Healthy job creation combined with household and business spending pushed the Lubbock Economic Index to a new high in November – the index is up 1.2 percent since November 2017.
This comes on the heels of the Lubbock economy entering its eighth year of expansion in October.
“Again, we have good economic news,” said Randy Laycock, Lubbock National Bank’s senior vice president of marketing, when he briefed local media. “We have a new record for the index and we feel like the first quarter (2019) will continue to reflect growth in general spending.”
Lubbock’s economy is still creating new jobs with payroll employment up 2.6 percent in November compared to a year earlier. Lubbock is 7th out of 26 Texas cities for job creation.
“There’s strong, good news there,” Laycock pointed out. It reflects the addition of 3,900 jobs, which includes 1,800 in the trade-transportation-utilities sector, 1,100 in leisure and hospitality, and 400 from construction, plus oil and gas jobs.
At the same time, Lubbock’s unemployment rate fell to 2.7 percent, slightly lower than the same time in 2017.
In addition to new jobs, consumer and business spending were healthy.
The number of existing homes sales fell slightly in November (301 vs. 316), but sales prices in November were 11.4 percent higher than in November 2017. For the first 11 months of 2018, the sales price of existing homes was 5 percent higher than the same period a year earlier.
“It’s interesting to see the value of homes rising,” said Chip Gilmour, LNB senior vice president. “Homes are still a very good investment.”
Investment spending measured by the inflation-adjusted value of building permits rose by 4.6 percent in November, but year-to-date in 2018, it was 42 percent lower than the same period in 2017. There were several permits for large projects such as the Buddy Holly Hall of Performing Arts & Sciences and the Citizens Tower downtown in 2017, which have created a pig-in-the python effect for construction spending in 2017 and 2018. The basis for comparison should start showing smaller gaps in 2019.
Hospitality and travel showed sizeable gains in November:
The oil and gas industry and cotton farmers in West Texas are facing conditions which have restricted activity. There has been downward pressure on oil prices in the Permian Basin due to pipeline constraints, according to the Federal Reserve Bank of Dallas. This has resulted in a decline in the number of oil rigs operating and a very small change in crude oil production (1.8 percent.) Also, cotton farmers on the South Plains have seen the number of bales picked/ginned drop by almost 32 percent this year due to the summer drought and a wet autumn.
Inflation slowed in Lubbock in November, as the Consumer Price Index (CPI) fell slightly from 2.3 to 2.2 percent. The change reflected stabilizing prices in the food/grocery sector. Another component of the Lubbock CPI, housing costs, rose from 3.7 percent to 3.9 percent. Apartment demand is exceeding expectations in Lubbock and other Texas cities, putting upward pressure on rentals. Inflation rates on a national and state level reflect the overall slowing in price increases seen locally.
Possible issues that could affect the economy in the first quarter of this year are the effects of last year’s tax reform laws on the size of tax refunds, Laycock said. The question, he posed, was whether spending on big ticket items will decline if tax refunds turn out to be smaller.
“There is also nervousness with the government shutdown and how it might affect payments to farmers,” he added.
The biggest economic challenge in 2019, Laycock said, is stock market volatility and trade issues with China. Sounding a positive note, Laycock said, “Trade issues seem to be stabilizing.”