south texas economy showing resilience to energy downturnservice-producing sectors an important...
TRANSCRIPT
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.
South Texas Economy Showing
Resilience to Energy Downturn
Keith Phillips
Assistant Vice President and Senior Economist
South Texas Economy Diverse
• Divide region into three key areas – The South Texas Border, San Antonio and Austin. Each has its own industry makeup and key drivers.
• In general this area is less sensitive to energy extraction and manufacturing and more sensitive to government spending.
• During most of expansion, region slightly lagged state with exception of Austin. This year better than state due to less sensitivity to oil industry.
Since 1990, South Texas Has Added Jobs Faster Than The Rest of Texas
80
100
120
140
160
180
200
220
240
260
280
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Austin
McAllen
Laredo
San Antonio
Brownsville
Rest of Texas
U.S.
Index, Jan. 1990 = 100, SA
SOURCES: Bureau of Labor Statistics, Federal Reserve Bank of Dallas.
95
100
105
110
115
120
125
130
135
2010 2011 2012 2013 2014 2015 2016
Austin
McAllen
LaredoSan Antonio
Brownsville
Rest of Texas
U.S.
SOURCES: Texas Workforce Commission, Bureau of Labor Statistics, Federal Reserve Bank of Dallas.
Index, Nov. 2009 = 100, SA
Besides Austin, Job Growth Near or Below Rest of TX During Pre-2015 Recovery
Service-Producing Sectors an Important Source of South Texas Economic Growth
Austin Brownsville Laredo McAllen San Antonio Rest of TX
Mining 0.82 0.20 4.59 1.76 1.57 5.02
Manufacturing 0.72 0.50 0.09 0.31 0.56 0.95
Retail 0.98 1.24 1.22 1.38 1.06 1.00
Transportation and Warehousing 0.54 0.96 4.31 1.02 0.90 1.32
Professional and technical services 1.59 0.29 0.41 0.31 0.80 1.01
Computer systems design and related svcs 2.46 0.06 0.05 0.07 0.55 0.99
Management and technical consulting svcs 1.86 0.28 0.99 0.35 0.89 1.16
Leisure and hospitality 1.17 1.00 1.03 0.87 1.22 0.96
Health care and social assistance 0.85 2.04 1.20 1.94 1.22 0.97
Home health care services 0.77 11.75 6.32 10.14 2.76 2.07
Federal Government 0.66 1.22 1.69 0.84 1.87 0.76
State and Local Gov't 1.20 1.46 1.41 1.56 1.00 0.98
NOTE: Data from 2015; location quotients measure the ratio of employment share locally to employment share nationally.
SOURCE: Texas Workforce Commission; Bureau of Labor Statistics; Federal Reserve Bank of Dallas.
50
100
150
200
250
300
Note: Data adjusted to exclude temporary Census workers.Sources: Texas Workforce Commission, Bureau of Labor Statistics, Federal Reserve Bank of Dallas.
Index,Jan. 1995 = 100, SA
McAllen
Laredo
Brownsville
Rest of Texas
Austin
San Antonio
Historically Federal Government Civilian Jobs Have Grown Strongly on Border
This Year Most of South Texas Growing
Faster than Rest of State
• Energy and manufacturing decline hitting other areas much harder
• Health care strong along the
border, weak in Austin and San Antonio
• Federal government stronger
this year • With the exception of
Brownsville, metros’ growth outpacing the rest of the state this year
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Job Growth
Austin
San Antonio
Brownsville
Laredo
McAllen
Rest of TX
Percent, Annualized YTD
SOURCES: Bureau of Labor Statistics, FRB Dallas.
South Texas Border
Home Health Care Big Part of Border Job Growth From Early 1990s to About 2012
0
2
4
6
8
10
12
Note: Data are adjusted for annual BLS occupational reclassifications.Sources: Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas.
Percent Share of Total Jobs, SA
McAllen
Laredo
Brownsville
Rest of Texas
10.6%
5.1%
9.3%
1.9%
Weak Peso Has Been A Drag on Border Retail Sales
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4-20
-15
-10
-5
0
5
10
15
20
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Border Retail Sales
Percent Change, Y/Y
Dollar/Peso Real Exchange Rate (Inverted)
Real Exchange Rate
Tight Credit Conditions Likely Impacting Housing Growth in South Texas Border
0
200
400
600
800
1,000
1,200
1,400
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Total TX Permits,5MMA, SA
Total Border Permits,5MMA, SA
Brownsville,Laredo, McAllen
Rest of Texas
Sources: Census Bureau; Haver Analytics; Federal Reserve Bank of Dallas.
Growth in Northern Mexico Likely Source of Strength for Border Region
60
70
80
90
100
110
120
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Index, Jul. 2007 = 100
NOTE: South Texas includes Laredo, Brownsville, and McAllen. Northern Mexico Border includes Nuevo Laredo, Matamoros, and Reynosa.SOURCE: INEGI, Bureau of Labor Statistics, adjustments by FRB Dallas.
South Texas Border Employment
Northern Mexico Border Employment
• 2016 job growth accelerating in Laredo and McAllen, slowing in Brownsville.
• Education and health care jobs continuing to grow strongly this year.
• Federal gov’t picking up sharply after weakness over the past several years.
• Retail jobs remain weak; very slow growth since the strengthening of the dollar began mid-2014.
• Growth in South Texas border MSAs likely to average around 1.5% – 2.5% this year, 2.0 – 3.0% in 2017.
Border Economy Improving in 2016
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2014 2015 2016*
Brownsville
Laredo
McAllen
% Growth, Dec/Dec
*Annualized through Sept 2016
San Antonio
Energy Activity has Less Impact on San Antonio than Rest of State
0
50
100
150
200
250
300
-5
-4
-3
-2
-1
0
1
2
3
4
5
2004 2006 2008 2010 2012 2014 2016
San Antonio
Texas
Y/Y job growth
NOTE: Eagle Ford rig count data not available prior to 2007.SOURCE: Bureau of Labor Statistics, Baker Hughes, Federal Reserve Bank of Dallas.
Eagle Ford Rig Count
Number
• 2016 job growth at 2.0% so far after 2.8% in 2015
• Federal govt. accelerating this year.
• Health care and construction holding steady after strong expansion in last two years.
• Retail, leisure and hospitality weaker, possible spillover effects from Eagle Ford.
• Overall job growth in San Antonio likely to be 2.0 – 2.5% this year and 2.5 – 3.0% in 2017
-4
-2
0
2
4
6
8
10
2014 2015 2016*
Total Jobs
Healthcare
Construction
Federal Govt.
*Annualized through Sept. 2016
San Antonio Economy Softening Somewhat in 2016
% Growth Dec./Dec.
Austin
Austin Technology Services Employment Continues to Outpace Overall Job Growth
60
80
100
120
140
160
180
200
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NOTE: Data are seasonally adjusted, dashed lines represent estimates based on broader industry data.SOURCE: Texas Workforce Commission; Bureau of Labor Statistics; adjustments by Dallas Fed.
High-tech services
Index, Jan. 2005 = 100
Total nonfarm
High-tech manufacturing
• 2016 job growth down to 1.5% so far this year from 4.6% last year.
• High tech services growth slowing but remain strong.
• Finance and government accelerating from last year.
• Manufacturing, health care shedding jobs; leisure and hospitality and retail still growing but are very weak
• Overall job growth likely to be about 2.0% this year – 3.0 to 4.0% next year
Austin Economy Slowing in 2016
-15
-10
-5
0
5
10
15
2014 2015 2016*
*Annualized through Sept. 2016
% Growth Dec./Dec.
Total jobs
Manufacturing
Prof., scientific, & tech. svcs
Leisure and hospitality
Summary and Conclusions
• Historically job growth has been strong in South Texas
• Metros areas in region have common and unique features
• This year, Austin and San Antonio slowing • South Texas Border improved but still below long-
term trend. • Despite current weakness, outlook is generally
good: job growth in the major regions of South Texas will surpass the rest of the state in 2016 and 2017 – exception is counties in the Eagle Ford