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Is DFW’s Economy Insulated from Recession?

Business

Dallas Skyline | Image by Dalton Aiken/Shutterstock

Dallas-Fort Worth has the most diversified economy in Texas, according to new forecasts from Jones Lang LaSalle (JLL), which may prove helpful in a potential downturn.

The metroplex already has 7.8 million people and is the fastest-growing metropolitan area in the U.S. Still, by 2045, it could be home to 3.4 million more residents, according to the report.

West and East coast migrations will continue to fuel that population increase.

Dallas-Fort Worth also has the jobs to back up this population growth. More than 250,000 jobs were added this year, with Dallas-Plano-Irving adding 13,500 in mining, logging, and construction alone.

The region’s diversified economy helps insulate it from a looming recession. DFW industry is more diverse than in Texas’ other major cities, strengthening its resilience to withstand economic instability.

Despite having a smaller population than New York and LA, the DFW area saw greater job growth than its more populated counterparts, according to JLL’s report.

Jobs in the region were spread evenly across industries. No one sector held more than 22% of employment across the metroplex. The largest sectors of employment were trade, transportation, and utilities, at 21.8%.

“Professional and business services” was the second largest employment sector at 18%. Education and health services, government, leisure and hospitality, and financial activities augment the metroplex’s job diversity.

Dallas-Fort Worth continues to lead the nation in sales from real estate investments bought and sold since 2020, beating out New York and Los Angeles. The area saw a sales volume of over $43 billion from the fourth quarter of 2021 to the third quarter of 2022, according to JLL’s report.

The industrial development pipeline was also the largest in the nation due to a greater need for industrial space, according to the Fort Worth Star-Telegram. There are over 62 million square feet of industrial space under development.

Goldman Sachs is 35% sure the nation will experience a recession in the next 24 months. Nevertheless, Scott Mueller, who leads the firm’s southwest private wealth management division, said North Texas is in a strong position.

“North Texas will not be impacted as strongly as other parts of the country; you can be comfortable with that statement,” Mueller assured.

“We’ll still be driven by the macro economy, but there’s a growth tailwind here just by population growth and the associated economic activity group that will help alleviate that effect here,” he said.

Mueller said it would be “a business opportunity,” especially for businesses “on the private wealth management side in this whole region.”

Jenny Rudolph of the Fort Worth Star-Telegram echoed Mueller’s sentiment.

“While economists have predicted a looming recession, DFW is positioned to weather the storm well and recover quicker thanks to consistent job growth, a wide range of employment industries, and proven resiliency in past downturns,” she wrote.

Rudolph noted the metroplex recovered faster than major cities like New York, Austin, and Houston during previous economic declines.

However, Luis Torres, an economist for the Federal Reserve Bank of Dallas, is not as optimistic.

Monthly jobs reports have shown employment growing 50% faster in Texas than in the U.S., but recent revisions by the Federal Reserve Bank of Dallas from a second-quarter census of employment and wages, show that the gap between Texas and the rest of the country was only 0.3 percentage points this year.

“We’re not protected from a downshift in the U.S. economy,” he said. “We don’t have the extra buffer that we thought.”

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