The Bryan-College Station economy grew steadily in the fourth quarter of 2018, powered by job growth and consumer spending.
It produced a record high of 159.5 for the Bryan-College Station Economic Index. The index closed out the year with a 3.7 percent gain in the fourth quarter, compared with the same period in 2017 and the it rose 2.7 percent in December compared with a year earlier.
December marks 91 months of economic expansion since the end of the recession in 2011. It’s the longest economic expansion since the 1990s.
“Overall, it was a good year, still positive,” said Tom Maynard, senior vice president and regional manager of Commerce National Bank in Bryan-College Station. “Cautious Optimism” was the theme for the Economic Outlook Conference sponsored last month by the Bryan-College Station Chamber of Commerce, Maynard noted. His optimism is based on continuing employment growth and the uptick the bank has seen for loan requests, he said.
The local economy created an estimated 2,200 jobs during 2018. On average, employment grew 3.6 percent for the year, but the rate of new job creation cooled considerably during the course of the year. Employment grew in excess of 4 percent at the beginning of 2018 and slowed to less than 2 percent at year-end.
The Bryan-College Station unemployment rate declined steadily throughout the year, averaging below 3 percent for the first time. The unemployment rate stabilized at year-end, and the December unemployment rate was a tenth of a point higher than December 2017, suggesting declining unemployment rates may have bottomed out.
It may be difficult to push the unemployment rate lower. The Federal Reserve Bank of Dallas suggests labor markets are tighter and competition for skilled labor is beginning to surface with reports of employers competing with non-wage incentives like signing or vacation bonuses rather than rising wages.
A bright spot in the Bryan-College Station economic forecast was consumer and business spending. As measured by retail sales tax receipts adjusted for inflation, spending shot upward in December by 12.7 percent over the December 2017 spending total. Fourth-quarter spending rose 4.2 percent and the strong finish helped to pull 2018 annual growth to 2.4 percent compared to 2017.
Unlike retail sales, auto spending was stronger earlier in the year and then declined in the last quarter of 2018. Total auto sales for 2018 grew 10 percent over 2017, but fourth-quarter sales slipped 2.4 percent and the December total declined 3.4 percent compared to the previous December.
Construction activity declined sharply for the second consecutive year following a record dollar amount for building permits issued in 2016. The total real valuation of all permits issued in Bryan-College Station fell 30 percent in 2018 compared to 2017, which in turn was off by about 18 percent compared to the 2016 record year. The 2016 record value in building permits represented a huge spike, Maynard said, pointing to two, large, high-rise dormitories on the Texas A&M campus which have now been completed. So, the numbers fell as permit activity return to more normal levels.
New housing construction also declined for the second straight year following the record level of building permits issued in 2016. The total real valuation of single-family housing permits issued in Bryan and College Station was down 30 percent in 2018 compared to 2017, which in turn was off by about 18 percent compared to the 2016 record year.
The sharp declines were caused by overbuilding in the spec market, Maynard said, “but they are beginning to move now.”
Sales of existing home sales fell slightly in 2018, down by 1.5 percent compared to the 2017 annual sales total.
Housing sales peaked in 2015 at 3,456 and their numbers have drifted down since then. The average price of those homes, however, continued to climb, averaging 5 percent higher for 2018, and 6.1 percent in the fourth quarter. The December monthly average was down, but only compared to a high number in December 2017, which posted a 20.6 percent increase in home sold over the previous year.
The total dollar volume of residential real estate sales in 2018, adjusted for inflation, rose only 0.7 percent compared to the 2017 total; but that was sufficient to establish a new annual record thanks to higher prices in 2018. The fourth quarter total was also a record (for the fourth quarter), logging a 4.6 percent year-over-year increase.