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21 Apr. 2015 | Comments (0)

Everything is bigger in Texas, the saying goes, and consumer confidence is no exception. Job growth and low unemployment have made Texans far more confident than their fellow Americans for some time. However, the Texas economy is expected to moderate this year, the result of a nearly 50 percent decline in crude oil prices. And while declines at the pump are always welcome news for consumers, this one is a double-edged sword in Texas. On one hand, consumers benefit from the price declines, although most are saving, rather than spending, their newfound discretionary income (see blog: Hit The Road, Jack). On the other hand, Texas’ energy-centric economy and labor market are suffering from the decline in oil prices. This raises the question: will Texas confidence keep booming—or go bust? As of March, the modest cooling in economic and job growth has not hurt consumer confidence in the state (see chart 1). Texas confidence remains at post-recession highs, but has been relatively flat since last summer. And when we look beyond the “confidence” number, it appears the tide may be turning. Lynn blog chart 1               The Present Situation Index, which measures consumers’ assessment of current business and employment conditions, has been the key driver of confidence in Texas. But the increase in this sub-component has been fueled primarily by positive sentiment regarding the job market, and consumers’ assessment of business conditions has been relatively flat for the past year. Since business conditions lead to job growth, unless we see business conditions improve in the months ahead, we are likely to experience a softening in the jobs component (see chart 2). And recent data from our Help Wanted OnLine® Series show a decline in labor demand for energy-related jobs. Thus we could very well see a less optimistic Present Situation Index soon. Lynn blog chart 2               There’s more. If we look six months down the road, the Expectations Index, which measures consumer outlook regarding business conditions, employment, and income, paints a similar picture. Expectations for business conditions have been moderately weakening since last fall:  the proportion of consumers expecting conditions to improve has declined, and the proportion expecting conditions to worsen has risen (see chart 3). At the same time, Texans have become less optimistic about the employment outlook. The gap between those expecting more jobs and those expecting fewer jobs has narrowed considerably. Lynn's blog chart 3               What goes up must come down. We can expect a dip in Texans’ confidence in the short term.  This is relative. Compared to most US consumers, denizens of the Lone Star State will continue to walk with a spring in their step, as everything, including confidence, continues to be a little bigger in Texas.  
  • About the Author:Lynn Franco

    Lynn Franco

    Lynn Franco is director of economic indicators and surveys at The Conference Board. Franco is responsible for overseeing the production and release of all global indicators for The Conference Board, i…

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