Memorandum CITY OF DALLAS

Transcription

1 Memorandum CITY OF DALLAS DATE: December 2, 216 TO: SUBJECT: Honorable Members of the Budget, Finance, & Audit Committee: Jennifer S. Gates (Chair), Philip T. Kingston (Vice Chair), Erik Wilson, Rickey D. Callahan, Scott Griggs, Lee M. Kleinman Is the Worst Over? Texas Economy Gaining Speed On Monday, December 5, 216, the Federal Reserve Bank of Dallas will brief the Budget, Finance, & Audit Committee on Is the Worst Over? Texas Economy Gaining Speed. We have attached the briefing for your review. Please let me know if you need additional information. ab M. Elizabeth.Reich Chief Financial Officer [Attachment] cc: Honorable Mayor and Members of the City Council A.C. Gonzalez, City Manager Larry Casto, City Attorney Craig D. Kinton, City Auditor Rosa A. Rios, City Secretary Daniel F. Solis, Administrative Judge Ryan S. Evans, First Assistant City Manager Ehc D. Campbell. Assistant City Manager Jill A. Jordan, P.E., Assistant City Manager Mark McDaniel. Assistant City Manager Joey Zapata. Assistant City Manager Sana Syed. Public Information Officer Elsa Cantu. Assistant to the City Manager Mayor & Council DaiI.as, The City That Works: Diverse, Vibrant and Progressiv&

2 Budget, Finance and Audit Committee Is the Worst Over? Texas Economy Gaining Speed Pia M. Orrenius Federal Reserve Bank of Dallas December 5, 216 The views expressed herein are those of the presenter and do not reflect those of the Federal Reserve Bank of Dallas or Federal Reserve System.

3 After Great Recession, 11th District was first to recover all lost jobs Index, each District's peak employment = Dallas San Francisco Minneapolis U.S. New York Atlanta Richmond Kansas City Boston Chicago Philadelphia St. Louis Cleveland 95 9 Peak=t t+12 t+24 t+36 t+48 t+6 t+72 t+84 t+96 t+18 t+12 SOURCES: Bureau of Labor Statistics; FRB Dallas. 2

4 What a difference an oil boom makes 11 th District and the Great Recession Last in, first out; in expansion since November : blistering Texas job growth at 3.7% (U.S. 2.2%) Oil prices drop by 7% 215: state growth slips under nation Texas job growth of 1.3% (U.S. 2.%) 216: growth slows further Texas job growth of 1.5% YTD (U.S. 1.5%) 3

5 NV ND CO TX FL GA OR UT WA CA SC DE MA TN ID NC U.S. AR AZ RI LA OK MI NY OH KY WY WI NM IN IL MO MD AL PA MN SD KS CT NJ NH IA NE MS VA ME MT HI VT AK WV In 214, Texas 4th in job growth Percent Change, SAAR Texas U.S SOURCES: Bureau of Labor Statistics; FRB Dallas. 4

6 Wages: Oil boom helped fuel job and wage growth in Texas Percent change Texas U.S. minus Texas Lowest wage quartile Lower-middle wage quartile Upper-middle wage quartile Highest wage quartile NOTES: Calculations include workers over age 15 but exclude the self-employed. Wage quartiles and employment growth based on the Texas and U.S. wage distributions from the 25 and 215 American Community Survey (ACS). SOURCES: 25 and 215 ACS. 5

7 ID UT FL OR AZ CA TN CO GA SC WA VA DE NV AR HI NJ NC U.S. KY MI IN MD NH NE MN TX OH MS NY MT IA MA RI SD WI AL VT IL MO PA CT ME NM KS AK OK LA WV WY ND In 215, Texas slips to 26th in job growth Percent change, SAAR U.S. Texas -6 SOURCES: Bureau of Labor Statistics; FRB Dallas. 6

8 Texas job growth bounces back after slowing in the energy bust Q/Q percent change, SAAR 6. U.S. Texas NOTES: Quarterly employment is last month of a quarter. Partial Q4 216 based on October 216 data. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal adjustments by FRB Dallas. 7

9 Dallas Job Growth Above Texas Y/Y percent change, SA 6 5 Dallas Texas NOTE: Last data points for Texas and Dallas are 216 YTD annualized employment growth through October. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by the Dallas Fed. 8

10 Dallas Fed Business Outlook Surveys also suggest activity has picked up Index, 3MMA, SA Revenue (TSSOS) Production (TMOS) Mean TMOS since 27 = 4.7 Mean TSSOS since 27 = 1.7 Nov. ' SOURCES: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey (TMOS); Texas Service Sector Outlook Survey (TSSOS). 9

11 Texas bust: Falling oil prices brought down rig count, drilling activity ceased Rig count, weekly Texas Rig Count WTI Oil Price Nominal price, $ weekly Natural Gas Price NOTE: Natural gas price is multiplied by 1. SOURCES: Baker Hughes; Energy Information Administration; Wall Street Journal

12 Dollars per barrel In the top two areas in which your firm is active: What WTI oil price does your firm need to profitably drill a new well? Permian Basin Eagle Ford Other U.S. Other Texas Oklahoma Onshore Gulf Coast Louisiana $5 $51 $53 $55 $55 $56 $ Number of responses NOTES: Line depicts the mean and bars depict the range of responses. 63 E&P firms answered this question from March 16-24, 216. Other U.S. includes Bakken, Kansas, Gulf of Mexico and others. SOURCE: Federal Reserve Bank of Dallas Energy Survey. 11

13 Oil production has been slow to fall because Permian going strong Million barrels per day TX Oil Production Permian Basin Oil Production Eagle Ford Oil Production NOTE: Texas oil production data through August, Eagle Ford and Permian Basin oil production data through December. 12 SOURCES: Oil and Gas Journal; Baker Hughes.

14 Oil and gas industry shrinking Energy s role declining in Texas 6. percent of GDP, down from 14 percent at peak in percent of employment, down from 2.6 percent at peak in 214 But Texas still home to 36 percent of U.S. crude oil production, 25 percent of U.S. natural gas production 29 percent U.S. refinery capacity, > 6 percent of U.S. petrochemical production 13

15 Natural gas exports to Mexico Average price (cents per kwh), SA Billions CF Natural gas exports to 14 Mexico Electricity prices NOTE: Black line indicates date of reform, Aug SOURCES: EIA; Sistema de Información Energética.

16 Goods sector job declines severe, and some weakness spread to services Percent change in employment, SAAR YTD Trade, Transp. & Util. (2%) Gov. (16%) Educ. & Health Serv. (14%) Prof. & Bus. Serv. (14%) Leisure & Hosp. (11%) Mfg. (7%) Fin. Act. (6%) Constr. (6%) Oil & Gas Extract., Mining Supp. (2%) Info. (2%) NOTES: 216 YTD is the annualized percent change through October; each sector s share of employment in October is in parentheses. 15 SOURCES: Bureau of Labor Statistics; TWC; seasonal and other adjustments by FRB Dallas.

17 Oil & gas cities lose jobs, other major metros slow in first half of 216 Index, Jan. 13=1, SA Dallas Austin San Antonio Ft. Worth Houston Corpus Christi Midland & Odessa SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal adjustments by FRB Dallas. 16

18 Billions real $, 5MMA, SA 6 End of the petrochemical construction boom weighs on state construction spending Residential 2 Nonresidential 1 Nonbuilding NOTE: Last data point is October. 17 SOURCE: Federal Reserve Bank of Dallas

19 Texas exports off oil boom highs due to slowing demand, dollar, lower oil prices Index, real $, Jan. '=1, SA 26 Mexico 4% 4% Texas Canada European Union Asia, excl. China Latin America, excl. Mexico China 14% 17% Q % 9% 41% Other U.S. minus Texas SOURCES: U.S. Census Bureau; WISERTrade. 18

20 Signs of trouble in banks commercial & industrial loan quality worsens in Texas Nonperforming C&I loans (millions of dollars) 1,6 1,4 1,2 1, Loans past due 9+ days Nonaccrual loans Total C&I loans C&I loans (billions of dollars) * NOTE: Data through 9/3/16. SOURCES: Quarterly Reports of Condition and Income; Federal Financial Institutions Examination Council. 19

21 ...while U.S. C&I loan quality remains relatively stable Nonperforming C&I loans (billions of dollars) Loans past due 9+ days Nonaccrual loans Total C&I loans C&I loans (billions of dollars) 2, 1,8 1,6 1,4 1,2 1, * NOTE: Data through 9/3/16. SOURCES: Quarterly Reports of Condition and Income; Federal Financial Institutions Examination Council. 2

22 District loan growth slowed, moved down to national level Y/Y percent growth th District 7.3 U.S * NOTE: Data through 9/3/16. SOURCES: Quarterly Reports of Condition and Income; Federal Financial Institutions Examination Council. 21

23 What are the bright spots? Conditions are improving in the most recent data Employment, activity, rig count, loan growth State s diverse economy benefits from U.S. growth, has own advantages Business climate, low cost of living attract firms, people Some slowing was welcome Labor markets still tight Single-family housing markets tight 22

24 Unemployment rate still lower in Texas, although gap with U.S. has narrowed Percent, SA 12 1 U.S Texas SOURCE: Bureau of Labor Statistics. 23

25 House prices still rising Thousands of real $, 4MMA, SA U.S. $236,83 $212,61 15 Texas SOURCE: Multiple Listing Service. 24

26 Months in Inventory, SA Texas home inventories at historic lows but Houston trending up Texas Houston San Antonio Austin Ft. Worth Dallas SOURCE: Multiple Listing Service. 25

27 Apartment construction robust but off its highs; single-family still relatively flat Index, 5MMA, Jan. 5=1, SA Multifamily Permits Residential Housing Starts 75 5 Single Family Permits SOURCE: U.S. Census Bureau. 26

28 State in-migration has yet to turn down Net Migration (Thousands) 35 3 Domestic migration International '91 '93 '95 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 SOURCE: U.S. Census Bureau. 27

29 Domestic Migration to Dallas Accelerates After 25 Thousands 14 Domestic International Natural Increase NOTE: Estimates not available for Census years. SOURCE: U.S. Census Bureau. 28

30 Dallas More Diverse Than its Sister City Percent Texas Dallas Fort Worth Hispanic Other, nonhispanic Asian, nonhispanic Black, nonhispanic White, nonhispanic SOURCE: U.S. Census Bureau, 215 American Community Survey 1-year estimates. 29

31 Texas economic outlook 216 growth forecast is for 1.5 percent job growth 2 nd half likely to grow 2.2 percent Houston, other energy metros will lag the rest of state Unemployment rate should peak soon, then improve 217 better; forecast for 1.5 to 2. percent growth Stronger U.S. and global economy; weaker/stable dollar Oil markets closer to balance? But some fiscal tightening relative to current cycle 3

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34 Despite robust job growth, high-wage jobs in Texas are not growing as a share of total jobs Percent change in the quartile, Texas U.S. minus Texas Lowest wage quartile Lower-middle wage quartile Upper-middle wage quartile Highest wage quartile NOTES: Calculations include workers over age 15 but exclude the self-employed. Wage quartiles and employment growth based on the Texas and U.S. wage distributions from the 25 and 215 American Community Survey (ACS). SOURCES: 25 and 215 ACS. 33

35 Dallas Stronger than Major Texas Metros in 216 Percent change, YTD SAAR Dallas San Antonio Austin Fort Worth Houston YTD.2.1 NOTES: Data show seasonally adjusted annualized percentage employment growth December 214 October SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by the Dallas Fed.

36 Fort Worth s Median Age Slightly Higher than Dallas and Texas Percent 1 Age, years Dallas Fort Worth Texas Under 15 years years years years Over 64 years Median Age SOURCE: U.S. Census Bureau, 215 American Community Survey 1-year estimates. 35

37 Share of College Graduates Higher in Dallas Relative to Fort Worth and Texas Percent Dallas Texas Fort Worth Less than High School High School Some College Bachelor's Degree Graduate or Professional Degree SOURCE: U.S. Census Bureau, 215 American Community Survey 1-year estimates. 36

38 Share of College Graduates Higher in Dallas Relative to Fort Worth and Texas Percent 4 35 Texas Dallas Fort Worth No High School Diploma Bachelor's Degree or Higher SOURCE: U.S. Census Bureau, 215 American Community Survey 1-year estimates. 37

39 Dallas Median Household Income Growth Slower, but Higher 215 Income than Texas Percent 3 25 $55,653 2 $61,142 $6, Dallas Fort Worth Texas NOTE: Bars represent nominal median household income growth from 26 to 215. Values above bars represent nominal median household income in 215. SOURCE: U.S. Census Bureau, 26 and 215 American Community Surveys. 38

40 Dallas Unemployment Dips in October Percent Texas 4 3 Dallas Fort Worth SOURCE: Census Bureau; seasonal and other adjustments by Federal Reserve Bank of Dallas. 39

41 Location quotient in Mature Advanced materials Business and Finance, and IT and Telecom Big in Dallas Computer manufacturing Construction Transportation & logistics Business & financial services Defense & security Percentage-point change in employment share, NOTE: Bubble size represents industry share of metropolitan statistical area employment. SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors calculations. Information technology & telecommunications Recreation & food services Health.5 Energy & Education mining. Transitioning Government Emerging % 5% 8% Star 4