Texas Economic Outlook 2015: Insights and Projections
Explore the 2015 Texas economic outlook with insights from Keith Phillips, a Senior Economist and Research Officer. Discover trends in national and state economies, job growth, leading indicators, and projections for Real Gross Domestic Product (RGDP) growth. Understand the impact of factors like consumer spending, energy prices, and a strong dollar on Texas' economy and job market.
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2015 Texas Economic Outlook: Tapping on the Brakes Keith Phillips Sr. Economist and Research Officer 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.
National Economy Picking Up Consumer spending picked up in 2014 as housing prices and stock market improved, and consumer debt fell Declining energy prices in second half provided a further boost Europe remains a question mark but if energy prices remain low, US economy should pick up further in 2015
Average Job Growth of 260K per Month in 2014 After 199K in 2013 (2.3% vs 1.8%) Thousands,SA 600 400 200 0 -200 -400 -600 -800 Source: Bureau of Labor Statistics -1000 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
U.S. Leading Index Suggests Continued Good Growth over Next 6 Months Annualized % change 20 15 12-month 6-month 10 5 0 -5 -10 -15 -20 1960 Source: Conference Board, Federal Reserve Bank of Dallas 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
RGDP Grew 2.5% in 2014, January Blue Chip Survey Projects 2.8% in 2015 SAAR, Percent 8.0 2013 3.1% Q4/Q4 2014 2.4% Q4/Q4 6.0 2015 2.8% Q4/Q4 4.65.0 2012 2.0% Q4/Q4 4.6 4.5 3.9 3.9 4.0 3.5 2.9 2.72.5 2.7 2.5 2.3 2.2 1.8 1.7 1.6 2.0 1.3 0.8 0.1 0.0 -0.5 -2.0 -1.5 -2.1 -4.0 -5.4 -6.0 -8.0 -8.2 Source: Blue Chip Economic Indicators -10.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
TX Economy Has Grown Above Trend and Stronger than Most States In past five years growth in energy, construction and exports provided a strong stimulus to Texas. 2014 growth was broad based across sectors. Energy, construction, business services, health care, exports and tourism strong. Government sector improved. In 2015, low oil prices and continued labor market tightness will likely restrain growth. Strong dollar may dampen exports. I expect job growth will slow in 2015 to between 1.0% and 2.0% (from 3.4% in 2014).
Texas Economy Growing Well Above Trend (Texas Business Cycle Index) M/M SAAR 12 10 8 6 4 2 2.6% trend 0 -2 -4 -6 -8 NOTE: Shaded areas represent Texas recession.
Texas Ranked Sixth in Job Growth in 2014 Percent Change, Dec. 2013 - Dec. 2014 5 4.5 4 TX 3.5 3 2.5 U.S. 2 1.5 1 0.5 0 -0.5 GA TN TX NC NY NJ NV NH IL NE HI ND IA MI WI NM IN OR WA ID LA WY OH PA WV KS MN MO MS FL SC AR AZ DE OK AL MD RI DC AK SD ME CA KY MA VT VA MT CO US UT CT Source: Bureau of Labor Statistics
Texas Jobs Growing Faster Than Nations Percent, Job Growth Y/Y 5 U.S. Texas 4 3.5 3.4 2.7 3 2.12.3 2.3 1.61.71.8 2 0.8 1 0 -1 -2 -3 -3.4 -4 -3.8 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas -5 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Job Growth is Broad-Based Across Large Texas Metro Areas Nonfarm Employment Index Aug. 2008=100 120 Austin 115 Houston San Antonio Dallas TX 110 Ft. Worth Corpus Christi El Paso 105 U.S.* 100 95 90 2008 2009 2010 2011 2012 2013 2014 2015 *Indexed from U.S. Peak Employment in January 2008 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Texas Unemployment Rate Low and Falling Percent, SA 10.5 9.5 US unemployment rate 8.5 7.5 6.5 5.7 (Jan.) 5.5 Texas unemployment rate 4.5 4.4 (Jan.) 3.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Job Growth Broad-Based Across Industries Dec/Dec Percent Change (Job Growth 2011-2014) 20 Oil & Gas 15 10 Business Services Construction Manufacturing Leisure & Hospitality Finance, Insurance, & Real Estate Trade, Information Services Transportation, & Utilities Health & Education 5 Government 0 Share of Total Employment (2.6%) (5.5%) (20.1%) (7.6%) (13.4%) (6.1%) (10.3%) (1.8%) (13.2%) (15.9%) -5 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Texas Construction Contract Values Increased Strongly Last Year Real $, Mil 5MMA, SA 8000 7000 Total 6000 5000 4000 Residential 3000 Non Residential 2000 1000 Non Building 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: F.W. Dodge, Federal Reserve Bank of Dallas
TX Home Inventories Remain at Historically Low Levels Months 18 3.4 Texas 16 5.2 U.S. 14 12 10 8 Jan. 2014 6 4 2 0 Source: Multiple Listing Service
Mortgage Foreclosures Back to Normal levels but Delinquencies Remain Elevated 5 TX Delinquencies TX Foreclosures Started 4.5 US Delinquencies US Foreclosures Started 4 3.5 3 2.5 2.1 2 1.9 1.5 1 0.46 0.5 .35 0.34 0 1998 Source: Mortgage Bankers Association 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Low TX Office Vacancy Rate Likely to Motivate Continued Strength in Office Construction Real, Millions $, 5MMA Percent 450 35 Office and Bank Buildings Contract Value 400 30 350 Office Vacancy Rate 300 25 250 20 200 150 15 100 10 50 0 5 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Source: F.W. Dodge, CBRE, Federal Reserve Bank of Dallas
TX Manufacturing Production Growth Slow, New Orders Falling Index 100 80 60 40 Feb-15 20 0 -20 -40 Production -60 Volume of New Orders -80 -100 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15
Texas Exports Have Weakened in Recent Months as Value of the Dollar has Risen Index Index, SA, Real Jan. 2000=100 Jan. 1988=100 260 110.0 Texas Value of the Dollar 105.0 240 100.0 220 95.0 200 90.0 180 Texas 85.0 160 80.0 140 75.0 120 70.0 U.S. minus Texas 100 65.0 80 60.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census, Bureau of Labor Statistics, WISERtrade Federal Reserve Bank of Dallas
Oil Prices Low, Drilling Rig Count In Sharp Decline Number Nominal $ 1000 160 Rig Count 900 140 800 120 700 100 600 80 500 60 400 40 Oil price 300 20 Gas price(*10) 200 0 Source: Oil and Gas Journal, Baker Hughes Source: Oil and Gas Journal, Baker Hughes.
Low Oil Prices Will Likely Dampen TX Job Growth in 2015 Oil prices have declined over 50% since last July, initial drop from $106 to $80 likely was good for TX economy Sustained drop from $80 to $50 will hurt TX economy - $50 is below the breakeven point for majority of shale drilling. Texas GDP growth will likely weaken more than jobs as output per worker in mining is about 4.6 times more than average for the state.
Energys Share of TX Economy Increased with Shale Drilling Percent, SA Percent 5 16 Mining as a Share of Nominal Texas GDP 4.5 13.5 % 14 4 12 3.5 10 3 2.7 % 2.5 8 Mining as a Share of Total Texas Employment 2 6 1.5 4 1 2 0.5 0 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 NOTE: GDP values prior to 1997 and employment values prior to 1990 extrapolated from SIC coded data. SOURCES: Bureau of Labor Statistics, Bureau of Economic Analysis, FRB Dallas.
TX Job Growth Relative to Nation Impacted by Oil Prices Real price, $, monthly average Percent difference in TX and U.S. growth, 12MMA 4 160 Texas Job Growth Relative to U.S. 3 140 2 120 1 100 0 -1 80 Real Oil Price -2 60 -3 40 -4 20 -5 -6 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 SOURCES: Wall Street Journal, Bureau of Labor Statistics.
Recent Weakness in Leading Index Led By Declining Oil Prices and Rising Dollar Texas Leading Index Components, 3 month change November -January Net Change in Texas Leading Index -3.54 Texas Value of the Dollar -1.03 U.S. Leading Index 0.31 Real Oil Price -1.41 Well Permits -1.30 New Unemployment Claims -0.47 Texas Stock Index 0.15 Help Wanted Index 0.45 Average Weekly Hours -0.25 -4.00 -3.50 -3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00
Texas Job Growth Likely to be about 1.0 2.0% in 2015, down from 3.4% in 2014 Index Millions of Jobs (1987=100) 12.5 135 130 12.0 Leading Index 125 11.5 120 11.0 115 10.5 110 Texas Nonfarm Employment and TLI Forecast (with 80% confidence band) 10.0 105 9.5 100 9.0 95 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas, author's calculations
San Antonio has a Small Share of Jobs in the Oil and Gas Industry El Paso* Brownsville-Harlingen Mcallen-Edinburg-Pharr Sherman-Denison San Antonio Beaumont-Port Arthur Austin-Round Rock Lubbock Dallas-Fort Worth-Arlington Laredo Amarillo College Station-Bryan Houston-Baytown-Sugar Land Corpus Christi Tyler San Angelo Abilene Victoria Longview Odessa Midland 0 5 10 15 20 25 30 Share of Employment in Mining Sector *El Paso data as of 2008. All others as of 2012. Source: Bureau of Economic Analysis
No Clear Boost to San Antonio Job Growth from Eagle Ford Development Y/Y job growth 8 6 Texas San Antonio 4 2 0 -2 -4 -6 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 SOURCE: Bureau of Labor Statistics, Federal Reserve Bank of Dallas.
Summary U.S. economy picked up in 2014 lower oil prices at year end stimulating further gains in consumer spending TX growth was strong and broad-based in 2014 - initial oil price decline from $106 to $80 had positive impact. Movement of oil prices from $80 to $50 will have negative impacts but growth likely to remain positive. This year Texas job growth likely to moderate to 1.0-2.0% Bottom line: Texas likely to continue to grow but not nearly as strongly as last year.
