Recently, JLL’s Chief Economist Ryan Severino presented an interesting overview on when we could expect a national recession and what to be on the lookout for. That prompted us to look at the DFW economy and its drivers. Our research shows that, thanks to a number of factors in place, North Texas bucks most of those trends. In fact, our market sees no major signs of slowing down in the immediate future.
Probably the biggest headline, we expect 96,000 new jobs in 2018 with no slowdown in sight. DFW is running at a 2.7 percent annual increase, outpacing New York at 1.4 percent and 1.6 percent for Los Angeles. Just last week, the Texas Workforce Commission announced its 23rd consecutive month of employment growth with the state adding an additional 34,700 positions in May. And, with pockets of highly educated workers in a very diverse economy, DFW can supply workers in most industry sectors.
With the fundamentals of all real estate classes performing well in DFW, we are on most investors “buy” list. We are concerned a bit though with housing prices increasing by 60 percent since 2013. That is certainly outpacing DFW wage growth. But when you step back and compare prices to other U.S. markets, DFW home prices are still a bargain. Often, those moving to DFW can buy more house than they are accustomed to.
And don’t forget about the engines that drive our growth—access to two world-class airports, no state income taxes, central time zone, business friendly climate and overall low cost of living. With these attributes, DFW is historically like a huge vacuum in a down cycle. The region draws companies looking to lower costs and recruit quality workers. This will continue to be a buffer for us against a strong downturn.
The one somewhat concerning trend is unemployment. With unemployment rates hovering around 3.7 percent, it has become difficult to hire in some industries, which stalls some business growth. A construction executive recently told me he can’t find enough talent to land more construction contracts.
As I tend to be bullish on the DFW economy, I wanted to do a quick sanity check. I asked some of my JLL teammates, “On a scale of one to ten, how strongly do you feel that our local economy will grow through 2019?” Of the 29 responses, the average was 8.69, with several tens and the low being seven. When asked, using the same scale, how confident they were in the DFW economy through 2021, the average dropped to 6.12 with high votes of eight and lows of fours.
If we continue our growth path, it will certainly be a long run. But as a friend in oil and gas reminded me, “Most of our industries are a little like being a farmer. Every several years you are going to have a drought—so plan for it!” Some level of drought will certainly hit us but it looks like we have several more years of runway!
Steve Thelen is Managing Director at JLL’s Dallas office.