Texas economies remain solid, and HdL continues to predict statewide, aggregate YoY local sales and use tax trends will remain positive through 2025.



Overview: Positive news is the foundation of this quarter’s report, with inflation easing, albeit not at the pace initially projected. This is reflected in the Federal Reserve’s recent decision to hold interest rates steady in the near term. Consumer demand, with its outsized impact on the national and state economy, is expected to remain strong, stoked by increases in real wages and elevated household net worth. Lingering concerns over the amount of consumer debt remain a moderating consideration. The U.S. and Texas economies remain solid and moderate expansion is expected through 2025. While projected rates of growth will remain cool in some business categories, HdL continues to predict statewide, aggregate YoY local sales and use tax trends will remain positive through 2025.


2Q24 1.43% | 3Q24 1.37% | 4Q24 1.78% | 1Q25 1.36% | 2Q-4Q25 1.63%

HdL’s most recent quarterly sales and use tax allocation dataset suggests uneven results, but overall growth. Consumer demand is driving positive trends in the retail sector, with Internet Retail running especially hot as consumers turn to online shopping for convenience and to maximize buying power. However, robust Internet Retail trends come at the expense of brick-and-mortar retail sales, which make up the core of the General Retail category. In response, HdL has strengthened Internet Retail predictions, but projects General Retail results will remain soft through year-end 2024. Slight improvement is expected in the latter half of 2025. HdL expects improved YoY results in the Restaurants & Entertainment category, with restaurants and hotels ranking among the top categories nationally for growth in consumer spending over the past year.

In the Construction & Manufacturing category, high interest rates and borrowing costs have cooled the state’s housing market. Consequently, demand and prices for construction materials have leveled. However, Texas remains a popular destination for workers seeking employment, with Texas adding more jobs over the past year than any other state. HdL expects demand for construction services to remain steady in the near term and accelerate in the late stages of 2024 and into 2025 as interest rates ease. HdL has improved its trend outlook in this category beginning in late 2024 accordingly.

Construction & Manufacturing

2Q24 -1% | 3Q24 -1% | 4Q24 0.5% | 1Q25 0.5% | 2Q-4Q25 1%

Asset 32

General Retail

2Q24 -1.5% | 3Q24 -1.5% | 4Q24 -1.5% | 1Q25 -1% | 2Q-4Q25 -0.7%

Internet Retail TX

Internet Retail

2Q24 10% | 3Q24 10% | 4Q24 10% | 1Q25 8% | 2Q-4Q25 8%

Asset 414x

Grocery Stores & Pharmacy

2Q24 3% | 3Q24 2% | 4Q24 2% | 1Q25 1% | 2Q-4Q25 2%

Asset 394x

Restaurants & Entertainment

2Q24 3% | 3Q24 3% | 4Q24 3% | 1Q25 2% | 2Q-4Q25 2%

Professional & Financial Services

2Q24 3% | 3Q24 3% | 4Q24 3% | 1Q25 2% | 2Q-4Q25 2%

icon telecom 5

Utilities & Other Service Providers

2Q24 3% | 3Q24 3% | 4Q24 3% | 1Q25 2% | 2Q-4Q25 2%

Asset 29


2Q24 3% | 3Q24 3% | 4Q24 3% | 1Q25 3% | 2Q-4Q25 3%


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U.S. Real GDP Growth

2023/24: 2.5%  |  2024/25: 1.9%

Real GDP grew at an annual rate of 3.2% in 4Q2023, driven by increases in consumer spending, exports, and local and state government expenditures. Despite a decline in confidence, consumer spending rose by a solid 2.6% when adjusted for inflation over the past year. Top categories for spending growth include recreational vehicles and goods (12%), new cars (4%), restaurants and hotels (4%), and recreational services (4%). The U.S. will almost certainly experience a reasonable pace of GDP growth in 2024, led by solid growth in consumer demand. Labor markets will remain tight, industrial production will be steady, and long-run interest rates will likely stay in the same range. In many ways, 2024 will resemble 2023 with a solid, moderately expanding economy. Strong consumer demand suggests that inflation will be running hotter than the 2% pace that the Federal Reserve hopes to achieve.

U.S. Unemployment Rate

2023/24: 3.9%  |  2024/25: 4.2%

Unemployment in the nation remains low despite a slight increase from 3.7% in January to 3.9% in February. In January, there were 1.44 job openings for every unemployed person, indicating a tight labor market despite higher interest rates. The U.S. job openings rate was 5.3%, lower than its peak in March 2022 but still higher than before the pandemic. Tight labor markets will continue to push up real earnings, which grew at a rate of 3.6% in 2023. The labor force participation rate remained steady at 62.5%, slightly below the 63.3% rate right before the pandemic began, which is surprising given the strong real earnings growth.

TX Unemployment Rate

2023/24: 4.0%  |  2024/25: 4.2%

Texas’s unemployment rate held steady at 3.9%, down 0.2 percentage points from January 2023. This diverges from the national trend, where unemployment increased by 0.3% over the last year. The state’s labor force also expanded by 12,800 positions, increasing 0.1% over the previous month. YoY Texas gains now stand at 1.6%, nearly double the national rate. With steady job growth and limited increases in the labor force expected this year, the state’s unemployment rate will remain low and workers are almost certain to see continued wage gains.

TX Total Nonfarm Employment Growth

2023/24: 2.6%  |  2024/25: 1.2%

Employment in the state grew by 18,900 jobs in January alone, adding 263,900 jobs YoY. This 1.9% increase surpasses the nation’s growth rate of 1.8% during the same period. Texas continues to lead the nation and has added more jobs over the last year than any other state, accounting for one in ten jobs added in the U.S. in the last twelve months. Despite the hot jobs market, employment growth has gradually decelerated since peaking in April 2021 and continues to outpace labor force growth, limiting the pace of job creation over the course of 2024.

TX Median Existing Home Price

2023/24: $318,436  |  2024/25: $331,262

While mortgage rates reached a 6-month low in December, the real estate market has been slow to heat up as homeowners with low mortgage rates are reluctant to move. In 4Q2023, the median sale price for existing homes dropped 5.6% YoY, the fourth straight quarter of declines. Price reductions are expected to reverse course mid-2024 as limited inventory will restrain the extent to which prices can fall. Mortgage rates are starting to ease, with further loosening expected in 2024. These factors will help spur demand in the year ahead, helping to push prices back up, particularly in the latter half of the year.

TX Residential Building Permits

2023/24: 232,458  |  2024/25: 227,151

Strong demand for real estate and pro-development policies continue to keep the number of residential permits in Texas above pre-pandemic levels. Nonetheless, higher interest rates and borrowing costs have cooled the state’s housing market. In the fourth quarter of 2023, the number of residential permits rose 0.36%, just ending a streak of four consecutive year-over- year declines dating back to 4Q2022. Given the recent easing of mortgage rates, residential permits will likely continue to expand in Texas and a moderate increase in permits is anticipated in the near term.

TX Gasoline Prices

2023/24: $3.04  |  2024/25: $3.30

Gasoline price averages have come down drastically in Texas, reaching $2.89 per gallon in 4Q2023. While prices have fallen compared to 2022, they are ultimately at the mercy of global markets, including OPEC+, which announced an extension of oil output cuts through the end of June 2024. Although it remains to be seen what kind of impact this will have on retail gasoline in 2024, the United States, Brazil, and Guyana are producing more oil than ever, which could keep supply strong enough to offset cuts.

TX Consumer Price Index

2023/24: 3.5%  |  2024/25: 2.2%

Inflation is slowing significantly but will continue to be a concern. Ongoing price hikes due to excessive consumer demand are expected to persist in 2024. While peak inflation is behind us, it is predicted to remain hotter than usual for the current fiscal year. The Fed recently indicated that they are still concerned about the pace of inflation, that they plan to hold the Federal Funds rate steady, and that they will be continuing their $90 billion per month pace of quantitative tightening. Given that, and the fact that inflation is already easing, Beacon Economics expects the Texas CPI to continue falling in FY 2024-25.



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