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Sep 20, 2023 383 likes •674 views

Regional Economic Update Anil Kumar Economic Policy Advisor and Senior Economist Overview Texas economy expanding at a moderate pace but job growth decelerated in Q4 Jobs grew at 2.5 percent annual rate in December 2.4 percent rate

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Regional Economic Update

Economic Policy Advisor and Senior Economist Anil Kumar

SLIDE 2

Texas economy expanding at a moderate pace but job growth

decelerated in Q4

Jobs grew at 2.5 percent annual rate in December
2.4 percent rate in 2018 (faster than 2.1 percent in 2017)
Labor markets remain tight
Construction activity softened and house price growth decelerating
Wage and price pressures moderating
Exports strong despite recent dollar strength
Expect 1-2 percent job growth in 2019—slower than 2018

Overview

SLIDE 3

11.1 17.0 11.3

10 20 30 40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Manufacturing Production (TMOS) Service Sector Revenue (TSSOS) Retail Sales (TROS) Index, 3MMA, SA NOTES: Data through December 2018. Dashed lines are post-recession averages (Jan. 2010-Dec. 2017). SOURCES: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS).

TBOS Headline Indexes Show Signs of Slower Growth

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2 4 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Texas U.S. Q/Q job growth, SAAR Texas: 2.5 U.S.: 2.1 NOTE: Dashed lines indicate long-run averages (Jan. 1990-Dec 2017). SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by FRB Dallas.

Texas Payroll Employment Growing Moderately

1.7 1.3 2.3 1.0 2.2 1.4 2.5 2.0 1.2 4.5 2.4 3.1 1.8 2.5 1 2 3 4 5

Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

U.S. Texas

M/M job growth, SAAR

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3.1

3.0 3.3 4.1 1.6 3.6 6.1 3.4 5.6

2.8 1.1 0.9 3.3 1.6 5.8 1.3 3.7 2.1 10.2

2 4 6 8 10 12 Trade, transp., util. (20%) Govt. (15.4%)

Prof. & bus.
svcs. (13.9%)
Educ. &

health (13.7%) Leisure & hosp. (10.8%) Mfg. (7.1%)

Fin. act.

(6.2%) Const. (6%) Other svcs. (3.4%) Oil & gas (1.9%)

Info. (1.6%)

NOTES: Quarters are Q3 and Q4 2018. Numbers in parentheses refer to share of state employment in December 2018. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by FRB Dallas. Percent, Q/Q job growth, SAAR

Job Growth Mostly Broad-based Across Sectors

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3.1 1.8 3.5 4.9 0.6 3.9 2.8 3.9 1.9 1.7 1.2 0.2 1 2 3 4 5 6 Dallas (21%) Fort Worth (8.4%) Houston (24.7%) Austin (8.5%) San Antonio (8.4%) El Paso (2.5%) NOTES: Quarters are Q3 and Q4 2018. Numbers in parentheses refer to share of state employment in December 2018. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by FRB Dallas. Percent, Q/Q job growth, SAAR

Q4 Job Growth Slower in Most Metros

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3.9 3.7 3 4 5 6 7 8 9 10 11 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Percent, SA NOTE: Data through December 2018. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by Federal Reserve Bank of Dallas.

Texas Unemployment Rate Holds Steady and Remains Near Historical Lows

Texas U.S.

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1 2 3 4 5 6 7 8 9 10 2011 2012 2013 2014 2015 2016 2017 2018 U.S. Houston Texas San Antonio Dallas Austin

Ft. Worth

Months of inventory NOTE: Data through Dec. 2018. SOURCES: Multiple Listing Service; Texas A&M Real Estate Center.

Existing Home Inventories Edge Up but Remain Still Low

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5 10 15 20 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Percent, Y/Y, SA NOTE: Data through October 2018. SOURCE: Standard & Poor's. Dallas U.S.

House Price Growth Decelerates More in Texas than U.S.

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Most Measures Point to Slower House Price Growth

House Price Changes in Texas and the U.S. Latest Period Year/Year 2017 Year/Year Texas U.S. Texas U.S. Texas U.S. FHFA House Price Index (Q3) 4.5 5.1 5.7 6.3 7.7 6.6 S&P/Case Shiller Index (Oct.) 3.0 6.1 3.9 5.5 7.7 5.8 MLS Median Sales Price (Dec.)

5.2
11.3

1.1 1.2 4.3 4.0

NOTES: Dallas is used to approximate Texas for the S&P/Case Shiller Index; all data is annualized. SOURCES: FHFA, S&P/Case Shiller, MLS.

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1.0 1.0 1 2 3 4 5 6 7 8 9 10 2001 2004 2007 2010 2013 2016 Texas U.S. Percent seriously delinquent NOTES: Data through Q3 2018. Seriously delinquent includes 90+ days past due and severe derogatory. SOURCE: Federal Reserve Bank of New York Consumer Credit Panel/Equifax. Mortgage Loans 8.9 7.8 2 4 6 8 10 12 14 16 2001 2004 2007 2010 2013 2016 Credit Card Loans 13.4 11.4 5 10 15 20 2001 2004 2007 2010 2013 2016 Student Loans 5.1 4.2 2 4 6 8 2001 2004 2007 2010 2013 2016 Auto Loans

Delinquency Rates Reflect Still-healthy Household Financial Situation

Percent seriously delinquent Percent seriously delinquent Percent seriously delinquent

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4.5 4.7 3.1 4.0 3.8 2.8 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Wages Input costs (excluding wages) Selling prices

Firms Expect Lower Wage and Price Pressures in 2019

2018 2019 (expected) Percent NOTE: Data collected Dec. 18–26, 2018 with 317 firms responding. SOURCE: FRB Dallas Texas Business Outlook Surveys.

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521 51.57 35.0 20 40 60 80 100 120 140 160 200 400 600 800 1,000 1,200 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 TX rig count Natural gas price Oil price NOTES: Natural gas price is multiplied by 10. Data through week of January 18, 2018. SOURCES: Wall Street Journal; Baker Hughes; Energy Information Administration. Rig count, weekly Nominal price, $, weekly

Rig Counts Flatten After Recent Declines in Oil Prices

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Energy Sector Business Activity Slowed Significantly in Q4

10 20 30 40 50 2016 2017 2018 Index SOURCE: Federal Reserve Bank of Dallas Energy Survey. 2.3 2018:Q4

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165.1 275.9 120.4 80 90 100 110 120 130 140 80 100 120 140 160 180 200 220 240 260 280 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 U.S. ex. Texas Texas Index, January '00=100, SA NOTE: Exports lines through October 2018, value of the dollar line through November, and pie charts refer to Q3 2018. SOURCES: U.S. Census Bureau; WISERTrade. Texas trade-weighted value of the dollar Index, January '00=100, SA 33.7 21.9 13.2 12.8 8.6 5.44.4

Mexico Asia, excl. China Latin America, excl. Mexico EU Canada China Other

19.9 17.9 15.1 14.7 7.6 7.4 17.6

Oil and gas Petroleum and coal products Chemicals Computers and electronics Transportation equipment Machinery, excl. electrical Other

Texas Exports Pick Up Despite Stronger Dollar

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14.0 6.8

20 40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 General Business Activity (TMOS) General Business Activity (TSSOS) General Business Activity (TROS) NOTES: Data through December 2018. Dashed lines are post-recession averages (Jan. 2010-Dec. 2017). SOURCES: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS), and Texas Retail Outlook Survey (TROS). Index, 3MMA, SA

Perceptions of Broader Business Conditions Moderate Significantly

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Texas economy expanding at a moderate pace but job growth

decelerated in Q4

Labor markets remain tight
House price growth decelerating
Wage and price pressures expected to moderate in 2019
Lower oil prices likely to affect energy sector activity
Expect 1-2 percent job growth in 2019—slower than 2.4 percent in

2018

Key downside risks:
Lower oil prices, higher rates, strong dollar, labor supply

constraints, tariffs, and trade policy uncertainty

Summary

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3.7 3.8 3.9 4.1 4.4 4.7 7.4 7.5

1 2 3 4 5 6 7 8 9 10 U3 (total unemployed workers) U3 +discouraged workers U4 +marginally attached to the labor force U5 +part-time for economic reasons

Broader Measures of Unemployment Well Below Pre-recession Averages

Texas Nov. 6MMA Texas Pre-recession avg. '00-'06 U.S. Nov. 6MMA U.S. Pre-recession avg. '00-'06 Percent

NOTES: Data through November 2018. Discouraged workers calculated as a percent of the civilian labor force plus discouraged workers. Marginally attached workers calculated as a percent of the civilian labor force plus all marginally attached workers. Part time for economic reasons calculated as a percent of the civilian labor force plus all marginally attached workers. U6 (Broader unemployment rate) equals U3 plus discouraged workers plus marginally attached plus part time for economic reasons. SOURCES: BLS/CPS.

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10 20 30 40 50 60 70 100 200 300 400 500 600 700 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 Texas U.S. NOTES: Data are through January 12, 2019. Dashed lines are pre-recession averages (2000-2006). SOURCE: United States Department of Labor. Thousands, 4WMA, SA Thousands, 4WMA, SA

Low Initial Unemployment Claims Reflect a Tight Labor Market

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90 100 110 120 130 140 150 160 170 180 190 200 2011 2012 2013 2014 2015 2016 2017 2018 Index, Jan. '11=100, 6MMA NOTE: Data through Dec. 2018. SOURCES: Multiple Listing Service; Texas A&M Real Estate Center.

Existing-Home Sales Moderated Significantly in 2018

Ft. Worth

Austin San Antonio Houston Texas Dallas U.S.

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15.0 10.5 12.9

10 20 30 40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Current selling price (TROS) Current price finished goods (TMOS) Current selling price (TSSOS) Index, 3MMA, SA NOTES: Data through Dec. 2018. Dashed lines are post-recession averages (Jan. 2010-Dec. 2017). SOURCES: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS), and Texas Retail Outlook Survey (TROS).

TBOS Price Indexes Suggest Price Pressures Easing

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29.0 20.3 16.1

10 20 30 40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Current Wages and Benefits (TMOS) Current Wages and Benefits (TSSOS) Current Wages and Benefits (TROS) Index, 3MMA, SA NOTES: Data through Dec. 2018. Dashed lines are post-recession averages (Jan. 2010-Dec. 2017). SOURCES: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS), and Texas Retail Outlook Survey (TROS).

TBOS Wage Indexes Ease but Remain Above Average

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101 112 70 75 80 85 90 95 100 105 110 115 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Index, January '07 = 100 NOTE: Texas data through Dec. 2018; U.S. through Nov. SOURCES: Conference Board; FRB Dallas. Texas U.S.

Texas Leading Index Points to Slower Growth

Three-month percent change *Estimated December value. NOTE: Change from Sept. to Dec. 2018. SOURCE: FRB Dallas.

1 Real oil price Texas Stock Index Texas value of the dollar* New unemployment claims* Help-wanted index Well permits U.S. leading index* Average weekly hours Net change in Texas Leading Index*

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Labor Force Participation Rate

63.8 63.1 62 63 64 65 66 67 68 69 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Percent Texas U.S. NOTE: Dashed lines refer to pre-recession averages (Jan. 2000 – Dec. 2006). SOURCE: Bureau of Labor Statistics.

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Employment to Population Ratio

61.4 60.6 58 59 60 61 62 63 64 65 66 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Percent Texas U.S. NOTE: Dashed lines refer to pre-recession averages (Jan. 2000 – Dec. 2006). SOURCE: Bureau of Labor Statistics.

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132.7 90.1 73.5 72.1 20 40 60 80 100 120 140 160 180 200 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Multifamily permits Real residential contract values Housing starts Single-family permits Index, January '06=100, 5MMA NOTE: Permits and housing starts through October, contract values through November 2018. SOURCES: Bank of Tokyo-Mitsubishi; U.S. Census Bureau; F.W. Dodge.

Residential Construction Activity Softens

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14.3 7.2

10 20 30 40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 New Orders (TMOS) Growth Rate of Orders (TMOS)

Manufacturing Demand Growth Decelerates

Index, 3MMA, SA NOTES: Data through December 2018. Dashed lines are post-recession averages (Jan. 2010-Dec. 2017). SOURCE: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey (TMOS).

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Oil Price Expectations for 2019 Remain Disperse

5 10 15 20 25 30 35 < 50 50.00–54.99 55.00–59.99 60.00–64.99 65.00–69.99 ≥ 70 Percent reporting NOTES: Executives from 160 oil and gas firms answered this question during the survey collection period, Dec. 12–20, 2018. For reference, WTI (West Texas Intermediate) spot prices averaged $49.22 per barrel during the period. SOURCES: Federal Reserve Bank of Dallas Energy Survey; Energy Information Administration. Dollars per barrel