Salvador Contreras University of Texas Rio Grande Valley January 27, Research Assistants: Jacob Almaguer Ruth Cano Ivan Vazquez

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1 Salvador Contreras University of Texas Rio Grande Valley January 27, 2017 Research Assistants: Jacob Almaguer Ruth Cano Ivan Vazquez

2 Outline of presentation Rio Grande Valley The big numbers Where we are headed Population Outlook of the regions economic potential Promising trends Headwinds Employment Manufacturing Trade

3 The Rio Grande Valley Selected characteristics of the Rio Grande Valley Cameron Hidalgo Starr Willacy RGV Population 422,16 42,304 63,79 21,903 1,30,1 Personal Income (1,000s) 11,324,99 20,702,76 1,6, 614,992 $ 34,20,322 Employment 192,39 361,922 23,731 6,421 4,613 Self-employed 4,49 97,90 7,241 2,320 13,036 Deposits in Banking s System (1,000s) 4,43,74 9,2, ,969 1,20 $ 14,217,44 Taxable Sales 3,64,19,264 7,64,92,66 269,069,376 74,06,240 $11,643,312,36 Border Crossings 10,90,071 1,170,77 2,497,99 0 2,61,643 Source: U.S. Census, U.S. Department of Transportation, FDIC, Texas Comptroller of Public Accounts. Data compiled by CBESt. FDIC data is for year ending June Sales revenue is for full year November 201 to October Border crossings are total headcount of northbound traffic in 201. utrgv.edu/cbest

4 Economic Forecasts for Border/South Texas

5 Area Population Population growth is decelerating Highest population growth is in Hidalgo and Webb counties Forecast: under 1% growth in El Paso and Nueces Hidalgo and Webb average growth of about 2 and 1.7%) Cameron 1.2% State average is 2.1% % % Cameron El Paso Hidalgo Nueces Starr Webb Zapata Source: US Census. CBESt utrgv.edu/cbest Average annual population growth Annual, forecast forecast

6 Regional Economic Activity The region is expected to show strong economic performance in 2017(forecast) over 201 (actuals) Corpus Christi is expected to benefit from a rebound in commodity prices and strong demand for natural gas Brownsville-Harlingen MSA is will benefit from investments in the region from UTRGV, SpaceX,... Laredo should benefit from a depreciating peso by improve trade flows McAllen-Edinburg-Mission region has seen strong investment interest from large retailers like Dave & Busters, Dick s Sporting Goods, Walmart,

7 Texas MSAs Growth Metros in Texas are expected to grow in 2017 at a pace above what was observed in 201 (70 basis points) All major metro economies are expected to expand above 3% over our 2016 estimates Austin-Round Rock toping our range at 4.7% McAllen-Edinburg-Mission is expected to be the th fastest growing metro in Texas Brownville-Harlingen and Corpus Christi metros are expected to expand 1.9% Laredo follows close behind at 1.7% El Paso and Texarkana are expected to see modest if any growth in 2017 CBESt 2017 Projected Real GDP growth rates by Metro year-over-year (%) growth forecast actual Metro Midland Odessa Austin-Round Rock College Station-Bryan San Antonio-New Braunfels 3..9 Dallas-Fort Worth-Arlington Houston-The Woodlands-Sugar Land McAllen-Edinburg-Mission Victoria Tyler Waco Longview Killeen-Temple Sherman-Denison Brownsville-Harlingen Corpus Christi Amarillo Abilene Laredo Lubbock Beaumont-Port Arthur Wichita Falls San Angelo El Paso Texarkana Border/South Texas Metro average All Texas Metros Average Source: U.S. Bureau of Economic Analysis. CBESt. utrgv.edu/cbest

8 Months inventory (6-month MA) Home Inventory Number of months it will take to exhaust current inventory at current sales volume Brownsville-Harlingen and McAllen- Edinburg-Mission metros show a clear improvement in the pace of sales relative to inventory over 6-years El Paso since mid-2014 Laredo and Corpus Christi metros show tight housing market Although, months inventory have gradually risen since late 14/early Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Brownsville Corpus Christi El Paso Laredo McAllen

9 Average home price index (6-month MA) 140 Home prices January 2010: index = 100 Since 2010 prices are up 37 in Corpus and 34% in Laredo metros Laredo prices are about 1% higher than 2007 Prices in Brownville-Harlingen and McAllen-Edinburg-Mission metros are up 2 and 24% respectively El Paso metro prices are up 7% Jan-07 Apr-07 Jul-07 Oct-07 Jan-0 Apr-0 Jul-0 Oct-0 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-1 Apr-1 Jul-1 Oct-1 Jan-16 Apr-16 Jul-16 Oct-16 Brownsville Corpus Christi El Paso Laredo McAllen

10 Retail Sales Payments to municipalities have grown % on average over the past 10 years Pace has been maintained over past years Cameron and Hidalgo county saw a uptick in growth Forecasts suggest continual strength in retail sales in Cameron, El Paso, and Hidalgo Nueces will require sometime to recover from energy sector shock Webb is expected to struggle Average annual growth in sales tax remittances Annual, Forecast Cameron El Paso Hidalgo Nueces Webb Source: Texas Comptroller of Public Accounts. CBESt utrgv.edu/cbest

11 Employment We forecast positive net employment growth in Cameron, Hidalgo, Nueces, and Webb We anticipate that El Paso net job growth will be as it was in 201 We expect Hidalgo to increase net employment by 34% over 201 levels Cameron county is expected to increase employment by 1% over 201 levels Net employment change Actual Forecast Cameron 3,24 4,163 El Paso,946,92 Hidalgo,72 11,730 Nueces 1,267 2,31 Webb 3,2 4,044 Source: US Census. CBESt. utrgv.edu/cbest

12 Headwinds Protectionism and Trump administration Wall Import Taxes PESO, NAFTA, TRADE, MEXICAN SHOPPERS

13 Wages-Top occupations by selected MSAs Brownsville- Harlingen McAllen-Edinburg- Mission El Paso Laredo Corpus Christi All Occupations Office and Administrative Support Occupations Sales and Related Occupations Education, Training, and Library Occupations Personal Care and Service Occupations Food Preparation and Serving Related Occupations Transportation and Material Moving Occupations Construction and Extraction Occupations Top share of total Share of total employment 16% 10% 9% 10% 10% 6% Mean hourly wage $16.21 $13.24 $13.77 $20.90 $.1 $9.47 Annual mean wage $33,710 $27,40 $2,640 $43,470 $1,330 $19,690 Share of total employment 17% 12% 10% 10% 9% % Mean hourly wage $16.26 $13.1 $13.4 $22.69 $.72 $9.6 Annual mean wage $33,10 $27,30 $2,170 $47,200 $1,140 $20,00 Share of total employment 19% 12% 7% 11% 7% 6% Mean hourly wage $17.7 $14.10 $14.47 $22.70 $9.41 $14.47 Annual mean wage $36,90 $29,320 $30,100 $47,220 $19,60 $30,100 Share of total employment 20% 12% % 10% 11% 62% Mean hourly wage $16. $14.00 $13.31 $19.6 $9.37 $14.73 Annual mean wage $3,00 $29,120 $27,60 $40,60 $19,490 $30,640 Share of total employment 1% 10% 11% 7% 7% 0% Mean hourly wage $20.1 $1.27 $17.49 $10.13 $16.97 $21.27 Annual mean wage $41,970 $31,770 $36,30 $21,070 $3,310 $44,20 Source: U.S. Bureau of Labor Statistics. May 201 Metropolitan and Nonmetropolitan Area Occupational Employment and Wage Estimates.

14 Sector share of total employment 201 estimates Sector Employment Education/Health is the has the highest share of all employees. Second biggest sector is retail for Cameron, El Paso, Hidalgo Education/health + retail + construction make up about 0% of all employment in Cameron, Hidalgo, and Starr (9) Manufacturing is % or less in Cameron, Hidalgo, Starr, Webb, and Zapata Cameron El Paso Hidalgo Nueces Starr Webb Zapata Source: US Census. CBESt utrgv.edu/cbest edu/health retail construction production art other transportation public manufacturing finance agriculture wholesale information

15 Manufacturing Employment Index (12-month moving average) 120 Manufacturing Manufacturing employment has fallen in all south Texas/border region metros Corpus Christi is down 30% from 2000 levels Laredo and El Paso are down 7% Brownsville-Harlingen is down 1% McAllen-Edinburg-Mission is down 47% Since January 2011, Brownsville- Harlingen and McAllen-Edinburg-Mission MSAs have seen an increase of 9.4 and.4% respectively Jan-91 Oct-91 Jul-92 Apr-93 Jan-94 Oct-94 Jul-9 Apr-96 Jan-97 Oct-97 Jul-9 Apr-99 Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-0 Jan-06 Oct-06 Jul-07 Apr-0 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14 Jan-1 Oct-1 Jul-16 Brownsville-Harlingen Corpus Christi El Paso Laredo McAllen-Edinburg-Mission Source: Federal Reserve Bank of St. Louis

16 Importance of trade to region Total trade index by port. (12-month moving) Source: U.S. Department of Commerce. From BBB Summer 2016 v12, n2 Total trade by port (201 dollars, millions of dollars, 12-month moving average) Source: U.S. Department of Commerce. From BBB Summer 2016 v12, n2

17 Questions?

Construction Spending, Labor & Materials Outlook

Construction Spending, Labor & Materials Outlook San Antonio Chapter-AGC June 17, 2016 Ken Simonson Chief Economist, AGC of America simonsonk@agc.org Construction spending & employment, 2006-16 $1,250