These Texas cities would likely fare best — and worst — during possible recession in 2023
Economic uncertainty as the United States gets closer to reaching its debt ceiling could lead to a recession.
The debt ceiling, or debt limit, is the total amount of money that the United States government is allowed to borrow for existing legal obligations
A bill that would increase the federal debt limit and decrease spending passed the Republican-led House April 26, but disagreements on parts of the bill are prolonging an agreement.
Dirk Mateer, senior economics lecturer at The University of Texas, said hitting the debt limit would trigger a lot of uncertainty in the market.
“When negative surprises hit the economy, people naturally retrench and try to figure out what they should do next and it doesn’t necessarily mean spending more money, it means spending less money,” he said.
What causes a recession?
The National Bureau of Economic Research defines a recession as a significant decline in economic activity spread across the economy and lasting more than a few months.
Most recessions are brief, however it may take an extended time to return the economy to its previous peak, according to the NBER.
Unexpected events like wars and the COVID-19 pandemic can cause economic uncertainty, Mateer said.
“There’s so many things that can happen in the world around us that its usually just a matter of time before something comes along that breaks that balance,” he said. “That’s what’s been happening lately with inflationary pressures and now the belief that the higher interest rate that the Federal Reserve is moving to will cause a recession to try to get rid of the inflation that’s being built in the economy.”
What effects does a recession have on goods and services?
Economic conditions influence consumer spending habits.
When times are good people tend to eat out more, but during a recession people tend to buy more groceries which is beneficial to supermarkets, Mateer said.
Necessities like gas and utilities tend to be stable during recessions.
Historically, home prices go down during a recession because the number of home buyers tends to fall, but that may not be the case this time around, Mateer said.
“If interest rates were to fall because we were in a recession, which is what the government would try to do to spur us out of it, home buyers might be like ‘Oh great interest rates are falling again. Now I can afford the home I want and I better get that interest rate now’,” he said.
Which Texas cities are impacted the most during a recession?
The economic impact a recession has in the U.S. varies by state and, in some cases, by city.
With a large energy sector, Texas usually holds up better than other states, however cities that serve as energy sector hubs like Houston and Odessa tend to do better than cities like Fort Worth and Dallas, Mateer said.
The energy sector isn’t the only factor that influences how well a city holds up.
Mateer said Austin did well during the COVID recession thanks to its political importance as the state capitol and people migrating to the city.
Frisco was ranked as the city with the second-most resilient economy out of 300 of the largest U.S. cities in a study by financial technology company SmartAsset.
In a separate study, SmartAsset ranked three Texas cities in the top 10 worst cities to ride out a recession. Mission was the eighth worst, Brownsville was sixth and Pasadena was third.
“Overall Texas is a good place to be in a recession, but different parts of Texas do well or relatively poorly compared to other parts of Texas,” he said.
