As COVID cases surge in Dallas and Texas, so do signs of distress
Local and state economies have outperformed the nation for years, and Dallas-Fort Worth and Texas held up well in the early days of the pandemic. Recovery is a different story.
Employment growth has lagged behind national rates, unemployment claims remain stubbornly high and thousands have left the labor force. As Texas COVID-19 cases rise again – and Congress continues to work on a relief plan – there are signs of growing distress.
Late payments are rising, many are expecting their incomes to decline, and grocery lines stretch for miles, including the 8,500 families who waited for food at Dallas Fair Park this past weekend.
“People are locked up on their own even without a government mandate,” said Pia Orrenius, chief economist at the Federal Reserve Bank of Dallas. “We can’t really escape the effects of the virus because we all withdraw as consumers when the virus rises.”
The pandemic recession is different from most deep downturns, partly because the government grew rapidly and dramatically in the spring. Additional unemployment benefits of $ 600 per week, stimulus checks, and special support for small businesses and their workers made a real difference.
Low-income families were able to maintain their spending, and some increased it. This resulted in a sharp rebound in consumer spending after the end of the national lockdown, even if it wasn’t pre-pandemic levels – and didn’t extend across all sectors.
But much of the great relief ended three months ago, and the virus is picking up again – it spreads pain and suffering, threatens to overwhelm health workers and dampen economic recovery.
Many families and small businesses have held out the summer and turned to the winter holidays to encourage more business and activity. The resurgent virus destroys many of those hopes.
The Dallas Fed expects Texas to end up with over half a million fewer jobs in 2020 than a year ago. Credit cards, cars, and other debt crime rates are rising, another sign of the growing financial burden.
“Every month that goes by with no extra support for these families and small businesses [brings them] One step closer to running out of savings and unable to pay your bills, ”Orrenius said. “You have less safety net and less savings to live on until things turn around.”
About one in three American adults lives in a household that is having difficulty paying their expenses during the pandemic, according to a Census Bureau pulse poll, completed Nov. 9. The ratios are higher in Dallas-Fort Worth and Texas. In Houston, where the economy has also been hit by a deep oil and gas slump, an estimated 45% are struggling to get bills.
A few weeks ago, the recovering economy should continue to grow in the fourth quarter. However, the COVID-19 resurgence has been so severe that economic conditions could “keep getting worse,” said Robert Kaplan, CEO of the Dallas Fed.
“Now we are in a difficult time,” Kaplan said during an interview with KERA’s Krys Boyd. “I’m afraid to say this, we are going to have a tough fourth quarter and I think a very challenging first quarter.”
The good news is that vaccines will be available soon and should be widely available by the middle of next year. “But we have to survive the next six months,” said Kaplan.
Many are afraid of falling incomes. One in four Americans expects someone in their household to experience loss of income from work in the next four weeks, according to the Census Bureau pulse polls. The numbers are worse in Texas and Houston.
Kaplan is also concerned about financial constraints, particularly with families who have relied on previous government relief.
People “are slowly running out of savings and we cannot say exactly when that will happen,” Kaplan said. “But we’re getting closer to that.”
The Dallas Fed regularly surveys executives in Texas and has raised many concerns over the past month.
One executive quoted the surge in COVID cases in El Paso, where the prevalence is widespread in the community: “This is affecting both customers and businesses,” the executive told the Dallas Fed. “We hope that in six months we can have a more stable environment.”
Another called Washington lawmakers for failing to act: “The lack of support from DC has had a profound impact on every aspect of my business, from financial to my desire to stay in business to the depression, not in to be able to help / keep staff. ”Executive said.
Another complained about the difficulty of recruiting workers: “Work, work, work; We need people, ”said the managing director. “We are losing people and cannot find a replacement.”
In early November, companies had about 6,000 open positions at a local hiring event, said Laurie Larrea, president of Workforce Solutions Greater Dallas, a nonprofit that manages government funding programs for workers in the area.
But even with high unemployment, these jobs are difficult to fill: “People in the community say, ‘No, I have too many tasks,'” said Larrea.
Some people have to look after young families or older parents. Others want flexible hours or accommodation to work from home.
“They are looking for work, but they are very selective,” said Larrea. “People are reluctant to put themselves in danger. There is too much at stake. “
Texas is being swept away by businesses and individuals moving here, which has long contributed to the region’s success. Kaplan said he answers inquiries every few days, particularly from California, New York, and Illinois.
This bodes well for the future of the state, and he expressed his confidence in the Texas business leaders.
“You don’t want locks,” he said. “But they would like to hear … a clear, repetitive, relentless message about wearing masks.”
It will take a while, Kaplan warned, for the unemployment rate to drop below 4% in Texas, where it was in January.
“Maybe that’s the best indicator of when we’re being called that,” Kaplan said. “But it probably won’t be until late ’22 or sometime early ’23.”