TEXAS is the 11th largest economy in the world. The reasons why Texas has traditionally grown faster The increasing international prominence of Texas

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Transcription:

TEXAS is the 11th largest economy in the world. The reasons why Texas has traditionally grown faster The increasing international prominence of Texas Why global companies are basing headquarters or North American operations in Texas Texas workforce projections Projections for future growth What could go wrong? 11:30 to 12:30 3 speakers with Q&A

JASON SAVING Senior Research Economist Dallas Federal Reserve Bank KING WHITE CEO and Founder Site Selection Group HANK N. MULVIHILL, JR. Director and Senior Wealth Advisor Smith Anglin Financial The Optimist Economist

NOTICE: Investing involves risk including the possible loss of principal and other losses. You must do your own due diligence prior to making any investment decisions. Opinions expressed in this presentation are for educational purposes only and are not to be considered as individual investment advice. NOTICE Henry (Hank) N. Mulvihill, Jr. is a licensed investment advisor representative registered with Smith Anglin Financial, LLC, the Advisor Firm. The Advisor Firm is a Registered Investment Advisor (RIA) firm located at 14755 Preston Road Suite 700 Dallas, Texas 75254. Registration of an Investment Advisor does not imply any level of skill or training. The oral and written communications of an Advisor provide you with information which you may use to evaluate or retain an advisor. The Advisor Firm may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Advisor Firm website may contain information about meetings, and general economic and market comments, and information about the firm. The Advisor Firm website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the Advisor Firm websites on the Internet should not be construed by any individual as a solicitation to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct investment-related communication by Advisor Firm representatives with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of the Advisor Firm, please contact the state securities regulators for those states in which the Advisor Firm maintains a notice filing. A copy of the Advisor Firm current ADV Part II is available from the Advisor Firm upon request, or from the SEC. Past performance may not be indicative of future results. Therefore, no individual should assume that future performance of any specific investment strategy will be profitable or equal the corresponding indicated performance level. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for an individual s investment portfolio. No portion of the Advisor Firm website content or links should be interpreted as individual investment, legal, accounting or tax advice.

United States Map With Flag by George Hodan

BIG FIVE massively powerful trends for the United States 1. MONEY abundant and low priced 2. WORKERS Abundant - Reduced Wage Pressure. Millennials! 3. INFRASTRUCTURE legal, roadways, internet, fiber, pipelines, capital markets - More Infrastructure than anywhere else 4. WATER inland rivers, annual snow and rainfall huge competitive advantage for agriculture, transportation and manufacturing. People too! 5. OIL and GAS The U.S. is now the world s leading producer.

Office of Tax Policy Research IRS

http://www.businessinsider.com/state-income-tax-rate-rankings-by-state-2018-2

IRELAND 12.5% Competitive 2018 U.S. 21% Former U.S. 39.1%

https://www.eia.gov/electricity/monthly/current_month/epm.pdf Table 5.6.B. Average Price of Electricity to Ultimate Customers by End-Use Sector, by State, Year-to-Date through December 2017 and 2016 (Cents per Kilowatthour)

Texas Gross State Product $1,587 B https://www.forbes.com/p laces/tx/ November 2016 Dallas-Arlington-Fort Worth Metropolitan Statistical Area gross metropolitan product, or GMP: $504.36 B North Texas economy ranks No. 24, just behind Sweden. https://knoema.com/nwnfkne/ world-gdp-ranking-2017-gdpby-country-data-and-charts http://www.bizjournals.com/dallas/blog/2015/12/if-the-dallas-fort-worth-economy-were-itsown.html

Texas Gross State Product $1,587 B Population: 27,862,600 Median Household Income: $53,207 Job Growth (2016): 1.5% Cost of Doing Business: 10% below U.S.average College Attainment: 28.4% Net Migration (2015): 271,700 Moody's Bond Rating: Aaa https://www.forbes.com/places/tx/ November 2016

Texas - Forbes Lists #1 in Economic Climate #4 Best States for Business #4 in Business Costs #8 in Labor Supply #8 in Growth Prospects #25 in Regulatory Environment #32 in Quality of Life https://www.forbes.com/places/tx/ November 2016

http://www.jchs.harvard.edu/research/interactive-maps Who Can Afford the Median-Priced Home in Their Metro?

http://demographia.com/dhi.pdf

Estimated Percent Change of the Total Population by County, Texas, 2010 to 2016 Dallam Sherman OchiltreeLipscomb Hansford Hutchinson Hartley Moore RobertsHemphill Oldham Potter Carson Gray Wheeler -4.8% - 0% 0.1% - 2.5% 2.6% - 5% 5.1% - 10% 10.1% - 18.1% Source: U.S. Census Bureau, 2016 Vintage Population Estimates Deaf Smith Randall DonleyCollingsworth Armstrong Parmer Castro Briscoe HallChildress Swisher Hardeman Bailey Lamb Hale Floyd Wilbarger Motley Cottle Foard Wichita Clay Lamar Crosby King Knox Baylor Archer Cooke GraysonFannin Red River CochranHockley Dickens Montague Bowie Lubbock Delta Kent Jack Titus Yoakum Terry Lynn Garza Haskell Young Wise Denton Collin Hunt Hopkins MorrisCass Stonewall Throckmorton Franklin Rockwall Rains Gaines Scurry Fisher Jones Parker Tarrant Dallas Wood Marion Upshur DawsonBorden Stephens Shackelford Palo Pinto KaufmanVan Zandt GreggHarrison El Paso Hood Smith Andrews Martin Eastland Johnson Mitchell Ellis Nolan Taylor Erath Panola Howard Callahan Somervell Henderson Rusk Navarro Hill Loving Glasscock Ector Comanche Winkler Midland Coke Bosque Shelby Sterling AndersonCherokee RunnelsColemanBrown Hamilton Freestone Nacogdoches Hudspeth Culberson Ward Mills McLennanLimestone Crane San AugustineSabine Reeves Upton Reagan Tom Green Coryell Irion Leon Houston Angelina Concho Falls San SabaLampasas Trinity McCulloch Bell RobertsonMadison Schleicher Burnet Polk Tyler Jeff Davis Pecos Menard Milam Walker Jasper Newton Crockett Mason Llano Williamson Brazos Grimes San Jacinto Sutton Kimble Burleson Hardin Gillespie Travis Lee Montgomery Terrell Blanco Washington Orange Presidio Liberty Edwards Kerr Hays Bastrop Waller Kendall Jefferson Val Verde Fayette Austin Harris Brewster Real Comal Caldwell Chambers Bandera Guadalupe Colorado Fort Bend Kinney Uvalde Medina Bexar GonzalesLavaca Galveston Wharton Brazoria Wilson DeWitt Jackson Zavala Frio Atascosa Karnes Victoria Matagorda Maverick Goliad Dimmit McMullen Bee Calhoun La Salle Live Oak Refugio San Patricio Aransas Webb Jim Wells Duval Nueces Kleberg Zapata Brooks Jim Hogg Kenedy Starr Willacy Hidalgo Cameron 23

TEXAS 27,959,000 www.demographics.texas.gov

Ever hear Demographics are Destiny? CIA Factbook 330,890,000

Texas Population Pyramid by Race/Ethnicity, 2014 Male White, Non-Hispanic Female White, Non-Hispanic 85 + years 80 years 75 years 70 years 65 years 60 years 55 years 50 years 45 years 40 years 35 years 30 years 25 years 20 years 15 years 10 years 5 years Under 1 year 250,000 200,000 150,000 100,000 50,000 0 50,000 100,000 150,000 200,000 250,000 Source: Texas Demographic Center, 2014 Population Estimates 26

Texas Population Pyramid by Race/Ethnicity, 2014 Male Hispanic Female, Hispanic 85 + years 80 years 75 years 70 years 65 years 60 years 55 years 50 years 45 years 40 years 35 years 30 years 25 years 20 years 15 years 10 years 5 years Under 1 year 250,000 200,000 150,000 100,000 50,000 0 50,000 100,000 150,000 200,000 250,000 Source: Texas Demographic Center, 2014 Population Estimates 27

Texas Population Pyramid by Race/Ethnicity, 2014 Male White, Non-Hispanic Male Hispanic Male Black, Non Hispanic Male Other, Non Hispanic Female White, Non-Hispanic Female, Hispanic Female Black, Non Hispanic Female Other, Non Hispanic 85 + years 80 years 75 years 70 years 65 years 60 years 55 years 50 years 45 years 40 years 35 years 30 years 25 years 20 years 15 years 10 years 5 years Under 1 year 250,000 200,000 150,000 100,000 50,000 0 50,000 100,000 150,000 200,000 250,000 Source: Texas Demographic Center, 2014 Population Estimates 28

MEXICO 115,067,000 CANADA 35,332,000

JASON SAVING Senior Research Economist Dallas Federal Reserve Bank

Texas Economic Update (with Notes on Tax Reform) Jason Saving Senior Research Economist April 2018 Views expressed in this presentation are those of the presenter and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.

Introduction Texas is currently growing faster than the nation Part of a longer term trend Texas recently endured an energy slump and now Harvey What s the near term outlook? What are the main downside risks? How does tax reform affect the picture? Are there longer term state policy issues about which we should be concerned? 33

ND NV CO TX FL GA OR UT SC CA WA DE MA TN ID NC U.S. LA AR AZ OK MI RI NY OH KY NM WY WI IN IL MO MD AL PA MN SD CT KS IA NH NJ NE MS ME VA VT MT HI AK WV Typically, Texas grows faster than other states, a fact sometimes ascribed to our large energy sector Dec 2014 / Dec 2013 Percent Change, SAAR 5 Texas 4 Energy states denoted in black 3 U.S. 2 1 0 SOURCES: Bureau of Labor Statistics; FRB Dallas. 34

UT ID NV FL WA OR CA GA AZ TN NC SC CO MO HI MT VA NH U.S. MI IN MA AR KY MN MD NY TX NJ AL NE DE WI SD OH RI IL PA MS ME NM IA VT KS CT OK LA WV AK WY ND Employment growth slowed dramatically during the 2015-2016 oil bust Dec 2016 / Dec 2014 Percent Change, SAAR 4 3 Energy states denoted in black 2 1 0-1 -2-3 U.S. Texas -4 SOURCES: Bureau of Labor Statistics; FRB Dallas. 35

NV OR UT TX FL SC WA ID CA CO GA IA MT MA AL NC MS U.S. WI PA MI AZ MN NM OK RI MD HI KY NE NY TN SD AR IN ME VT MO NH VA OH NJ IL CT KS ND WY LA WV DE AK before rebounding in 2017, in a way other energy states didn t Dec/Dec Percent Change, SAAR 4 Energy states denoted in black 3 Texas 2 U.S. 1 0-1 SOURCES: Bureau of Labor Statistics; FRB Dallas. 36

BUT DO WE REALLY GROW FASTER THAN THE NATION?

Texas monthly employment growth usually exceeds nation s Percent change, m/m, SAAR 8 6 4 2 0-2 -4-6 -8 2.2-0.4 Texas U.S. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 NOTE: Last data point is Sept. 2017 for Texas and Oct. 2017 for U.S. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by Federal Reserve Bank of Dallas. http://www.dallasfed.org

Houston employment growth dipped during energy bust and again with Harvey Growth (Y/Y) 6 5 4 3 2 1 0-1 -2-3 -4 San Antonio North/Central Texas Houston Border 2010 2011 2012 2013 2014 2015 2016 2017 NOTES: Border includes Brownsville, Laredo, and McAllen. North/Central Texas includes Dallas, Fort Worth and Austin. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by FRB Dallas. 39

Texas unemployment rate again below nation s Percent, SA 12 10 U.S. 8 6 4 2 Texas 4.1 3.9 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 NOTES: U.S. data through Jan. 2018. Texas data through Dec. 2017. SOURCE: Bureau of Labor Statistics. 40

Metro Area Unemployment Rates Converge After 2000, except for Houston Percent, SA 9 Houston Fort Worth San Antonio Dallas Austin 8 7 6 5 4 3 2 1992 1997 2002 2007 2012 2017 4.8 4.2 3.9 3.5 2.7 NOTE: Last data point is September 2017. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by Federal Reserve Bank of Dallas.

Initial Claims Briefly Soar Post-Harvey Thousands, seasonally adjusted Thousands, seasonally adjusted 350 Allison Katrina Ike Harvey 70 300 250 Continuing claims 60 50 200 40 150 30 100 50 Initial claims 20 10 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 0 NOTE: Initial claims through Oct. 28, 2017; continuing claims through Oct. 21, 2017. SOURCE: U.S. Department of Labor.

Mil. jobs, SA Employment dipped after Harvey, then recovered its losses and is now growing at trend rate Texas Employment 12.6 Baseline estimate (9/4/17) 12.5 $60 billion estimate of damages (9/4/17) 12.5 Extrapolated data based on actual Aug.- Dec. growth 12.4 12.4 12.3 12.3 12.2 12.2 12.1 Jan. 2017 Feb. 2017 Mar. 2017 Apr. 2017 May. 2017 Jun. 2017 Jul. 2017 Aug. 2017 Sep. 2017 Oct. 2017 Nov. 2017 Dec. 2017 Jan. 2018 Feb. 2018 Mar. 2018 SOURCES: Bureau of Labor Statistics; National Oceanic and Atmospheric Administration; authors' calculations. 43

OUTPUT AND SECTORAL PERFORMANCE

Percent change, m/m, SAAR Dallas Fed business cycle (coincident) index points to continued moderate growth 10 8 6 4 2 0-2 -4-6 -8-10 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 4.7 NOTE: Data through Jan. 2018. SOURCES: Federal Reserve Bank of Dallas Texas Business Outlook Surveys (TBOS). 45

Index, 3MMA, SA 40 Dallas Fed also conducts Business Outlook Surveys, with headline measures near recent highs 30 20 10 0 Service Sector (TSSOS Revenue) 21.6 20.5-10 -20-30 Manufacturing (TMOS Production) Mean TMOS since 2007 = 6.2 Mean TSSOS since 2007 = 11.4-40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 NOTE: Data through Jan. 2018. SOURCES: Federal Reserve Bank of Dallas Texas Business Outlook Surveys (TBOS). 46

Texas exports fall during oil bust, then recover Index, real $, Jan. '00=100, SA 260 Texas 240 220 200 180 160 140 120 U.S. minus Texas 100 80 2000 2002 2004 2006 2008 2010 2012 2014 2016 NOTES: Last data point for line chart is Dec. 2017. SOURCES: U.S. Census Bureau; WISERTrade. 47

Petroleum products explain the 2009 jump Index, SA, real $, Q1 2000=100 550 450 Texas petroleum prod., chem. & mining exports 350 250 150 50 Rest of Texas exports U.S. ex. Texas '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 SOURCES: U.S. Census, Bureau of Labor Statistics, WISERtrade, Federal Reserve Bank of Dallas. 48

Energy stronger, but nowhere near recent highs Rig count, weekly 1,200 1,000 800 Texas Rig Count Nominal price, $ weekly 160 140 120 100 600 400 200 0 WTI Oil Price Natural Gas Price 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 80 60 40 20 0 NOTES: Last data point is Feb. 9, 2018. Natural gas price is multiplied by 10. SOURCES: Baker Hughes; Energy Information Administration; Wall Street Journal. 49

and energy activity is more heavily concentrated in West Texas Permian Basin Completed wells per day 25 Permian 20 Eagle Ford Bakken 15 10 5 0 2014 2015 2016 2017 SOURCE: Energy Information Administration.

Texas missed the boom-bust housing price cycle of early 2000s, is keeping pace with nation now Thousands of real $, 4MMA, SA 290 270 250 230 210 U.S. $252,422 $226,889 190 170 Texas 150 130 2000 2002 2004 2006 2008 2010 2012 2014 2016 SOURCES: Multiple Listing Service; Texas A&M Real Estate Center. 51

Residential starts and permits below pre-recession highs Index, 5MMA, Jan. 2005=100, SA 225 200 Multifamily permits 175 150 125 100 75 50 Residential housing starts Single family permits 25 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SOURCES: U.S. Census Bureau; Bank of Tokyo-Mitsubishi UFJ. 52

OUTLOOK AND CONCLUSION

Texas Leading Index components mostly positive Net contributions to change in the Texas Leading Index October -December 2.20 Net Change in Texas Leading Index -0.38 Texas Value of the Dollar 0.75 U.S. Leading Index 0.40 Real Oil Price 0.07 0.16 Well Permits New Unemployment Claims 0.53 Texas Stock Index 0.93 Help Wanted Index -0.25 Average Weekly Hours -1.0-0.5 0.0 0.5 1.0 1.5 2.0 2.5 NOTE: Seasonally adjusted. SOURCE: Federal Reserve Bank of Dallas. 54

Texas Jobs Forecast to Grow 2.5% to 3.5% in 2018 Index, '87 = 100 Millions, SA 135 130 125 120 115 110 105 100 Texas Leading Index Texas Nonfarm Employment and Forecast (with 80% confidence band) 2001 2004 2007 2010 2013 2016 2019 SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas. 14.0 13.5 13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 9.0 55

Talking Points Texas typically grows a percentage point faster than the nation Business climate, cost of living, immigration Post-Harvey growth has returned to trend and the energy sector s outlook is positive Are there short-term downside risks? Energy, labor market slack, higher trade barriers What about tax reform? 56

Tax Reform and Texas Lower corporate rates, expensing provisions may encourage firms to raise US production and investment Texas favorable business climate Caps on state and local deduction and mortgage deductibility will bind much more in higher-tax and highercost-of-living states More incentive to move Higher after-tax housing costs could slightly dampen home price appreciation nationwide Less true for Texas 57

Longer-term challenges K-12 test scores, funding at or below the national average Infrastructure receives an average grade from civil engineering assessments Largest share of uninsured residents in the nation How to maintain relatively low per capita tax burden and favorable business climate while addressing these issues? 58

KING WHITE CEO and Founder Site Selection Group

CORPORATE LOCATION TRENDS

SITE SELECTION GROUP 250+ PROJECTS completed per year 25 FORTUNE 100 companies represented 1,253 GLOBAL CITIES proactively researched 2.4M SQUARE FEET of real estate transactions in 2017 $300M REAL ESTATE transaction value in 2017 $2.0B ECONOMIC INCENTIVES secured in last 10 years

SERVICES & CLIENTS L OCAT I ON A DV I SORY SERV I C ES ECONOMIC I N C ENTIVE SERV I C ES C ORPORAT E R EAL ESTAT E SERV I C ES ECONOMIC D EVELOPMENT C ONSULT I N G

MACRO TRENDS IMPACTING LOCATION STRATEGIES Technological Advances Globalization Capital Deployment Business Climate 20

LOCATION DRIVERS HQ, IT & Back Office Manufacturing Plants Distribution Centers 1. Labor Availability 2. Labor Cost 3. Education System 4. Real Estate Availability 5. Economic Incentives 6. Business Climate 7. Accessibility 8. Disaster Recovery 1. Labor Availability 2. Labor Cost 3. Logistics 4. Business Climate 5. Real Estate Availability 6. Regulatory Environment 7. Utilities & Infrastructure 8. Economic Incentives 1. Logistics 2. Labor Availability 3. Labor Cost 4. Real Estate Availability 5. Business Climate 6. Economic Incentives 20

MAJOR WINS IN TEXAS Company Location Expansion Type Operation Type Economic Incentives ($M) Capex ($M) Facebook Fort Worth New Project Data Center $146.70 $500.00 40 # of Jobs American Airlines Fort Worth Expansion Project Headquarters $21.25 $350.00 9,279 General Motors Arlington, TX Expansion Project Distribution Center $14.30 $0.00 850 TJ Maxx San Antonio, TX New Project Distribution Center $11.30 $150.00 1,000 McKesson Irving, TX New Project Operations Center $9.75 $157.00 975 AmerisourceBergen Carrollton, TX New Project Headquarters $9.00 $113.00 1,184 Schlumberger Sugar Land Expansion Project Headquarters $8.55 $200.00 500 NTT Data Plano, TX New Project Headquarters $7.50 $28.00 6,377 Amazon Houston, TX New Project Distribution Center $7.00 $136.00 1,000 Fairway Energy Houston, TX Expansion Project Energy $6.50 $350.00 55 Charles Schwab Westlake, TX New Project Operations Center $6.00 $100.00 1,200 USAA San Antonio, TX Expansion Project Headquarters $6.00 $70.00 1,500 Liberty Mutual Plano New Project Operations Center $5.20 $325.00 4,000 Topgolf El Paso, TX New Project Retail $5.20 $15.70 500 Sabre Westlake, TX New Project Headquarters $5.00 $37.00 500 JPMorgan Chase Plano, TX New Project Operations Center $4.90 $220.00 4,800 Finisar Corporation Sherman, TX New Project Manufacturing $4.50 $140.00 500 Kubota Tractor Grapevine New Project Headquarters $3.80 $51.00 344 USA800 Wichita Falls, TX New Project Call Center $3.40 $0.00 650 Golden State Foods Burleson, TX New Project Manufacturing $2.70 $70.00 150 Ernst & Young San Antonio, TX New Project Shared Service Center $2.63 $10.50 600 GM Financial San Antonio New Project Operations Center $2.50 $20.00 490 Cognizant Irving, TX New Project IT Operations Center $2.11 $8.00 1,090 Source: Incentives Monitor SITE SELECTION GROUP PAGE 65

HEADQUARTER RELOCATIONS TO DFW 106 HQ RELOCATIONS TO DFW SINCE 2010 Source: Dallas Regional Chamber 20

FORTUNE 500 HQ MOVEMENT DFW +4 18 to 22 San Jose +4 13 to 17 Philadelphia +3 11 to 14 CHANGE IN NUMBER OF FORTUNE 500 HQS FROM 2014-2017 Chicago +2 31 to 33 Connecticut +2 10 to 12 Boston +1 10 to 11 San Francisco +1 17 to 18 Minneapolis NC 17 to 17 Washington DC NC 17 to 17 Atlanta NC 15 to 15 Detroit -3 13 to 10 New York -3 72 to 69 Los Angeles -6 21 to 15 Houston -6 26 to 20 Source: Dallas Regional Chamber 20

POPULATION GROWTH TRENDS Texas had highest population growth in US with +3,158,496 (+12.6%) people added since 2010 20

ECONOMIC INCENTIVE COMPETIVENESS MICHIGAN MICHIGAN COMPETITIVE RANKING Highly Competitive Competitive Non-Competitive Source: Site Selection Group Texas is Highly Competitive 20

TEXAS ENTERPRISE FUND DISBURSEMENT 58% of TEF Awarded to Projects in North Texas Region Source: Office of the Governor / Department of Research & Economic Analysis, 9/2016 20

UNEMPLOYMENT AT HISTORIC LOWS Source: Bureau of Labor & Statistics Metro Area Unemployment Rate Midland 2.4% Amarillo 2.8% Austin-Round Rock 3.0% Lubbock 3.1% College Station-Bryan 3.1% Odessa 3.3% San Antonio 3.4% San Angelo 3.4% Sherman-Denison 3.4% Dallas-Fort Worth 3.6% Abilene 3.6% Wichita Falls 3.6% Waco 3.8% Tyler 3.8% Laredo 3.9% Killeen-Temple 4.1% Victoria 4.4% El Paso 4.6% Longview 4.6% Houston 4.8% Texarkana 4.8% Corpus Christi 5.9% Brownsville 6.8% Beaumont 7.3% McAllen 7.6% 20

WAGE INFLATION DUE TO LABOR CHALLENGES Source: Bureau of Labor & Statistics Metro Area Wages and Salaries 12-Month % Changes for Period Ended 2016-2017 Dec. 2016 Sep. 2017 Dec. 2017 Change Northeast 2.9 3.0 2.7-0.2 Boston-Worcester-Manchester 2.9 2.8 2.2-0.7 New York-Newark-Bridgeport 3.3 3.2 2.4-0.9 Philadelphia-Camden-Vineland 2.4 1.8 2.4 0 South 1.4 2.1 2.7 +1.3 Atlanta-Sandy Springs-Gainesville 4.2 2.7 1.5-2.7 Dallas-Fort Worth 1.5 1.9 3.2 +1.7 Houston-Baytown-Huntsville 2.3 2.6 2.0-0.3 Miami-Fort Lauderdale 3.6 3.9 2.3-1.3 Washington-Baltimore-N. Virginia 2.8 3.3 3.0 +0.2 Midwest 2.9 2.2 2.2-0.7 Chicago-Naperville-Michigan City 3.0 2.3 2.6-0.4 Detroit-Warren-Flint 2.3 2.8 3.2 +0.9 Minneapolis-St. Paul-St. Cloud -0.2 1.0 1.1 +1.3 West 2.8 3.4 3.3 +0.5 Los Angeles-Long Beach-Riverside 3.1 3.2 3.3 +0.2 Phoenix-Mesa-Scottsdale 2.8 3.0 3.1 +0.3 San Jose-San Francisco-Oakland 2.9 2.9 3.6 +0.7 Seattle-Tacoma-Olympia 3.7 3.8 3.4-0.3 20

JOB OPENINGS INTENSIFY Job Postings per Person in the Labor Force Houston, TX San Antonio, TX Texas Austin-Round Rock, TX Dallas-Fort Worth, TX - 0.10 0.20 0.30 0.40 0.50 0.60 0.70 DFW HAD 2,388,013 UNIQUE JOB POSTINGS IN 2017 Source: EMSI, Bureau of Labor & Statistics SITE SELECTION GROUP PAGE 73

FUTURE CHALLENGES LABOR SHORTAGE COST OF DOING BUSINESS WORKFORCE DEVELOPMENT WAGE INFLATION POLITICS REAL ESTATE MEDIA PAGE 74

QUESTIONS? JASON SAVING, Senior Economist Dallas Federal Reserve Bank KING WHITE, CEO and Founder Site Selection Group HANK N. MULVIHILL, JR., CCM, CWS, CFP The Optimist Economist

www.siteselectiongroup.com 1.866.938.SITE (7483)

Texas Economic Update (with Notes on Tax Reform) Jason Saving Senior Research Economist April 2018 Views expressed in this presentation are those of the presenter and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.

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