Looking Back

Dr. M. Ray Perryman

January 10, 2023

As I’ve said before, one of the most striking characteristics the US economy demonstrated in 2023 was resilience. Texas set a blazing growth pace for the year, though things slowed a bit toward the end. Let’s look back at the year and the key developments from an economic perspective.

About a year ago, everywhere you looked there was another prediction of a recession (possibly a major one). Although I always thought (and said and wrote) that the fears were overblown, we were in an environment characterized by rampant inflation, with the Federal Reserve taking aggressive actions and indicating that it would stay the course until price increases slowed their upward spiral.

The path toward a “soft landing,” where inflation is tamed without fostering a recession, is always difficult. Last January, it appeared to many as if the chances of avoiding a downturn were next to nil. It was a case of a recession that wasn’t, with month after month of expansion despite ongoing challenges. We aren’t out of the woods completely (as is always the case), but a gentle touch down is looking increasingly likely.

Geopolitical tensions escalated during the year, with the Russia-Ukraine war continuing and new conflict breaking out in Israel-Gaza with the Hamas invasion. Additional regions are showing increasing stress, including Venezuela-Guyana. China’s faltering economy further rippled through world markets. Even with these problems and others, expansion continued.

Numbers of airline passengers finally got back to pre-pandemic levels, and the travel industry returned to profitability. However, the banking sector encountered significant challenges, with federal action needed to deal with highly visible (though not systematic) bank failures. Financial institutions face some ongoing challenges in real estate portfolios. Labor actions were also a major factor.

In Texas, official Census estimates indicated the state’s population topped 30 million in July 2022, with an increase of more than 470,700 over the prior 12 months. Numbers of residents in several other states declined and continue to do so. Another notable milestone is that the state’s largest racial/ethnic group is now Hispanics, followed by non-Hispanic whites.

Texas also won Site Selection magazine’s “Governor’s Cup” for an impressive eleventh consecutive year; the Cup is awarded to the state with the most major corporate locations and expansion projects. Several moves by the state legislature (such as maintaining key economic incentives) helped ensure ongoing competitiveness, although other actions were more problematic. Voters approved measures to fund expansion of broadband, water supplies, state parks, and higher education.

Looking back on 2023, the biggest story for the economy was continued growth despite some major challenges and increasing global tensions. Consumers led the way, and the job market was robust. Let’s hope 2024 is a little calmer. Stay safe!