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West Texas economy shows signs of stabilizing.

West Texas Economy Shows Signs of Stabilizing

Declining prices for oil and natural gas and continued softening of agricultural commodities in the 1980s are causal factors in the sharp declines in population and real retail sales of many small communities in West Texas during this time period. Despite the shrinking of the population base through 1988, real per capita retail sales in these communities have stabilized, with some increases indicated in the 1984-88 period. Better agricultural prices and the Crop Reserve Program initiated in 1986 are primary reasons for this reversal. The accompanying chart compares the counties including Amarillo and Lubbock with the remaining counties in the Texas Panhandle and South Plains. Real per capita retail sales declined sharply from 1979 to 1984 for all counties, the sharpest decline occurring in the South Plains, with an index of 123.5 in 1979 and 82.6 in 1984, a 33.1 percent drop. Since 1984, sales in the Panhandle and South Plains communities have stabilized, with Panhandle sales increasing from 87.9 in 1984 to 90.7 in 1988. However, figures for the cities of Amarillo and Lubbock have continued to decline, with Amarillo having the greater overall decline. Lost payrolls from firms such as Texaco Refining, Pioneer Corporation, Energas, Diamond Shamrock, Bell Helicopter, and Sante Fe Energy have contributed to this weakness. Though similar to Amarillo, Lubbock has experienced a slower rate of decrease.

Real per capita retail sales indicate that the Houston and Amarillo economies have experienced greater stability since 1982 than the other cities. Lubbock's decline, even though sharp since 1979, has been less steep than Amarillo's; however, Amarillo had a higher per capita level of real retail sales than Lubbock--$6,228 compared to $6,058 in 1988.

In conclusion, the Texas Panhandle and South Plains economies show the effects of declines in the agricultural and oil and gas industries. Because it is more involved in oil and gas, Amarillo has been affected to a greater extent. Stabilization of real retail sales in the smaller communities in West Texas appear to have positioned Amarillo and Lubbock so that they could materially benefit from a recovery in oil and gas and agriculture. The people of West Texas should, therefore, have a degree of confidence that the worst times are behind them and that economic activity is likely to blossom when oil and agricultural prices move higher in the future.

Jerry D. Miller Gene Edwards Professor of Finance West Texas State University
COPYRIGHT 1990 University of Texas at Austin, Bureau of Business Research
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Author:Miller, Jerry D.
Publication:Texas Business Review
Date:Feb 1, 1990
Words:413
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