Annual Texas Economic Review by Federal Reserve Bank of Dalls

8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls

1/19

Richard W. FisherPresident and CEO

Federal Reserve Bank of Dallas

Dallas

December 3, 2014

Comments on Monetary Policy andan Annual Texas Economic Review


2/19

$1,530,000,000,000

2013 Texas Economic Output


3/19


4/19

A Record-Setting Year in Texas

State output continues to climb to new heights. Employment growth is broad-based across industries and

income groups.

New highs for income per person.

Another year as top migration destination from other states.

Highest percentage of home mortgages with positive equity.

Construction contract values reach a record.

Oil & gas production soars along with refining capacity and

exports of petroleum products.


5/19

The Lone Star State Shines Bright

In the past several years, growth in energy, exports, professionaland business services, manufacturing, and trade, transportationand utilities have helped drive growth.

Full-year 2014 job growth is expected be ~3.5%, the current year-to-date run rate is 3.7% annualized growth (strongest since 1998).

The unemployment rate is 5.1%, near a 6-year low and below theU.S. rate of 5.8%.

Notably, since the beginning of the recession, the Texas labor force

has grown at a rate 10 timesthe U.S. labor force

Factors contributing to Texas growth: Larger share of fast-growing, fundamental industries.

Favorable long-term factors.


6/19

Total Nonagricultural EmploymentSince 1990 in Selected States

SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.

90

100

110

120

130

140

150

160

170

1990 1995 2000 2005 2010

Index, January 1990 = 100

+67%

+9%

+28%

Increase

since 1990

+25%

+47%

+11%

+6%

+12%

CA

FL

TX

U.S.

NYIL

MI

MA


7/19

Employment Growth by State

Thousands of jobs

NOTE: Data are from Dec. 2013Oct. 2014.

SOURCE: Bureau of Labor Statistics.

-50

0

50

100

150

200

250

300

350

400

450

TXCAFLNCGANYWACOTNAZUTPAIN

MOOHMAORMNOKSCIL

KYALLAMINJNVNDWICTKSIA

WVIDD

ENMARNEVAMERI

WYSDMTMSHINHMDVTAK


8/19

NOTES: Calculations include workers over age 15 with positive wages and exclude the self-employed. Wage

quartiles constructed based on U.S. 2000 wage distribution.

SOURCES: Current Population Survey Merged Outgoing Rotation Groups 2000, 2013; Dallas Fed.

14.1

27.8

-2.8

0.0

-5

0

5

10

15

20

25

30

35

40

Lowest Wage Quartile Lower-Middle WageQuartile

Upper-Middle WageQuartile

Highest Wage Quartile

Texas U.S. Minus Texas

Percent change in employment

Texas Creates Mid- and High-Paying JobsJob Growth by Wage Quartile, 20002013


9/19

72.5

56.3

43.2 42.3 40.5

29.4

17.5 16.9

8.8

-0.1

-10

0

10

20

30

40

50

60

70

80

Prof. &BusinessServices(13.3%)

Trade, Transp& Utilities(20.0%)

Construction(5.7%)

Leisure &Hospitality

(10.3%)

Educational &Health

Services(13.2%)

Government(15.9%)

Oil & GasExtraction &

MiningSupport(2.6%)

FinancialActivities

(6.1%)

Manufacturing(7.6%)

Information(1.7%)

Thousands of jobs

NOTES: Numbers in parentheses are total share of Texas nonfarm employment accounted for by each sector.

These data are seasonally adjusted and early benchmarked by Federal Reserve Bank of Dallas.

SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Dallas Fed.

Texas Job Gains by Sector

Year-to-date through October, Texas added

344,700 jobs (3.7% annualized growth)


10/19

Record Income Per Capita

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

'70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12

U.S.

Texas

Per capita personal income

NOTE: Quarterly data inflation-adjusted to 2009 dollars.

SOURCES: Bureau of Economic Analysis.


11/19

0

50

100

150

200

250

300

350

'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

DomesticInternational

Hurricane KatrinaNet migration (thousands)

NOTE: Data are for July of the previous year to July of the year indicated. Decennial census years unavailable.

SOURCE: Census Bureau.

Texas Remains Top Destination


12/19

Texas Has the Highest Percentage of HomeMortgages with Positive Equity

NOTE: As of second quarter 2014.

SOURCE: CoreLogic.

26

24

19

15

109

30

5

10

15

20

25

30

Nevada Florida Arizona Michigan California Massachusetts Texas

Percent of mortgages with balance > home value

Texashas the nations lowest share ofunderwater mortgages

Houston and Dallas are the nations top majormetros for the highest percentage of residences with

positive equity (97.5% and 97.0%, respectively)

U.S. avg: 10.7%


13/19


14/19

Texas Is a Leader in the Energy Boom

Texas is the countrys No. 1 producer of oil and gas.

Record natural gas production.

Oil production has nearly doubled in Texas in the last fiveyears, reaching its highest level since 1976.

Texas 3.2 million barrels/day of crude oilis ~37% of U.S.total and ranks as the worlds sixth largestcrude oilcontributor, more than Iraq and slightly less than Canada.

Texas accounts for ~29% of U.S. natural gas productionand is the worlds third largestcontributor, more thanNorway and Saudi Arabia combined

Texas is home to 25% of U.S. refinery capacity and 60% ofU.S. petrochemical production. Record net exports of ~2 million barrels/day of petroleum

products.


15/19

Texas Energy Production Has Soared

Million barrels per day

NOTE: Annual data except for final end points, which show August 2014 estimates.

SOURCES: U.S. Energy Information Administration; Railroad Commission of Texas.

10

12

14

16

18

20

22

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012

Natural gasCrude oil

Billion cubic feet per day


16/19

Some Current Challenges

Acute labor shortages:

Anecdotes of shortages for auditors, plumbers, welders, electricians,construction workers, truck drivers.

Wage gains statewide have increased to 4.3%yr/yr.

Emerging price pressures:

Houston is seeing wage inflation and shelter costs creep into overallprices: Core price inflation is 3.7%yr/yr.

Bottlenecks in ability to export various oil & gas products: Texas share of total world petroleum and coal products is ~6%; this

figure will likely grow rapidly if recent U.S. regulatory ruling allowingsome exports of condensate is expanded.

Declining affordability as housing prices have risen quickly and

mortgage lending has slowed: Q3 14 FHFA home prices increased 7.1% yr/yr in TX; 4.5% nationwide.

In sum, labor market tightness may restrain growth next year, theenergy sector may cool a bit, and regional price pressures may cool


17/19

Percent of homes considered affordable

NOTE: The Housing Opportunity Index assumes that the family spends 28 percent of its gross income on a 30-year, fixed-

rate mortgage with a 10 percent down payment.

SOURCES: National Association of Home Builders; Wells Fargo.

0

10

20

30

40

50

60

70

80

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

DFW

Chicago

U.S.

Boston

San Francisco

NYC

Housing Affordabili ty Declining


18/19

Texas growth continues to outpace the U.S., with broad-

based employment and income gains Texas has added 344,700 jobs year-to-date

2014 job growth is running a full percentage point strongerthan last year.

New records:

Employment and income per capita. Construction contract values.

Oil & gas production.

Yet, Texas is facing some growing pains:

Emerging labor shortages. Growing regional price pressures.

SUMMARY: Opportunities abound for Texas continuedsuccess; none of them have much to do with monetary pol icy

A Record-Setting Year


19/19

Richard W. FisherPresident and CEO

Federal Reserve Bank of Dallas

Dallas

December 3, 2014

Annual Texas Economic Review by Federal Reserve Bank of Dalls

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