2016 Texas Economic Outlook: Riding the Energy Roller Coaster Keith Phillips Assistant Vice President and Senior Economist

Transcription

1 216 Texas Economic Outlook: Riding the Energy Roller Coaster Keith Phillips Assistant Vice President and Senior Economist The views expressed in this presentation are strictly those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or the Federal Reserve System. Any secondary distribution of this material is strictly prohibited.

2 National Economy Slowed Slightly in 215 Job growth slowed from 2.2% in 214 to 2.% in 215, while RGDP growth slowed from 2.5% to 2.%. So far in 216 job growth moderate; RGDP.5% or 2.7%? Manufacturing sector hit by global weakness and strong dollar. Health care sector picked up with greater insurance coverage. Retail and leisure and hospitality has remained healthy, but positive impact of lower energy prices smaller than expected. RGDP growth expected to remain modest in 216.

3 215 Consumer Spending not as Strong as Expected Percent Y/Y Real Personal Consumption Expenditures Real Retail Sales '91 '93 '95 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 Sources: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis.

4 Household Balance Sheets in Better Shape Ratio, personal debt per capita/personal income per capita Credit card 6.1% Auto loan 8.8% HE revolving 4.% Student loan 1.% Other 2.9% U.S. Mortgage 68.2% Texas Student loan 1.9% Credit card 7.2% HE revolving 1.% 1.35 Other 4.5% 1.19 Auto loan 15.6%.97 (Q4).96 (Q4) Note: Data are through fourth quarter 215, except where noted. Sources: Federal Reserve Bank of New York, Bureau of Economic Analysis. U.S. Texas Mortgage 6.9%

5 Job Growth of 251K per Month in 214, 229K in 215, 192K in 216 Thousands,SA Source: Bureau of Labor Statistics

6 Percent change, annualized 2 U.S. Leading Index Suggests Continued Growth in Months Ahead month 12 month Note: Shaded areas represent U.S. recessions. Sources: Conference Board, Federal Reserve Bank of Dallas.

7 RGDP Growth Slipped to 2.% in 215, April Blue Chip Survey Projects 1.9% in 216 SAAR, Percent % Q4/Q % Q4/Q % Q4/Q % Q4/Q Source: Blue Chip Economic Indicators

8 Texas Economy Weakened Sharply in 215 but Continued to Add Jobs In five years prior to 215, growth in energy, construction and exports provided a strong stimulus to Texas. In 215, low oil prices, strong dollar and labor market tightness reduced job growth. Health care and leisure and hospitality remained strong offsetting some of the weakness in energy and manufacturing. In 215, jobs grew about 1.3% (157, jobs), a drop from 3.7% in 214. In 216, if oil prices average around $3 $4, growth will be about % to 1.5%. If prices average below $3, jobs could decline slightly.

9 Texas Ranked 29 th in Job Growth in 215; Jobs Contracted in Most Energy States Percent Change, Dec. 214 Dec U.S. TX 6 ID UT FL OR AZ CA TN CO GA SC WA VA DE NV AR HI NJ NC US KY MI IN MD NH NE MN OH MS NY TX MT IA MA RI SD WI AL VT DC IL MO PA CT ME NM KS AK OK LA WV WY ND NOTE: Black bars represent large energy producing states. SOURCE: Bureau of Labor Statistics

10 Texas Ranked 33rd So Far in 216, But Still Above Major Energy States Annualized Percent Change Mar. 216/Dec U.S. TX HI NV WA OR WI UT DC VT NC MT MD MI GA ID MA CO ME IL MO RI VA NH AZ FL NE US DE PA NY OH CT TN CA TX SD SC MS AL IA OK NM MN KY IN WV NJ LA KS AR AK WY ND NOTE: Black bars represent large energy producing states. SOURCE: Bureau of Labor Statistics

11 Percent, Job Growth Y/Y Texas Job Growth Less Than the Nation s U.S. 4 Texas Note: Striped bars indicate Mar. 216/Dec. 215 annualized growth. Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas

12 Percent, Dec./Dec Growth Was Mixed Across Major Metros Job Growth, Texas Houston (25%) Dallas (2.6%) Fort Worth (8.4%) San Antonio (8.4%) Austin (8.2%) El Paso (2.6%) NOTE: Figures in parentheses represent shares of total state employment. Shaded bars indicate Mar. 216/Dec. 215 annualized growth. SOURCES: Bureau of Labor Statistics, Federal Reserve Bank of Dallas. Corpus Christi (2.1%)

13 Percent, SA 1.5 Texas Unemployment Rate Still Holding Below National Rate 9.5 US unemployment rate Texas unemployment rate (Mar.) 5. (Mar.) Source: Bureau of Labor Statistics.

14 Texas Economy Continues to Expand (Texas Business Cycle Index) M/M SAAR % trend NOTE: Shaded areas represent Texas recession. SOURCE: Federal Reserve Bank of Dallas

15 Energy & Manufacturing Weakened Sharply in 215 Dec/Dec Percent Change 2 (Job Growth ) Trade, Transp & Utilities (2.2%) Government (15.6%) Professional & Business Svcs (13.5%) Health & Private Education (13.5%) Leisure & Hospitality (1.7%) Manufacturing (7.1%) Financial Activities (6.1%) Construction (5.7%) Natural Resources & Mining (1.9%) Note: Figures in parentheses represent shares of total nonfarm employment. Shaded bars indicate Mar. 216/Dec. 215 annualized growth. Source: Bureau of Labor Statistics, adjustments by Federal Reserve Bank of Dallas. Information (1.6%)

16 TX Construction Contracts Remain Healthy Real $, Mil 5MMA, SA Total Residential 3 Non Residential 2 1 Non Building Source: F.W. Dodge, Federal Reserve Bank of Dallas

17 Texas Office Markets Also Healthy Real, Millions $, 5MMA Office Vacancy Rate Office and Bank Buildings Contract Values Percent % '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 Note: Shaded areas represent Texas recessions Source: F.W. Dodge, CBRE, Federal Reserve Bank of Dallas 5

18 Index 1 TX Manufacturing Indicators Show Recent Signs of Improvement Apr Production Volume of New Orders Company Outlook -1 Jun-4 Jun-5 Jun-6 Jun-7 Jun-8 Jun-9 Jun-1 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 SOURCE: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey.

19 Exports Also Improving Index, SA, Real Jan. 2=1 26 Index Jan. 1988= Texas Value of the Dollar Texas U.S. minus Texas Source: U.S. Census, Bureau of Labor Statistics, WISERtrade, Federal Reserve Bank of Dallas 65.

20 Average Private Sector Earnings Weakening in Texas with Decline in High-Wage Energy Jobs Average hourly earnings, $/hr U.S. Texas $25.4 $ Percent Change, Y/Y Note: Data are seasonally adjusted, five month centered moving averages. Source: Bureau of Labor Statistics U.S. Texas.6

21 215 Job Losses Concentrated in High-Paying Sectors Percent change (Dec/Dec) 8 3 $31.3 $29.45 $27.15 $26.85 $24.9 $21.47 $ $ $ $ Info. (2%) Oil & Gas Extract., Mining Supp. (2%) Fin. Act. (6%) Prof. & Bus. Serv. (14%) Gov. (16%) Constr. (6%) Educ. & Health Serv. (13%) Mfg. (7%) Trade, Transp. & Util. (2%) Leisure & Hosp. (11%) NOTES: Numbers in chart are 214 average hourly earnings for each sector; numbers in parenthesis are each sector s share of total nonfarm employment. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by Federal Reserve Bank of Dallas.

22 Drilling Rig Count, Energy Prices Remain Low Number Nominal $ 1 16 Rig Count Oil price Gas price(*1) Sources: Oil and Gas Journal, Baker Hughes.

23 Eagle Ford, Permian Basin Jobs Declining Index, 27:Q1 = 1* Eagle Ford counties Permian Basin counties Rest of Texas '7 '8 '9 '1 '11 '12 '13 '14 '15 *Quarterly, seasonally adjusted. SOURCES: Bureau of Labor Statistics, seasonal and other adjustments by Federal Reserve Bank of Dallas.

24 Which Metros Performed the Best in 215? Size of Energy Sector Explains a Lot El Paso (3.1%) Brownsville Harlingen (1.6%) Killeen Temple Fort Hood (4.8%) Texarkana (2.2%) Waco (2%) Lubbock (2.2%) Austin Round Rock (4.7%) Dallas Plano Irving (4.3%) Sherman Denison (2.4%) Amarillo (1.1%) San Antonio (3.2%) Beaumont Port Arthur ( 1.3%) McAllen Edinburg Mission (1.6%) Fort Worth Arlington (1.3%) College Station Bryan (3.2%) Tyler (2.1%) Abilene (%) Laredo (1.3%) Wichita Falls (.5%) San Angelo (.4%) Houston Baytown Sugar Land (.2%) Corpus Christi (.7%) Longview ( 4.2%) Odessa ( 9.9%) Midland ( 8%) Correlation: Mining sector share of total employment Note: Data in parentheses are total nonfarm job growth Dec. 214 Dec Mining share data as of 214. Sources: Texas Workforce Commission, Bureau of Labor Statistics, Federal Reserve Bank of Dallas.

25 11 th District Banks Remain More Profitable than U.S. Banks Percent, Return on Assets th District U.S SOURCE: Quarterly Reports of Conditions and Income, Federal Financial Institutions Examination Council.

26 But Noncurrent Loans Have Ticked Up Regionally. Percent of Total Loans 6 U.S. 11th District Other Consumer Commercial & Industrial Commercial RE Residential RE SOURCE: Quarterly Reports of Conditions and Income, Federal Financial Institutions Examination Council.

27 Leading Index Components Mixed Net contributions to Change in the Texas Leading Index (January-March) -.86 Net change in Texas Leading Index -.3 Texas value of the dollar..2 U.S. leading index Real oil price -.67 Well permits.1 New unemployment claims.17 Texas Stock Index -.3 Help wanted index -.34 Average weekly hours NOTE: Seasonally adjusted. SOURCE: Federal Reserve Bank of Dallas.

28 Texas Jobs Forecasted to Grow -1.5% in 216 Millions, seasonally adjusted Leading Index Index, 1987= Texas nonfarm employment and forecast (with 8% confidence band) ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 ' SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas.

29 Dollars per barrel 12 Oil Futures Suggest Flattening of Prices, But Highly Uncertain 1 8 WTI spot price Futures prices (May 13) 95% futures confidence interval (Dec. '16) (Dec. '16) (Dec. '16) 21.3 Jan 215 Jul 215 Jan 216 Jul 216 Jan 217 Jul 217 Jan 218 SOURCES: Bloomberg; Energy Information Administration; calculations by FRB Dallas.

30 Summary In 215 Texas weakened sharply but continued to grow did much better than 198s and better than other energy states. Tight real estate markets and continued growth in sectors such as health care and leisure and hospitality are helping sustain positive job growth. I 35 Corridor remains strong. 216 Texas job growth likely to be between % and 1.5%. Biggest risk to the forecast is declining oil prices. If oil prices average below $3 for the year, then negative job growth likely.