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As a new year begins, federal and local economic experts provided insight on where the economy is headed in 2023 during the Greater San Marcos Partnership’s annual Texas Innovation Corridor Economic Outlook.
Roberto Coronado, senior vice president in charge of the Federal Reserve for the Dallas, San Antonio, and El Paso branches, served as the presenting speaker during Thursday’s event at the City Of San Marcos Conference Center. GSMP President Jason Giulietti provided a regional economic development update followed by a panel discussion with Alan Adelman, senior fund manager and research analyst for Frost, and Lincoln Talbert, Chief Financial Officer for Texas Regional Bank.
Coronado gave a broad economic outlook, stating that although he doesn’t have a perfect crystal ball, he sees the economy is slowing down.
“I don't think I have to tell anyone it's very hard for an economist to have a perfect crystal ball and see how the economy's going to evolve,” Coronado said. “Today's environment, it's even more difficult and challenging. So, I come to you with lots of humility so that you know what I'm about to say: We'll see how the year unfolds.”
Coronado stated that the U.S. and Texas economies both saw slower growth rates in the fourth quarter in 2022.
“The slowdown is broad base,” Coronado said. “There are some sectors doing well but for the most part we've seen a broad slowdown. When you look at output revenues, employment, new orders, indicators, housing, construction, and even some of the leading indexes for both the U.S. and Texas continues to suggest a slowdown in [20]23.”
Coronado added that the current high inflation rate along with rising interest rates will present challenges in 2023. But Coronado said the good news is that price and wage pressures have eased in recent months.
“So, the outlook suggests the U.S. and Texas will slow in 2023,” Coronado said. “There are plenty of risks for the U.S. and Texas economies. The top of mind for us is the Russian-Ukraine War and the implications it may have on all types of commodities and energy.”
Reflecting upon the pandemic’s effect on the economy, Coronado said most jobs lost during the pandemic have been recovered, highlighting that Texas’ bounce back stood out among other states.
“Texas has clearly outperformed, and this is a recurring theme throughout the last 20 to 30 years, that Texas tends to outperform the U.S. economy by a wide margin and the last 24 to 36 months has not been the exception,” Coronado said. “Texas has a little bit over 4% more jobs than those we had back in February of 2020. The U.S. is less than 1% more.”
Coronado said the Texas Innovation Corridor’s economy continues to perform “extraordinarily well.”
“This metropolitan statistical area, which includes San Marcos, has done extraordinarily well,” Coronado said. “We've seen a lot of growth — employment growth, and growth in general in the magnitude of almost 11% in this same time frame. When you look into population and migration dynamics across the U.S., Texas and a few other states have been very strong magnets for people moving to Texas to its people and businesses.”
During his regional economic development update, Giulietti noted that activity continues to take place throughout the Texas Innovation Corridor, which consists of Hays and Caldwell counties.
“You may have heard in September 2022, GSMP finished its third consecutive record year. By virtually every measure, output of the organization, which means positive impacts for our communities now and into the future, is at record levels,” Giulietti said. “The start of our fiscal 2023 fiscal year has not demonstrated anything different. In November, we set a record for the most Requests for Information more than any other month in the history of the partnership.”
Giulietti said over $75 billion in capital inquired about the region during the first two months of GSMP’s fiscal year. People moving to Texas — especially Hays and Caldwell counties, which saw a higher annual growth rate than Travis and Bexar counties at 3.8% — is one of the driving forces of economic growth in the region.
“The US census just released that the great State of Texas has officially surpassed 30 million resident ... a trend that is expected to continue for many, many years to come,” Giulietti said. “Texas was also named, for the second consecutive year in a row, the number one state for in-bound one-way UHaul destinations. These new residents are finding a home right here in between Austin and San Antonio.”
Giulietti also highlighted that the annual impact of GSMP-led economic development projects is more than $5 billion generated every year in Hays and Caldwell counties.
“In the last fiscal year alone, more than $284 million in new sales and property tax revenue was added to our local municipalities, counties and school districts thanks to these projects,” he said. “Over the last 16 months, the GSMP has generated … Roughly 25% of all direct and indirect jobs, 65% of all capital investment attracted … as it relates to total output of the entire history of the organization.”
Following Giulietti’s regional update, he moderated the panel between Adelman and Talbert, where both shared their thoughts on the local economy.
“Our expectation is yes — We are heading into an economic slowdown nationally and that will trickle down to Texas,” Adelman said. “Are we going to do better nationally? Yes. But what I would say is that we're going to have more adverse times from adversity comes opportunity.”
Adelman said their overall perspective is that nationally they expect to get into a mild recession, or flatline — not having economic growth from an overall perspective.
“We see inflation remains stubbornly high. There is not a client that we’ve talked to as Texas, that when we say, ‘how's business going,’ says we're having difficulty hiring qualified people; and that's everybody,” Adelman added. “So now that provides headwinds relative to the overall economy. I'd rather be in between San Antonio and Austin in the corridor here you guys, you’re just in a great position.”
Talbert agreed, saying that although the economy is slowing down, he doesn’t expect a deep recession.
“I think the challenge for business people going forward and entrepreneurs … everybody in this room, is the velocity of the change,” Talbert said. “This is the highest percentage increase in interest rates relative to where rates started, ever. Digesting that is a real challenge.”
