This article appeared in a March 2016 issue of the student newsletter.
Many students are in the dark when it comes to understanding our economy. But you don’t have to be one of them. If you learn a bit about our economy today, it can help you make wise life choices– from career planning to car buying.
Case in point: The Consumer Price Index (CPI). Ever heard of it? The CPI helps us track the health of our economy by calculating the average costs of basic goods over time. This monthly measurement matters to consumers – or “shoppers” like you – who look at the index to see how the price of eggs, housing or even medical care is changing over time.
The CPI is calculated by tracking more than 200 categories of basic goods and services from month to month. These 200 categories all fall under eight groups:
Large rises in the CPI during a short period of time typically mark periods of inflation, or rising costs.
Large drops in CPI during a short period of time usually mark periods of deflation, or falling costs.
Notice the chart here. Can you identify where the CPI rose drastically (inflation)? How about where it fell (deflation)? What year do you think our economy experienced a recession?
Just like the CPI measures our economic health on a national level, the Texas Economic Activity Index measures our economic health on a state level. It is calculated by Comerica Bank and shared monthly on the Comerica Economic Insights blog.
In 2015, the index fell 11 out of 12 months.
Robert Dye, chief economist at Comerica Bank, commented on the decline:
"This is strong evidence that the collapse of oil prices is dampening economic growth in Texas,” explained Dye. Despite falling energy prices, some components of the Texas Economic index are on the rise: payroll employment and house prices.
Texas continues to create new jobs and have a high demand for housing. For example, between December 2014 and December 2015, Texas total “nonfarm” employment increased by 166,900 jobs or 1.4%.
Dye said Comerica Bank expects both employment growth and house price growth to ease in Texas throughout 2016. “…Housing markets in North Texas and in Austin remain tight, supporting prices. However, house price appreciation in energy-centric Houston is flattening out.”
During the 12 months ending in December 2015, a total of 295,355 existing single-family homes were sold in Texas, 3.4% more than in the previous year.
Despite setbacks in the energy industry, hiring in most industries remains good in Texas. Businesses continue to hire new employees. This is good news for students who are graduating soon and looking for jobs.
That said, recent graduates will find the competition high for affordable, convenient housing. This surge in prices is expected to ease as the year goes on, a relief for many looking to buy their first home.
Interested in learning more about the health of our economy? Check out these helpful links.