First slump in 18 months for Waco economy, despite brisk job growth, spending | Local business news
June didn’t suffer economic impotence, but July did stumble, reported West Texas economist Karr Ingham in his latest analysis of Waco Trends, prepared for the First National Bank of Central Texas and the Tribune-Herald.
Jobs abound as central Texas continues to shake off the COVID-19 malaise. Since June last year, the area has created 8,200 jobs. Major local companies including L3Harris and Time Manufacturing have announced recruitment campaigns. Ingham calls the hiring pace a “bubble” and the seasonally adjusted figures show the region added 1,200 jobs between May and June.
Kris Collins of the Greater Waco Chamber of Commerce said Waco ranked second in Texas and seventh nationally for job growth between June last year and June this year, according to the Bureau of Labor Statistics.
But several business leaders attending Collins’ GWEI presentation on Wednesday said finding and keeping good employees is difficult.
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“When you have a good employee, you better do whatever it takes to keep them,” said Derek Scott, Jim Turner Chevrolet general manager.
Scott said retailers continue to struggle with inventory. Aside from parts shortages and supply chain issues, he believes automakers are deliberately moving towards limiting the number of vehicles they make available to dealerships at any one time.
“I think the days of 150 new cars in the parking lot are over,” he said.
Whatever the cause, spending on vehicles fell 20% in June and another 26% in July, year on year, Ingham reported. But those sharp declines don’t necessarily represent the year as a whole, as sales through July are $530 million, down just 4.4% from the same period last year.
July proved disappointing on several fronts. The Greater Waco Economic Index posted its first decline in 18 months, with the raw index slipping a tenth of a point to 150. Ingham said “culprits” were auto spending, nonresidential building permits and single-family home construction.
All suffered double-digit drops between June and July.
“The reasons for these declines were varied, ranging from actually low numbers to inflation, to this year being compared to very high numbers a year ago, or a combination of both,” Ingham wrote in his report.
It is worth noting the drop in permits for the construction of single-family houses between June and July. Builders secured 76 such permits in June, but apparently began hibernating or seeking shelter from the heat in July, as they only picked up 27 such permits. The year-to-date figure through July reached 467, up 16% from the same period last year.
Existing home sales through July totaled 2,121, up 4.9% year over year. The average selling price for homes in July was $308,727.
Magnolia Realty’s Ashley Warren said Greater Waco remains clearly a seller’s market. Buyers are willing and able to purchase affordable housing in decent condition. But the frantic pace that played out earlier this year has eased. Warren said she thinks it’s good for buyers, sellers and agents like herself, all with time to catch their breath.
Warren said cash buyers return to the Waco market after leaving as bidding wars raged and then mortgage rates rose.
Local spending remains positive. Retail purchases in Waco and surrounding cities totaled $2.9 billion through July, up more than 8% year over year, adjusting for inflation, Ingham reported. He said the rise is looking better considering 2021 is a stellar year.
“Monthly real spending in May, June and July 2021 increased by 45%, 43% and 20% year-on-year, respectively,” Ingham wrote. “And yes, the previous year was the COVID year 2020, but the impact of COVID on these numbers was relatively mild, so these were very real, sizeable gains in 2021 as opposed to simply recovering what was lost in 2020.
“That spending trends remain at par to slightly higher compared to the high numbers in 2021 continues to bode well for the local economy. And of course, increases in 2022 would potentially be larger if inflation were at normal levels and not abnormally high.”
Spending on hotel stays declined slightly in both June and July, but is up 9% year over year for the first seven months at $51.7 million.
Collins said the extreme heat may have hampered Waco’s tourism industry in June and July “since many of our attractions are outdoors.”
Permits secured for construction of commercial and industrial buildings and other non-residential projects through July totaled $510 million, up nearly 7% year over year. Ingham said the year-to-date total would set a record if not for the show in 2013 when Baylor University was building McLane Stadium.
“The economy certainly faces the challenges of inflation and a slowing economy, as reflected in gross domestic product (GDP) trends over the past two quarters,” Ingham wrote in his July GWEI summary. “However, inflation seems to have peaked and is on the way out. Again, this doesn’t mean prices are going down — it means they’re going up more slowly. But falling inflation rates are a welcome trend after the strong post-COVID upward pressure on prices for a variety of reasons, some of which are COVID-related and some self-inflicted in terms of US fiscal and monetary policy.
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