Keith Phillips, Sr. Economist and Advisor

Size: px

Start display at page:

Download "Keith Phillips, Sr. Economist and Advisor"

Meghan Kennedy
5 years ago
Views:

1 The Outlook for the Texas Economy Keith Phillips, Sr. Economist and Advisor

2 National Economic Overview

3 Growth in US Economy Positive But Sluggish Market working to heal itself asset prices falling, inflation and interest rates low increases investment opportunities Federal government and Fed also very stimulative so why is growth so timid? Housing and consumer spending typically ignite the recovery but not this time state and local government also atypically weak, US policy and European debt uncertainty But it is also true that we need fewer homes built, and consumers and governments need to pay down debt

4 Home Construction Generally Neutral Millions, units Billions, $ Real singlefamily construction Single-family building permits Source: Bureau of Economic Analysis, U.S. Census Bureau and author s calculations.

5 26 House Price Index, 2=1 Home Price Declines Continue U.S. Texas California Florida Nevada

6 Asset-Backed Commercial Paper Market Generally Stable Through September Percentage Points 4. SA, Bil.$ Asset-backed CP Outstanding Asset-backed CP less Treasury Yield

7 Job Growth Positive but Weaker than Spring Months Thousands (SA) 6 4 last 3 months = 96, Avg. Feb., March, April = 215, Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11

8 U.S. Leading Index Suggesting Recovery Likely to Continue Annualized month 12-month

9 Oct. Blue Chip Survey Projects Positive RGDP Growth to Continue but at a Slow Pace SAAR, Percent

10 1-yr./1-yr. Yield Spread Suggests Little Chance of Recession Over Next 4 Quarters Percentage points 5 4 Through September Only false signal

11 Percent of pre-crisis trend -2 Current Recovery Similar to Past Recoveries that Followed Banking Crisis Average path of GDP after banking crises (Selecting 28 as the first year of the crisis in the US) US Mean of countries experiencing banking crises Years after banking crisis; First year of crisis = year

12 Texas Came Into Recession Late and Recovery has been Stronger Texas began a recession in the second half of 28 due to a deepening financial crisis, and declines in energy prices and in high-tech demand. Texas jobs declined about 3.5 percent (about 366, net job loss) in 29. Rebounds in energy, high tech, and exports provided a stimulus to Texas in 21. Housing market less of a drag than nationally. Job growth was about 2.1 percent in 21. This year Texas job growth has continued to be faster than the national average although the pattern of growth has been similar - growth will likely be about 2. to 2.5 percent. Next year TX job growth likely about %.

13 Texas Jobs Growing Faster Than Nation s Y/Y, Percent U.S. Texas

14 Most Texas Industries Adding Jobs, Energy Booming Texas Industry Employment 21 Q3 : 211 Q3 Q/Q, SAAR 25 Mining Construction Business Services Trade, Trans. & Leisure & Utilities Hospitality Manufacturing Financial Firms Information Health and Education Government -5-1

15 Texas UR Has Remained Stubbornly High 1.5 Percent, SA US unemployment rate Texas unemployment rate

16 Household s Deleveraging Good for Long- Term but Weakens Spending in Short-Term Ratio, personal debt per capita/personal income per cap ita Auto Loan 6% HE Revolving 5% Credit Card 6% Student Loan 5% Other 3% U.S Mortgage 75% U.S. Texas Student Loan 7% Credit Card 8% Auto Loan 12% HE Revolving 1% Mortgage 68% Other 4% Texas

17 Texas Real Retail Sales Gradually Picking Up Index, SA, Real $ Texas 12 U.S

18 M/M SAAR Texas Economy Growing Moderately (Texas Business Cycle Index) M/M SAAR NOTE: Shaded areas represent Texas recession.

19 Business Cycle Pattern Similar Across Major Metros Private Employment Index Jun. 28= Austin El Paso S.A. Houston Texas Ft. Worth Dallas Jun-8 Jun-9 Jun-1 11-Jun

20 Texas Construction Contract Values Generally Flat Real $, Mil 5MMA, SA 7 6 Total Residential Non Residential 2 1 Non Building

21 Home Inventories Relative To Sales Below National Average Months Texas U.S

22 5 Mortgage Foreclosures Flat, Delinquency Rate High but Falling, TX Better than US TX Delinquencies TX Foreclosures Started 4.5 US Delinquencies US Foreclosures Started

23 Commercial Real Estate Remains Weak but likely to avert a crisis Banks headquartered in the Eleventh District have 22% share of gross assets in commercial RE loans vs. 11% in nation In June, 4.% (March was 4.3) of CRE loans in Eleventh District banks were noncurrent vs. 5.8% (was 6.3) in nation Vacancies and rents flattening out after falling Growing signs that prices are close to bottom, sales are increasing, but significant new construction not expected until at least 212.

24 TX Manufacturing Production and Orders Continue to Increase but at Slower Pace Index Oct Production -8 Volume of New Orders -1 Jun-4 Dec-4 Jun-5 Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11

25 Texas Exports Surpass Pre-Recession Level (by about 12% ) Index, SA Real Texas Value of the Dollar Texas U.S. minus Texas

26 TX Petrochemical, high-tech, transportation equipment and ag exports have surged Index, 25Q1=1 Real $, SA 17 TX total Computers & Electronics Transportation Equipment Agriculture and Food Chemicals Machinery Petroleum and Coal Products

27 High-Tech Output Plunged During Recession, Rebounded Strongly, Now Growing Moderately Percent, 6 4 Semiconductor and other electronic components Computer and peripheral

28 Drilling Rig Count has Returned to High Levels 1 Rig Count Oil price Gas price

29 State and Local Governments Continue to Cut Jobs Due to Budget Shortfalls Index, Jan 2 = U.S. Texas Texas State and Local share of Total Nonfarm Jobs - 15.% -3.% % 11 U.S. State and Local Share of Total Nonfarm Jobs- 14.4%

30 In Recent Months TLI Components Have Weakened Texas Leading Index Components, 3 month change June -August Net Change in Texas Leading Index -.17 Texas Value of the Dollar.38 U.S. Leading Index -.43 Real Oil Price -.28 Well Permits -.15 New Unemployment Claims -.65 Texas Stock Index -1.6 Help Wanted Index -.34 Average Weekly Hours

31 Millions Texas Jobs Likely to Grow % in 211 Slowing moderately in 212 ( to about 1.5%) Index Leading Index Texas Nonfarm Employment and TLI Forecast (with 8% confidence band) Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 95

32 Summary U.S. economy is expanding at a weak pace Texas is facing similar headwinds but growing faster due to strong growth in energy and exports and fewer problems in housing. 211 job forecast is for growth of 2.% to 2.5% - slightly slower in 212 to about %. Austin will continue to be a growth leader although may see some slowing due to high-tech slowdown Risks to the outlook include political uncertainty in the Middle East, European Debt issues, State and Local Government Spending, U.S. Fiscal Crisis, inflation.

Texas Economic Outlook: Tapping on the Brakes

National Economy Picking Up After Q1 Pause Texas Economic Outlook: Tapping on the Brakes Keith Phillips Assistant Vice President and Senior Economist Consumer spending picked up in 1 as housing prices