan warned, before the Texas unemployment rate dips below 4%, where it was in January.
“Maybe that’s the best indicator of when we’re so-called back,” Kaplan said. “But it probably won’t be till the end of ’22 or sometime in early ’23.”
