Even as the Texas economy begins climbing out of the doldrums, construction activity in the state will likely remain slow, leading economists say.
“Things will get better, but it is not going to be a sharply upward trend,” says Terry L. Clower, director of the Center for Economic Development and Research at the University of North Texas in Denton. “It will be a slow go and a bit of slogging through the mud for developers for the rest of 2010.”
Roger Meiners, chairman of the Department of Economics at the University of Texas at Arlington, agrees. He says his “best guess is things will improve slowly. The consensus is we’ve probably hit bottom, which means the decline has stopped. When they say the recession is over, it doesn’t mean we are back to where we were before it started.”
Odessa economist M. Ray Perryman calls 2010 a transition year for Texas, but beyond that, he says, “I expect significant momentum to develop.”
Angelos Angelou, principal executive officer of Angelou Economics in Austin, predicts the Texas economy to remain about the same in 2010 as it was in 2009.
“I don’t expect 2010 to be more active, and that’s not good,” Angelou says. “Construction has to follow the rest of the economy, and I do not expect the national economy to create any new jobs before the first quarter of 2010. We would have to create 140,000 jobs every month to stabilize unemployment.”
Texas’ unemployment rate, the 19th lowest in the U.S., is well below the national rate of about 10%.
“Our unemployment rose more slowly than it did in the rest of the country,” Meiners says. “But we’re around 8% now, and we’re no longer one of the lowest in the nation.”
Kenneth D. Simonson, chief economist for the Associated General Contractors of America, says Texas was slower to join the construction slump, due to its strong oil and natural gas markets, but as those cooled off, so did construction activity.
“In 2010, I think construction will hold up better in Texas than the rest of the country,” says Simonson, indicating large military projects will keep many contractors busy.
Where work proceeds Military work, such as projects at Fort Hood, Fort Bliss and Fort Sam Houston, and stimulus money will drive highway and school construction, but a declining tax base and unpaid taxes could deter some school districts from moving forward with new projects.
“Construction will continue unabated in communities with a military presence,” Angelou says. “And anything that relates to population growth in Texas, we will see that work continuing. So far, the only sectors with economic growth are government, education and health care.”
Angelou predicts unprecedented growth in health care during the next few years if national health reform passes.
“Fifty million uninsured will begin to use the system,” Angelou says. “The road to recovery is through health-care reform.”
Improved stock portfolios could put university and health-care projects back on track, Simonson adds.
Simonson anticipates strength in the power sector as utilities retrofit existing coal-fired plants to reduce emissions or boost output – or change the base from coal to natural gas or biomass. He expects more natural gas power plants and exploitation of the state’s shale formation.
“In Texas, it also means wind-farm construction,” Simonson says. “That hit a pause when they ran out of transmission capacity and funding when natural gas prices dropped. But I think...