2016 Texas Economic Outlook: Riding the Energy Roller Coaster · 2016 Texas Economic Outlook:...
Transcript of 2016 Texas Economic Outlook: Riding the Energy Roller Coaster · 2016 Texas Economic Outlook:...
FEDERAL RESERVE BANK of DALLAS
SAN ANTONIO BRANCH
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.
2016 Texas Economic Outlook:
Riding the Energy Roller Coaster January 12, 2016
Keith Phillips
Assistant Vice President and Senior Economist
National Economy Slowed Slightly in 2015
• Job growth slowed from 2.3% in 2014 to 1.9% in 2015, while RGDP growth likely slowed from 2.5% to 2.1%.
• Manufacturing sector hit by global weakness and strong dollar.
• Health care sector picked up with greater insurance coverage. Retail and leisure and hospitality remained healthy, but positive impact of lower energy prices smaller than expected.
• RGDP expected to pick up slightly in 2016.
2015 Consumer Spending Weaker Than Expected
-12
-10
-8
-6
-4
-2
0
2
4
6
8
'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15
Real Personal Consumption Expenditure
Real Retail Sales
Percent Y/Y
Sources: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis.
U.S. Households Reduced Debt
1.19
0.95 (Q3)
1.35
0.97 (Q3)
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
2000 2002 2004 2006 2008 2010 2012 2014 2016
Ratio, personal debt per capita/personal income per capita
U.S.
Texas
Mortgage68.7%
HE revolving4.1%
Auto loan8.7%
Credit card5.9%
Student loan9.7%
Other2.9% U.S.
Mortgage61.4%
HE revolving0.9%
Auto loan15.6%
Credit card7.0%
Student loan10.7%
Other4.4%
Texas
Note: Data are through third quarter 2015, except where noted.Sources: Federal Reserve Bank of New York, Bureau of Economic Analysis.
Average Job Growth of 221K per Month in 2015
After 260K in 2014 (1.9% vs 2.3%)
-1000
-800
-600
-400
-200
0
200
400
600
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 Jan-16
Thousands,SA
Source: Bureau of Labor Statistics
U.S. Leading Index Suggesting Healthy Growth in
Months Ahead
-20
-15
-10
-5
0
5
10
15
20
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Percent change, annualized
12-month6-month
Note: Shaded areas represent U.S. recessions.Source: Conference Board, Federal Reserve Bank of Dallas
January Blue Chip Survey Projects 2.1% RGDP Growth in
2015 and 2.6% in 2016
3.9
1.7
3.9
2.7 2.5
-1.5
2.9
0.8
4.6
2.7
1.9
0.50.1
1.9
1.1
3.0
3.8
-0.9
4.64.3
2.1
0.6
3.9
2.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SAAR, Percent
2013 2.5% Q4/Q4
2014 2.5% Q4/Q4
Source: Blue Chip Economic Indicators
2015 2.1% Q4/Q4
2016 2.6% Q4/Q4
Texas Economy Weakened Sharply in 2015 but
Continued to Add Jobs
• In five years prior to 2015, growth in energy, construction and exports provided a strong stimulus to Texas.
• In 2015, 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 2015, jobs grew about 1.3% (150,500 jobs), a drop from 3.6% in
2014. In 2016, if oil prices remain near $40 - $50, growth will be around 1.4% (161,200 jobs).
Texas Economic Growth Below Trend but Positive
(Texas Business Cycle Index)
-8
-6
-4
-2
0
2
4
6
8
10
12
Percent, M/M SAAR
Note: Shaded areas represent Texas recessionsSource: Federal Reserve Bank of Dallas
3.8% trend
Texas Ranked Third in Job Growth in 2014, Growth in
Energy States Varied Widely
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
ND FL TX GA UT NV OR CO WA CA NC SC AR AZ TN US DE ID KY MA LA WY MI WI OK NY AL NM MD CT IN IA KS OH NH MN RI PA IL DC VT AK VA SD MO NJ NE MS MT ME HI WV
Percent Change,Dec. 2013 - Dec. 2014
U.S.
TX
Note: Black bars represent large energy-producing states.Source: Bureau of Labor Statistics
Texas Ranked 32nd in Job Growth in 2015, but
Above Most Energy States
-4
-3
-2
-1
0
1
2
3
4
5
ID UT FL WA OR SC CA SD NV AZ HI MA GA MD NC KY IN NY IA US RI VT MI CO NE NJ TN VA ME DE CT OH TX DC AL MN WI MO AR MS NM PA MT NH IL KS OK AK LA WY WV ND
Annualized Percent Change,Dec. 2014 - Nov. 2015
U.S.
TX
Note: Black bars represent large energy-producing states.Source: Bureau of Labor Statistics
2015 Texas Job Growth Less Than the Nation’s
-3.8
0.8
1.6 1.7 1.8
2.3
1.82.1 2.3
3.5
2.7
3.6
1.3
-5
-4
-3
-2
-1
0
1
2
3
4
5
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
U.S.
Texas
Percent, Job Growth Y/Y
-3.4
Note: 2015 data annualized through November.Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Job Growth Has Been Broad-Based Across
Large Texas Metro Areas
90
95
100
105
110
115
120
125
2008 2009 2010 2011 2012 2013 2014 2015 2016
Houston
San Antonio
Ft. Worth
Austin
Dallas
Nonfarm Employment IndexAug. 2008=100
TX
El Paso
Corpus Christi
U.S.*
*Indexed from U.S. Peak Employment in January 2008Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Texas Unemployment Rate Still Below Nation’s but Rising
4.6(Nov.)
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Percent, SA
US unemployment rate
Texas unemployment rate
5.0(Nov.)
Source: Bureau of Labor Statistics.
Energy & Manufacturing Weakened Sharply in 2015
-20
-15
-10
-5
0
5
10
15
20
(Job Growth 2012-2015)
Oil & Gas
Construction
Trade, Transportation, & Utilities
Manufacturing
Business Services
Finance, Insurance,& Real Estate Leisure &
Hospitality
Information Services
Health & Education
Government
(2.1%) (5.8%) (20.2%) (7.3%) (13.5%) (6.0%) (10.5%) (1.7%) (13.5%) (15.6%)
Share of Total Employment
Dec/DecPercent Change
Note: Striped bars represent Dec. 2014 - Nov. 2015 annualized changeSources: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Texas Construction Contracts Strong in 2015
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Real $, Mil5MMA, SA
Residential
Non Residential
Non Building
Total
Sources: F.W. Dodge, Federal Reserve Bank of Dallas
Texas Home Inventories Remain
Near Historically Low Levels
0
2
4
6
8
10
12
14
16
18Texas
U.S.
Months
3.5
5.3
Nov.2015
Source: Multiple Listing Service
Texas Office Markets Remain Healthy
5
10
15
20
25
30
35
0
50
100
150
200
250
300
350
400
450
'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Real, Millions $, 5MMA Percent
Office Vacancy Rate
Office and Bank Buildings Contract
Values
Note: Shaded areas represent Texas recessionsSources: F.W. Dodge, CBRE, Federal Reserve Bank of Dallas
16%
Texas Manufacturing Indicators Mixed
-100
-80
-60
-40
-20
0
20
40
60
80
100
Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15
Production
Volume of New Orders
Company Outlook
Index
Dec. 15
Source: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey
Texas Exports Have Weakened as Value of the
Dollar Continues to Rise
65.0
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
80
100
120
140
160
180
200
220
240
260
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
U.S. minus Texas
Texas
Index, SA, RealJan. 2000=100
Texas Value of the Dollar
Source: U.S. Census, Bureau of Labor Statistics, WISERtrade, Federal Reserve Bank of Dallas
IndexJan. 1988=100
Drilling Rig Count Continues to Fall Amidst Renewed
Plunge in Energy Prices
0
20
40
60
80
100
120
140
160
200
300
400
500
600
700
800
900
1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Gas price(*10)
Oil price
Rig Count
Source: Oil and Gas Journal, Baker Hughes
Number
Source: Oil and Gas Journal, Baker Hughes.
Nominal $
Which Metros Performed the Best in 2015?
Size of Energy Sector Explains a Lot
0 5 10 15 20 25
Midland (-2.1%)
Odessa (-2.6%)
Longview (-5.1%)
Corpus Christi (0.9%)
Houston-Baytown-Sugar Land (0.1%)
San Angelo (-0.4%)
Wichita Falls (0%)
Laredo (2.4%)
Abilene (0.6%)
Tyler (-0.2%)
College Station-Bryan (5.8%)
McAllen-Edinburg-Mission (2%)
Beaumont-Port Arthur (0.5%)
Dallas-Fort Worth-Arlington (3%)
San Antonio (3.6%)
Amarillo (-0.4%)
Sherman-Denison (-0.2%)
Austin-Round Rock (4.2%)
Lubbock (1.3%)
Waco (-0.5%)
Texarkana (-0.2%)
Killeen-Temple-Fort Hood (2%)
Brownsville-Harlingen (1.3%)
El Paso (3.5%)
Mining sector share of total employment
Note: Data in parentheses are annualized job growth, Dec. 2014 - Nov. 2015. Mining share data as of 2014.Sources: Texas Workforce Commission, Bureau of Labor Statistics, Federal Reserve Bank of Dallas.
Austin-Round Rock (4.2%)
San Antonio (3.6%)Dallas-Fort Worth-Arlington (3.0%)
Houston-Baytown-Sugar Land (0.1%)Corpus Christi (0.9%)
Correlation: -0.52
Share of Manufacturing Also Accounts for
Some Differences in Job Growth
0 2 4 6 8 10 12 14 16
Beaumont-Port Arthur (0.5%)Waco (-0.5%)
Sherman-Denison (-0.2%)Amarillo (-0.4%)
Fort Worth-Arlington (0.2%)Longview (-5.1%)
Wichita Falls (0%)Houston-Baytown-Sugar Land (0.1%)
Odessa (-2.6%)Dallas-Plano-Irving (4.1%)
Corpus Christi (0.9%)San Angelo (-0.4%)
Austin-Round Rock (4.2%)El Paso (3.5%)Tyler (-0.2%)
College Station-Bryan (5.8%)Killeen-Temple-Fort Hood (2%)
San Antonio (3.6%)Midland (-2.1%)
Abilene (0.6%)Brownsville-Harlingen (1.3%)
Texarkana (-0.2%)Lubbock (1.3%)
McAllen-Edinburg-Mission (2%)Laredo (2.4%)
Note: Data in parentheses are annualized job growth, Dec. 2014 - Nov. 2015. Manufacturing share data as of 2014.Sources: Texas Workforce Commission, Bureau of Labor Statistics.
Manufacturing sector share of total employment
Austin-Round Rock (4.2%)
San Antonio (3.6%)
Corpus Christi (0.9%)Dallas-Plano-Irving (4.1%)
Houston-Baytown-Sugar Land (0.1%)
Fort Worth-Arlington (0.2%)
Correlation: -0.36
11th District Banks Remain More Profitable
Than U.S. Banks…
U.S.1.05
11th District 1.12
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Return on Assets, Percent
*Annual data, 2015 data are annualized through Q3
1.58
0
1
2
3
4
5
6U.S.
0.89
0
1
2
3
4
5
6Other
Consumer
C&I
Commercial RE
Residential RE
11th District
*Annual data, 2015 data are annualized through Q3
…But Noncurrent Loans Have Ticked Up Regionally
Percent of Total Loans
-0.08
0.17
0.27
-0.08
-0.10
-0.01
0.31
-0.21
0.26
-0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4
Average Weekly Hours
Help Wanted Index
Texas Stock Index
New Unemployment Claims
Well Permits
Real Oil Price
U.S. Leading Index
Texas Value of the Dollar
Net Change in Texas Leading Index
Net contributions to Change in the Texas Leading IndexSeptember-November
NOTE: Seasonally adjusted.SOURCE: Federal Reserve Bank of Dallas.
Leading Index Components Mixed
90
95
100
105
110
115
120
125
130
135
140
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
13.0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Index, 1987=100
Leading Index
Texas nonfarm employmentand forecast
(with 80% confidence band)
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas.
Millions, seasonally adjusted
Texas Job Growth Likely to Be Between
1.0%–2.0% in 2016, Similar to 2015
San Antonio Economy Grew Strongly in 2015
-2
0
2
4
6
8
10
2013 2014 2015*
Total nonfarm jobs
Health Care
*Annualized through Nov. 2015
Construction
Federal Government
% Growth Dec./Dec. • 2015 job growth at 3.6% so far—same pace as 2014.
• Health care and construction growth remained robust.
• Financial activities, business services also strong.
• Manufacturing, mining, federal government weak last year.
• Declines in Eagle Ford had little net negative impact.
Eagle Ford Jobs Declining
90
95
100
105
110
115
120
125
'07 '08 '09 '10 '11 '12 '13 '14 '15
Rest of Texas
Eagle Ford counties
Permian Basin counties
Index, 2007:Q1 = 100*
*Quarterly, seasonally adjusted.Sources: Bureau of Labor Statistics, seasonal and other adjustments by Federal Reserve Bank of Dallas.
Summary
• Texas weakened in the first half of 2015, but outlook improved as oil prices stabilized near $60—recent fall below $45 has weakened the outlook.
• Texas doing much better than 1980s 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.
• 2016 Texas job growth likely to be about 1.4% (161,200 jobs).
Biggest risk to the forecast is declining oil prices. If average oil prices fall to $20–$30, then negative job growth likely.
How Did My Forecast From Last Year Do?
Last year stated: Texas likely to continue to grow, but not nearly as strong as
previous year.
– Forecast was not weak enough
Last Year’s Job Growth Rate Weaker Than Forecast
(1.3% vs. Forecast of 2.0%–2.5%)
95
100
105
110
115
120
125
130
135
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16
Millions of JobsIndex
(1987=100)
Leading Index
Texas Nonfarm Employment, actual growth,
and TLI Forecast (with 80% confidence band)
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas, author's calculations
Texas Business Outlook Surveys