keith phillips, sr. economist and advisor
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2013 Texas Economic Outlook: Slightly Slower But Still Good to be in Texas . Keith Phillips, Sr. Economist and Advisor. National Economy Still Growing at a Modest Pace. International weakness slowing US exports Federal government spending, Affordable Care Act restraining growth - PowerPoint PPT PresentationTRANSCRIPT
Keith Phillips, Sr. Economist and Advisor
2013 Texas Economic Out look:Sl ight ly S lower But St i l l Good to be in
Texas
National Economy Still Growing at a Modest Pace
• International weakness slowing US exports• Federal government spending, Affordable Care
Act restraining growth • Meantime housing sector, consumer finances,
and state and local government improving • Q1 RGDP growth weaker than expected while
May job growth slightly stronger than expected
• 2013 Likely another year of moderate growth
Home Construction Picking Up
0
50
100
150
200
250
300
350
400
450
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010
Millions, units Billions, $2000
Source: Bureau of Economic Analysis, U.S. Census Bureau and author’s calculations.
Real single-family construction
Single-family building permits
Home Prices Showing Signs of Improvement
90
110
130
150
170
190
210
230
250
270
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
U.S.
Texas
California
Florida
Nevada
FHFA House Price Index, 2000=100
Lower Prices and Interest Rates Helping Housing Affordability – No Bubble Now
Source: NAHB - Wells Fargo Housing Opportunity Index
(Percent of homes sold for which the median family income could qualify)
1999:Q4 2013:Q1 Low PointDate of Low
PointUnited States 64 74 40 2006 : Q3
Los Angeles 43 40 22006 :
Q1/Q2/Q3New York 55 30 5 2006 : Q3/Q4Miami 59 63 10 2007 : Q1Austin 56 69 50 2000 : Q4Dallas 64 71 54 2007 : Q3Houston 66 70 47 2007 : Q3San Antonio 64 73 47 2006 : Q3
2000 2002 2004 2006 2008 2010 20120.600000000000001
0.700000000000001
0.800000000000001
0.900000000000001
1
1.1
1.2
1.3
1.4
0.99
1.1
Household Balance Sheets in Better ShapeRatio, personal debt per capita/
personal income per capita
U.S.
Texas
Job Growth Persistently Positive but not as Strong as Typical Rebound
-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
Thousands (SA)
-8.9
-5.3
-0.3
1.4
4.0
2.32.22.62.4
0.1
2.5
1.3
4.1
2.0
1.3
3.1
0.4
2.52.9
2.6
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
SAAR, Percent
2013 2.3% Q4/Q4
2012 1.7% Q4/Q4
June Blue Chip Survey Projects RGDP Growth of 2.3% in 2013
Past Several Years Texas Economy Has Grown above Trend and Stronger than Nation • In past three years growth in energy, high-tech and
exports provided a stimulus to Texas. Housing market less of a drag than nationally.
• In last three years Texas job growth has been above trend and faster than the national average.
• In 2012 growth in energy and exports slowed but construction and government improved – overall job growth at 3.3%.
• This year manufacturing, energy and Fed. Govt. will be slower while construction continues to accelerate
• This year I expect job growth of about 2.0%– 3.0% - slightly weaker than 2012.
Texas Economy Growing Above Trend(Texas Business Cycle Index)
-8
-6
-4
-2
0
2
4
6
8
10
12
Texas Coincident Index Suggests Economy Growing Above TrendM/M SAAR M/M SAAR
NOTE: Shaded areas represent Texas recession.
2.5% trend
Texas was Third Fastest Growing Job Growth State in 2012
-1
0
1
2
3
4
5
6
7
ND UT
TX NV
CO
MT
AZ
CA
NC SC HI
TN ID FL IN LA GA NJ
US
KS
WA
MN
MA
OK
KY IA MD
AK
MS
NY IL VA SD VT
OR
NH MI
MO WI
NE
OH RI
DE
PA AL
NM CT
DC
AR
WV
ME
WY
Y/Y Percent Change, December 2012
U.S.
TX
Source: Bureau of Labor Statistics
Texas Jobs Growing Faster Than Nation’s – Pickup in 2012
-3.8
0.8
1.6 1.7 1.82.2 2.3
3.3
2.4
-5
-4
-3
-2
-1
0
1
2
3
4
5
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
U.S.
Texas
Job Growth Y/Y, Percent
-3.4
2012 Texas State and Local Government Jobs Bounced Back from 2011 Fiscal Cliff
95
100
105
110
115
120
125
U.S.
Texas
Index, Jan 2000 = 100
U.S. State and Local Share of Total Nonfarm Jobs- 14.1%
Texas State and Local share of Total Nonfarm Jobs - 14.4%
Texas Unemployment Rate Has Declined Sharply
6.4
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
Percent, SA
US unemployment rate
Texas unemployment rate
7.5
Most industries Adding Jobs – Manufacturing Weakening
-2
0
2
4
6
8
10
12
14
16
18
Q/Q, SAAR Texas Industry Employment 2012 Q1 : 2013 Q1
Mining
ConstructionTrans., trade ,
UtilitiesManufacturing
Busincess Serv.
Finance , Insurance,Real Estate
Leisure and Hospitality
Information Services
Health and Education
Govt.
Texas Real Retail Sales Growing Moderately
90
100
110
120
130
140
150
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Index, SA, Real $Jan. 2000=100
Texas
U.S.
Texas Construction Contract Values Slightly Picking Up
0
1000
2000
3000
4000
5000
6000
7000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Real $, Mil5MMA, SA
ResidentialNon Residential
Non Building
Total
Home Inventories Relative To Sales Falling to Lean Levels
0
2
4
6
8
10
12
14
16
18
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Texas
U.S.
Months
4.2
5.1
2.4
0.56
0.67
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
TX Delinquencies TX Foreclosures Started
US Delinquencies US Foreclosures Started
.35
2.9
Mortgage Foreclosures Sliding, Delinquency Rates High but Falling, TX Better than US
Texas Mortgages Less at Risk of Default
52.4
34.9
40.2
31.9
25.2
21
8.5
23.2
0
10
20
30
40
50
60
70
Nevada Arizona Florida Michigan California Idaho Texas U.S.
Percent of Mortgages "Under Water"Q2 2011 - Q4 2012 Percent
16.1
5
10
15
20
25
30
35
0
50
100
150
200
250
300
350
400
450
'89 '96 '03 '10
Real, Millions $, 5MMA Percent
Office Vacancy Rate
Office and Bank Buildings
Contract Value
16 Percent Threshold
Note: Shading represents Texas Recessions.
Declining TX Office Vacancy Rate Suggests Office Construction May Pick Up
TX Manufacturing Production and Orders Generally Weak
-100
-80
-60
-40
-20
0
20
40
60
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
Production
Volume of New Orders
Index
May.-13
Texas Exports Moving Sideways After Strong Growth in 2009 -2011
60.0
65.0
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
80
100
120
140
160
180
200
220
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
U.S. minus Texas
Texas
Index, SA RealJan. 2000=100
Texas Value of the Dollar
Drilling Rig Count Increasing Slightly
0.000
20.000
40.000
60.000
80.000
100.000
120.000
140.000
160.000
200
300
400
500
600
700
800
900
1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Gas price(*10) Oil price
Rig Count
All Texas Metros Moved From Recovery to Expansion
90
92
94
96
98
100
102
104
106
108
110
Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
Houston
S.A.
Ft. Worth
Austin
Dallas
Nonfarm Employment IndexAug. 2008=100
TX
El Paso
Corpus Christi
Metros with Big Presence of Fed. Govt. and Health Care Struggling
96
98
100
102
104
106
108
110
112
114
July '10 July '11 July '12 July '13
Austin
Houston
DFW
BorderSan Antonio
El Paso
Index, Nov.2009=100, SA
Federal Govt. Educ. & Health Svc.Border, SA, El Paso 3.6% 16.9%Rest of Texas 1.5% 12.1%
NOTE: Figures are shares of total nonfarm employment.SOURCE: Texas Workforce Commission.
Recent Increase in TLI Components Have Been Mixed
0.25
-0.03
0.43
0.04
-0.28
-0.08
0.27
-0.06
0.54
-0.40 -0.30 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.60
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
Texas Leading Index Components, 3 month contribution to change
February -April
2013 Job Growth Forecast is for Slightly Slower Growth - 2.0% to 3.0 %
95
100
105
110
115
120
125
130
135
9.0
9.5
10.0
10.5
11.0
11.5
12.0
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
Millions
Thou
sand
s
Index
Leading Index
Texas Nonfarm Employmentand TLI Forecast (with 80%
confidence band)
Summary• U.S. economy continues to grow at a moderate,
disappointing pace • Texas has faced similar headwinds (weak consumer
spending, housing) but has grown faster due to strong growth in energy and exports and fewer problems in housing.
• Texas job growth picked up in 2012 to 3.3 percent mainly due to improvement in state and local government jobs.
• 2013 TX job growth will likely slow somewhat to between 2.0 and 3.0 percent as energy, exports and federal government slow and construction picks up.
• Risks to the outlook include political and international uncertainty and continued uncertainty with US fiscal spending.