Texas Border Project
By Roberto Hugo Gonzalez
Atlas, Hall & Rodriguez, LLP (AHR) has partnered with the Federal Reserve Bank of Dallas to host a lunch presentation, making it the second year that AHR has held such a luncheon. The highly anticipated event featured “Live Virtual: 2025 Texas Economic Outlook.” Business leaders, policymakers and community members wanted to hear insights from Pia M. Orrenius, vice president and senior economist at Dallas Fed.
Both the AHR McAllen offices featured Full House in person, effectively providing a detailed study of Texas’ economic performance in 2024, the formation factors for 2025, and opportunities and risks ahead. Check out parties in Rio Grande Valley, El Paso, Houston, San Antonio and Austin.
See the gallery of images below.
Texas maintained a strong economic position in 2024, but employment growth had lowered forecasts and expectations of 1.7% below the historic state average of 2.0%. “The Texas economy is healthy, but in reality, looking back at last year, it’s slower than I expected,” Ornius said. Several factors that contributed to this slowdown, including higher interest rates, lower oil and gas prices, and uncertainty over the election year, have delayed the company’s major decisions. Despite these challenges, Texas continued to outperform its national economy and maintained its reputation as a business-friendly hub with a strong labor market foundation and a dynamic workforce.
Texas’ energy, financial services and construction sectors experienced employment growth in 2024, but Austin and Dallas performed poorly due to layoffs in tech and business services. Smaller metro areas, including Brownsville and Beaumont, saw an impressive economic expansion, benefiting from increased labor force growth and investment. The state’s workforce saw record growth driven primarily by international migrants. This offset a decline in domestic migration. “We recorded workforce growth and I think it benefited many of these little metros,” Ornius pointed out. Despite external pressure, Texas’ population growth of 1.8% has helped to maintain its economic momentum.
The 2025 Economic Forecast Project continued to grow employment and signal transduction by 1.6%, but below trend expansion. While business in Texas remains optimistic, economic risk remains important. “We see 2025 as a balance between post-election optimism and the expected negative growth effects of higher tariffs, lower immigration and reduced government spending,” she said. I’ve explained it.
Several key factors in 2025 will affect economic growth. While businesses look forward to deregulation and tax cuts to encourage investment and expansion, Texas’ strong business environment continues to attract businesses and talent. The state’s budget surplus and rainy day funds provide financial flexibility in economic stability. However, trade tariffs could lead to retaliation measures and affect Texas’ exports, particularly in energy and manufacturing. A reduction in immigration through stricter policies could limit the expansion of the workforce, while federal spending cuts could slow certain industries and impact public sector employment.
The Texas housing market was stable in 2024, with home prices adapting to inflation. Rents in Austin and San Antonio remained stable, with Houston’s housing market remaining low. Concerns in commercial real estate, particularly the office sector, have been eased.
The energy sector remains strong, with Texas crude oil production reaching 5.8 million barrels per day despite declining rig numbers. New drilling technology has improved production efficiency. “It’s actually really fun talking to energy executives and learning about oilfield productivity,” Orrenius said, highlighting that drilling innovations mean less production rigs. The New Mexico oil boom in the Permian Basin is contributing to regional economic growth.
Texas remains the country’s top exporter, but export growth has stagnated due to strong, low demand for the US dollar from China. Business leaders are concerned that new import tariffs could lead to retaliatory actions and impact Texas’ trade-based economy. “And you say, “Well, peers, tariffs are not going to affect exports.” Customs duties are on imports. But then, I will tell you, that if you place tariffs on imports, you could incur retaliatory tariffs that affect exports,” Orrenius warned.
Texas inflation has fallen below the national average, but businesses are hoping to see a higher price increase in 2025. Financial conditions have improved, banks report increased loan volumes and fewer concerns about commercial real estate. As inflation continues to exceed federal target levels, the outlook for Federal Reserve fee reduction remains uncertain.
The 2025 Texas Economic Outlook presentation reaffirmed the state’s resilience, highlighting key challenges for the coming year. Texas continues to be a leader in job creation, energy production and business-friendly policies, but trade, federal policies and global demand uncertainties pose challenges. “Business leaders are optimistic for 2025 despite economists revising their forecasts,” Orrenius observed.
As businesses and policymakers navigate these economic dynamics, insights from the Federal Reserve Bank of Dallas will be important in shaping strategic decisions for next year.
Atlas, Hall & Rodriguez and LLP continue to promote Texas economic dialogue and empower business leaders, investors and community members. The company will defend economic education and community involvement through events like these.
