Texas Economic Outlook: Cruising in Third Gear Keith Phillips Assistant Vice President and Senior Economist 1/19/17 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.
Texas Economic Growth Weak in 215 and 216, Accelerating This Year In five years prior to 215, growth in energy, construction and exports provided a strong stimulus to Texas. In 215 and 216, low oil prices and strong dollar reduced job growth but Texas did better than other energy states. This year, Texas employment is growing much faster than 216, faster than the nation and above trend. Pickup mostly due to a rebound in energy and manufacturing sectors. Jobs forecasted to grow 2.6 percent this year with a similar pace of activity next year. 2
216 Texas Growth Was Below National Average Percent Change, Dec. 215 - Dec. 216 5 4 3 2 1-1 -2-3 -4 U.S. TX -5 ID UT WA NV FL GA AZ OR NC CA MI TN CO MO NH SC MN KY IN MA US MT NJ NY MD TX AR AL SD DC HI NM PA NE OH WI VA DE VT ME RI IA IL MS KS CT OK WV LA ND AK WY NOTE: Black bars represent large energy-producing states. SOURCE: Bureau of Labor Statistics. 3
Texas Job Growth Has Improved This Year to 3 rd Fastest Growing State Percent Change, Dec. 216 - Aug. 217 3.5 3 2.5 TX 2 1.5 U.S. 1.5 -.5-1 -1.5 NV FL TX MD RI GA NH ND UT CO OR MA AR SC IA VA OK TN AL MO WA NY US NC MN ID DC CA KY LA AK OH MS MT VT DE PA NJ HI CT AZ IN MI ME NE WI IL NM SD WY WV KS NOTES: Black bars represent large energy-producing states. Growth rates are seasonally adjusted and annualized. SOURCE: Bureau of Labor Statistics. 4
Texas Economy Expanding Above Trend After Weak First Half of 216 Percent, M/M SAAR 12 1 8 6 4 (Texas Business-Cycle Index) 2 3.8% trend -2-4 -6-8 NOTE: Shaded areas represent Texas recessions SOURCE: Federal Reserve Bank of Dallas 5
Percent, Dec./Dec. 6 I-35 Corridor Continues to Grow, Energy Metros Rebounding Job Growth, 214-217 5 4.8 4 3 2 1 1.2 2.6 2.1 3.9 1.1 2.7 2.5 1.9 1.6 3.2 1.5 2. 1.7-1 -2 Texas. Houston (24.7%) Dallas (2.8%) San Antonio (8.5%) Fort Worth (8.4%) Austin (8.3%) El Paso (2.6%) -.9 Corpus Christi (1.6%) NOTE: Striped bars represent annualized growth Aug. 217/Dec. 216. Figures in parentheses represent shares of total state employment. SOURCES: Bureau of Labor Statistics, Federal Reserve Bank of Dallas. 6
Goods-Producing Industries Rebounding in 217 Dec/Dec Percent Change 15 1 5-5 -1-15 -2-25 -3 Trade, Government Transp & Utilities (15.8%) (19.9%) Health & Private Education (13.7%) Professional & Business Svcs (13.6%) (Job Growth 215-217) Leisure & Hospitality (1.8%) Manufacturing (6.9%) Financial Activities (6.1%) Construction (5.7%) Natural Information Resources & (1.6%) Mining (1.7%) NOTE: Striped bars are annualized growth Aug. 217/Dec. 216. Figures in parentheses represent shares of total nonfarm employment. SOURCES: Bureau of Labor Statistics, adjustments by Federal Reserve Bank of Dallas. 7
Texas Manufacturing Outlook Survey Shows Index Significant Improvement This Year 1 8 6 4 2 Sept '17-2 -4-6 Production Volume of New Orders -8-1 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 NOTE: Data are seasonally adjusted. SOURCE: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey. 8
Recently Rig Count Has Flattened Out After Strong Number Growth Since Mid-216 Nominal $ 1 Rig Count 9 1 8 12 7 8 6 5 Oil price 453 6 4 3 $5.14 4 2 $3.88 2 1 Gas price (x1) 21 211 212 213 214 215 216 217 NOTE: Data are weekly, last data point is the week of Sept. 22, 217. SOURCES: Oil and Gas Journal, Baker Hughes. 9
Energy Survey Suggests Strong but Slightly Weaker Growth in Energy Activity in Second Half Index 6 5 4 Q4 216 Q1 217 Q2 217 Q3 217 Price per barrel $53.49 $48.79 $5.2 3 2 1 Business Activity Capital Expenditures Employment Company Outlook NOTE: Data for uncertainty index and price forecast begin in Q1 217. SOURCE: Federal Reserve Bank of Dallas. Uncertainty End of Year Price Forecast 1
Texas Leading Index Components Mixed Net contributions to change in the Texas Leading Index (May - July 217).93 Net Change in Texas Leading Index.74 Texas Value of the Dollar.4 U.S. Leading Index -.25 -.15 -.5 -.2 -.15 Real Oil Price Well Permits New Unemployment Claims Texas Stock Index Help Wanted Index.42 Average Weekly Hours -.4 -.2..2.4.6.8 1. NOTE: Seasonally adjusted. SOURCE: Federal Reserve Bank of Dallas. 11
Texas Jobs Forecasted to Grow 2.% to 3.% in 217 and 218 Millions, seasonally adjusted Index, 1987=1 13.5 14 13. 12.5 12. 11.5 11. 1.5 1. 9.5 9. Leading Index 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 '17 '18 135 13 125 12 115 11 15 1 95 9 SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas. 12
Estimates for Hurricane Harvey Impact Suggests Temporary Job Decline in September Texas Employment Millions of jobs, SA 12.6 12.5 12.4 12.3 12.2 12.1 Baseline $75 billion $1 billion 12. 11.9 SOURCES: Bureau of Labor Statistics; National Oceanic and Atmospheric Administration; authors' calculations. 13
Summary In past two years Texas weakened sharply but continued to grow - did much better than 198s and better than other energy states. In second half of 216 energy and manufacturing sectors stabilized and job growth picked up. In 217 these sectors have rebounded. Texas likely to grow about 2.6 percent this year, similar rate next year. Biggest risk to the forecast is sharp decline in oil prices or exports. 14
Dallas Fed Publications Public Resources from the Dallas Fed: Southwest Economy Regional Economic Updates San Antonio and Austin Economic Indicators Texas Business Outlook Surveys Energy Survey National Economic Updates International Economic Updates Additional Research Publications and Data 15