INTRODUCTION. activity (Houston-Sugar Land- Baytown, Dallas-Plano-Irving, San. Worth-Arlington, Austin-Round

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1 AUGUST/SEPTEMBER 2013 IN THIS ISSUE The Long-Term Forecast for the Economies of Texas Metropolitan Areas Texas largest population centers are the key to future economic expansion in the state. Through 2040, these metropolitan areas are projected to see annual employment growth ranging from 1.48% to 1.84%, with smaller cities also experiencing notable gains. In this issue, key findings from The Perryman Group s most recent forecast are highlighted. The Northwest Texas Region The Northwest Texas Region is home to the Abilene and Wichita Falls metropolitan statistical areas (s) and includes 30 counties. The oil and gas industry is creating a flurry of economic activity across the area, along with other recent developments. Check out this page to see an overview of this part of the state. Economic Development News Around the State Throughout Texas, economic development news continues to make local headlines. Turn to this section to see the latest projects creating new jobs in the state. The Long-Term Forecast for the Economies of Texas Metropolitan Areas INTRODUCTION Through 2040, Texas six largest metropolitan statistical areas (s) are projected to generate three of every four net new jobs. These major centers for business activity (Houston-Sugar Land- Baytown, Dallas-Plano-Irving, San Antonio-New Braunfels, Fort Worth-Arlington, Austin-Round Rock-San Marcos, and El Paso) also contribute to growth elsewhere in the state. As a group, the smaller s are likely to contribute another 18%, with rural areas comprising the remaining 7% of net new jobs. Smaller s 18% According to The Perryman Group s most recent long-term forecast, most major cities in Texas are well positioned for long-term growth. In fact, with the exception of El Paso, the pace of expansion in the state s largest population centers is forecast to exceed the statewide average. The long-term outlook for the US and Texas economies was the subject of a prior newsletter, but is briefly summarized at present in order to provide context for the metropolitan area projections. Contribution to Texas Job Gains through 2040: Area Job Increases as a % of the Texas Total Rural Texas 7% Austin-Round Rock- San Marcos 8% Dallas-Plano-Irving MD* 21% Focus On: Real Personal Income A breakdown of real personal income by metropolitan statistical area provides a quick look at the forecast for 2012 to See a snapshot of the anticipated growth for the state as well as for an near you. San Antonio- New Braunfels 8% Houston-Sugar Land- Baytown 25% *MD Metropolitan Division Fort Worth- Arlington MD* 8% El Paso 3% THE PERRYMAN GROUP Page 1

2 Compound Annual Growth Rate Compound Annual Growth Rate Projected Growth Rates in Wage and Salary Employment for Texas and Major s % 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Texas Austin- Round Rock-San Marcos *MD Metropolitan Division 5.0% 4.0% 3.0% 2.0% 1.0% 1.62% Dallas- Plano- Irving MD + Projected Growth Rates in Real Gross Product for Texas and Major s % 1.84% 0.0% Texas Austin- Round Rock-San Marcos *MD Metropolitan Division 1.70% Dallas- Plano- Irving MD + SUMMARY OF THE FORECAST FOR TEXAS The Perryman Group s latest longterm forecast for Texas calls for 1.65% Fort Worth- Arlington MD % 3.53% 3.52% Fort Worth- Arlington MD % El Paso 3.15% El Paso 1.65% 1.65% Houston- Sugar Land- Baytown 3.54% Houston- Sugar Land- Baytown San Antonio- New Braunfels 3.35% San Antonio- New Braunfels total economic expansion through 2040 of almost $2 trillion (in real gross product). More than 6.4 million jobs are likely to be added statewide by Continuing a long-time pattern, Texas is expected to outperform the nation. In terms of the rates of growth, output (real gross product) is projected to expand at a 3.47% annual pace over the 2012 to 2040 timeframe, while employment increases by 1.62%. New jobs are forecast to be concentrated in the large services industry group, with a gain of almost 3.9 million. The fastest rates of growth are expected to occur within the services (2.23% compound annual rate of growth), information (1.63%), and mining (1.56%) segments. For output (real gross product), the services; finance, insurance, and real estate; and mining industry groups are projected to see the largest increases with gains of $539.3 billion, $276.7 billion, and $230.8 billion, respectively. The information and manufacturing segments are likely to see particularly strong rates of output growth. OUTLOOK FOR THE STATE S METROPOLITAN AREAS Over a long-term forecast horizon, business activity is projected to become increasingly concentrated in the major population centers. Growth rates in the five largest metropolitan statistical areas are expected to exceed the statewide average, but El Paso is likely to continue to experience more modest increases in employment and economic activity. The fastest compound annual growth rate in employment is projected to be in the Austin area, with a 1.84% pace. Even so, the much larger Houston and Dallas areas will generate the most new jobs. Output (real gross product) expansion follows a similar pattern, with Austin setting the pace and the largest metropolitan areas racking up the greatest dollarvalue gains. The state s smaller metropolitan areas are also notable contributors to overall growth. The oil-rich Page 2 THE PERRYMAN GROUP

3 Midland is forecast to lead the way in terms of output (real gross product) expansion, with a 3.66% compound annual rate of growth over the 2012 to 2040 timeframe. Odessa is also likely to see gains in output at a rate exceeding the statewide average during the period. As indicated in the accompanying table, a number of other cities are expected to experience relatively strong performance through Oil and gas exploration and production activity, manufacturing locations and expansions, and foreign trade are generating gains in communities across the state. AUSTIN-ROUND ROCK-SAN MARCOS The Austin-Round Rock-San Marcos is comprised of Bastrop, Caldwell, Hays, Travis, and Williamson counties. The area s highly educated workforce and base of growth industries will serve as the foundation for future strong performance. The area has Texas Metropolitan Statistical Areas (s) Ranked by Projected Long-Term Growth in Output (Real Gross Product) Compound Annual Growth Rate Metro Midland 3.66% Austin-Round Rock-San Marcos 3.61% Houston-Sugar Land-Baytown 3.54% Dallas-Plano-Irving MD 3.53% Fort Worth-Arlington MD 3.52% Odessa 3.49% STATE OF TEXAS 3.47% Longview 3.46% Tyler 3.44% Waco 3.44% Beaumont-Port Arthur 3.41% Amarillo 3.39% Victoria 3.37% San Antonio-New Braunfels 3.35% McAllen-Edinburg Mission 3.35% Sherman-Denison 3.31% Corpus Christi 3.30% Wichita Falls 3.23% San Angelo 3.22% Abilene 3.21% Brownsville-Harlingen 3.21% Laredo 3.19% College Station-Bryan 3.18% El Paso 3.15% Lubbock 3.12% Texarkana 3.06% Killeen-Temple-Fort Hood 2.98% recently experienced notable employment growth across most industry groups and continues to rank among the strongest-performing cities in the United States. The current unemployment level remains significantly below that of the state and nation. Austin s concentration in the tech sector increases the tendency toward business cycles to some extent, but The Perryman Group s long-term forecast indicates that the area will continue to outperform most parts of the country. The Austin-Round Rock-San Marcos is forecast to see compound annual growth of 3.61% in output (real gross product) over the time period, with annual growth exceeding 4% in the information and services sectors. Durable manufacturing is also a strong contributor to economic vitality. An estimated 558,100 net new jobs are expected for the area, a 1.84% compound annual pace. The area s large services sector will be the source of most net new jobs, with a gain of 354,540 projected over the period. DALLAS-PLANO-IRVING The Dallas-Plano-Irving Metropolitan Division (MD) is comprised of Collin, Dallas, Delta, Denton, Ellis, Hunt, Kaufman, and Rockwall counties. The Dallas area s role as a business and financial center positions it well for future stability, with logistics and technology-oriented businesses contributing to growth. Over the long-term forecast horizon, the Dallas area is projected to remain one of the stronger performing areas of the nation. Although the technology-oriented manufacturing base will continue to be vulnerable to business cycles, the area s diverse economy is likely to lead to ongoing growth, with continued on page 6 THE PERRYMAN GROUP Page 3

4 An Economic Overview The Northwest Texas Region This month s featured Northwest Texas Region includes 30 counties and two major metropolitan statistical areas (s): Abilene and Wichita Falls. Around 557,840 residents call the Northwest Texas Region home, representing 2.13% of the Lone Star State s total population. The area also generates 1.46% of Texas real gross product (RGP or output) and accounts for 2.06% of all wage and salary jobs in the state. From 2012 to 2017, the region is forecast to see an increase in population of approximately 14,120. This represents a compound annual growth rate (CAGR) of 0.50%. During the same short-term period, real retail sales is projected to grow by $1.71 billion, a CAGR of 3.94%. Real personal income (RPI) is likely to reach $22.1 billion by 2017, a rise from $18 billion in Business activity and development are evident across the Northwest Texas Region. In Wichita Falls, an 80- room La Quinta Inn & Suites is under construction and should be opening in March. Retail establishments are also popping up across the city. A 15,000 square foot Natural Grocers store and a 6,000 square foot Braum s are moving into the new Town Square Shopping Center. Abilene is on the path to a record year in oil and gas drilling. In July, the city had approved nine permits for wells and more were in the works. The energy industry is also bringing new businesses to Snyder in Scurry County. The 320-acre SnTX Industrial Park has been attracting tenants and a new housing development for oil field workers has recently been built. A new business park is also starting to take shape in Eastland. Air Evac Lifeteam air ambulance service will be the first to locate to this 92-acre development. Mining Sector Leads RGP Growth for Region Expanding at an annual growth rate of 4.57%, the region's real gross product is forecast to reach $22.5 billion in The mining sector is projected to see the largest CAGR from at a rate of 7.61%. The following graph displays projections for the Northwest Texas Region s total RGP by sector for the year The graph below highlights the Northwest Texas Region s total RGP by sector for the year Projected Sectoral Composition of Real Gross Product for the Northwest Texas Region 2017 Government 15.73% Services 19.59% FIRE 10.68% Information 2.36% Agriculture 2.44% TWU 4.29% Note: TWU is Transportation, Warehousing, & Utilities FIRE is Finance, Insurance, & Real Estate Mining 19.67% Construction 3.25% Durable Mfg. 6.38% Nondurable Mfg. 3.61% Trade 12.00% Job Creation Encouraging For Northwest Texas Growing at a CAGR of 2.01%, total wage and salary employment in the Northwest Texas Region is forecast to reach 257,110 by This pattern reflects a gain of nearly 24,400 jobs over the short-term period. The projected growth from for all sectors of employment can be tracked in the table below. Growth in Employment in the Northwest Texas Region by Industrial Sector: Compound Percentage Annual Jobs Gained of 2017 Growth Rate Employment Agriculture 0.24% % Mining 2.96% 1, % Construction 1.92% % Durable Mfg. 1.42% % Nondurable Mfg. 0.82% % Trade 2.23% 3, % TWU 1.68% % Information 1.77% % FIRE 1.72% % Services 2.97% 12, % Government 0.85% 2, % Compound Annual Growth Rate reflects changes in the size of the base used to calculate growth. Page 4 THE PERRYMAN GROUP

5 Economic Development News from Around the State Victoria: Ken Garner Manufacturing to build plant at Lone Tree II Business Park. Construction equipment parts maker could create up to 100 jobs at full operation in Houston: $20 million expansion wraps up for Toshiba International Company. Project added 107,000 square feet of office & manufacturing space and 100 new hires. Work on phase one of Springswoods Village Town Center project gets underway. Will include 250 luxury apartments, hotel, offices and up to 100,000 sq. ft. of retail space. Austin: Multi-media company setting up new facility here with about 60 workers. GateHouse Media s Center for News and Design expected to employ 200 by end of San Marcos: Engineered Filtration Inc. moving its headquarters from Connecticut. Energy-related distributor of filters will set up shop in 25,000 square foot space in city. Williamson County: Construction begins on a $135 million surgical hospital. Located near Round Rock, Forest Park Medical Center Austin to be complete Dec Waco: MaxFlight Advantages, LLC relocating headquarters from Dayton, Ohio. Will operate in two 25,000 sq. ft. facilities. Employment could reach 80 over next 3 yrs. New 42,000 square foot Cabela s store opening soon with about 100 employees. El Paso: Ground broken on 34,000 sq. ft. Texas Tech University nursing school. Construction on the Gayle Greve Hunt School of Nursing to wrap up in November Longview: Cabinet manufacturer CCI Group is expanding at its local facility. Company is adding a 15,625 square foot warehouse and expects to employ 50 in Frisco: City recently selected as the future site for Dallas Cowboys headquarters. Project to cost at least $115 mln. & include 12,000-seat indoor stadium, 2 outdoor fields. San Antonio: EControls growing its presence here, setting up shop in larger space. The company is planning to expand its current workforce of 175 by 100 to 150 by Karnes County: Hacher Investments developing 120 acres near city of Kenedy. Kenedy Business Park looking to recruit Eagle Ford Shale-related companies to its 29 lots. Want to include a business announcement for your community? Let our editors know what s taking place in your neck of the woods. Share the details of recent economic development happenings in your area. The Perryman Report & Texas Letter is read monthly by the state s most notable leaders. submissions to info@perrymangroup.com or send fax to THE PERRYMAN GROUP Page 5

6 continued from page 3 expansion in real gross product at a 3.53% compound annual rate over the period. All industrial sectors are forecast to expand, with output growth concentrated in the services and finance, insurance, and real estate segments. Through 2040, an estimated 1.3 million net new wage and salary jobs are expected to be added, with the services sector gaining almost 858,400 net new jobs, with another 161,600 in the wholesale and retail trade industry group. FORT WORTH-ARLINGTON The Fort Worth-Arlington MD is comprised of Johnson, Parker, Tarrant, and Wise counties. A relatively low cost of living and doing business as well as a central location and competitive logistics position will serve Fort Worth well in the decades to come. The Perryman Group s forecast calls for moderate expansion in the Fort Worth area through 2040 (though business cycles are inevitable) driven by growth across a spectrum of industry groups. The Fort Worth-Arlington MD is projected to see growth in real gross product (RGP or output) at a 3.52% compound annual rate. All sectors of the area economy are expected to see output (real gross product) expansion, with gains in the information segment exceeding 4% per annum. Wage and salary employment is likely to expand by 1.65% over the long-term horizon, led by the services, information, and mining sectors. EL PASO The El Paso is comprised of El Paso County. The area s relatively low cost of doing business is a competitive edge, and Fort Bliss and associated activity serve as a source of ongoing stimulus. Expansion in the area continues to be spotty, but The Perryman Group s long-term forecast calls for modest growth through Real gross product in the area is forecast to grow by 3.15% per year over the time period. The largest expansion is projected to occur within the services segment, with the finance, insurance, and real estate industry group also expected to provide strong growth. The area is likely to add almost 164,000 net new jobs over the period (a 1.48% rate of growth), with the largest numbers forecast for the services, government, and trade industry groups. With advantages ranging from oil and natural gas resources and industry linkages to low costs of doing business, the state s population centers will serve as engines for growth. HOUSTON-SUGAR LAND- BAYTOWN The Houston-Sugar Land-Baytown is comprised of Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, San Jacinto, and Waller counties. The oil and gas industry will remain a source of substantial business activity through the long-term forecast horizon, as Houston continues to serve as a center for the energy segment. The Port of Houston, together with other regional facilities, will also contribute to growth. The Houston area has been one of the strongest economic performers in the nation recently, with significant gains across virtually all industrial segments. The Perryman Group s most recent forecast indicates that this economic vitality will continue, with real gross product expanding at a 3.54% annual rate. The services and mining segments are projected to experience the highest gains in output, with all industrial sectors expanding through the long term. Wage and salary employment is forecast to grow at a 1.65% compound annual rate through 2040, with the area s large services sector generating the largest number of net new jobs. SAN ANTONIO-NEW BRAUNFELS The San Antonio-New Braunfels is comprised of Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina, and Wilson counties. The area economy benefits from a stable base of education, health care, military, and related activity, and is projected to sustain moderate growth through the longterm forecast horizon. Expansion in output (real gross product) is forecast to occur at a 3.35% annual rate, with the highest gains in the services; finance, insurance, and real estate; and trade segments. Wage and salary employment growth of 1.65% per annum is projected through 2040, with the highest employment growth rates likely to be in the services and information industry groups. CONCLUSION Texas metropolitan areas are likely to experience growth exceeding most parts of the United States over a long-term forecast horizon. With advantages ranging from oil and natural gas resources and industry linkages to low costs of doing business, the state s population centers will serve as engines for growth. Business cycles are inevitable, but the long-term outlook for Texas s is decidedly positive. Page 6 THE PERRYMAN GROUP

7 FOCUS ON: Real Personal Income Real Projected Projected Compound Personal Real Personal Real Personal Annual Major Metropolitan Income Income Income Gain Growth Rate Statistical Areas Austin-Round Rock- San Marcos $64, $194, $130, % Dallas-Plano-Irving MD* $176, $524, $348, % Fort Worth- Arlington MD* $78, $241, $162, % El Paso $22, $58, $36, % Houston-Sugar Land- Baytown $253, $724, $470, % San Antonio- New Braunfels $72, $218, $145, % STATE OF TEXAS $920, $2,663, $1,743, % Real Projected Projected Compound Personal Real Personal Real Personal Annual Other Metropolitan Income Income Income Gain Growth Rate Statistical Areas Abilene $5, $15, $9, % Amarillo $8, $24, $15, % Beaumont- Port Arthur $13, $38, $24, % Brownsville- Harlingen $8, $24, $15, % College Station- Bryan $6, $17, $11, % Corpus Christi $14, $41, $26, % Killeen-Temple- Fort Hood $14, $43, $28, % Laredo $5, $15, $10, % Longview $7, $21, $13, % Lubbock $9, $25, $16, % McAllen-Edinburg- Mission $15, $45, $29, % Midland $7, $19, $12, % Odessa $4, $12, $8, % San Angelo $3, $9, $6, % Sherman-Denison $3, $11, $7, % Texarkana $3, $8, $5, % Tyler $7, $19, $12, % Victoria $4, $11, $7, % Waco $7, $20, $12, % Wichita Falls $5, $13, $8, % *Metropolitan Division (Part of the Dallas-Fort Worth-Arlington ) Millions of 2005 Dollars THE PERRYMAN GROUP Page 7

8 ADDRESS SERVICE REQUESTED First-Class Mail U.S. Postage Paid Waco, TX Permit # N. Valley Mills Drive, Suite 300 Waco, TX A B O U T O U R S E R V I C E S The Perryman Group assists clients in analyzing and communicating complex information in commonsense terms through comprehensive and objective analyses and presentations. Whether in litigation, regulatory hearings, public finance or legislative assemblies, The Perryman Group brings the power of economic analysis in easily understood and persuasive language. Services provided by The Perryman Group include: Litigation Support and Expert Testimony Antitrust, Patent Infringement, Economic Damages Economic Impact Assessment Industry, Infrastructure, Utilities, Legislative Issues Economic Forecasting and Modeling Demand, Commodities, Interest Rates, Utilities Economic Development Analysis Target Industry, Strategic Planning, Surveys Public Policy and Regulatory Analysis Proposed State or Federal Legislation and Regulatory Issues Survey Research and Analysis Product Demand, Policy Effects, Attitudes Business Valuation Acquisitions, Tax Planning, Financial Reporting Presentations and Speeches Associations, Corporations, Organizations General Economic and Industry Research For more information, contact Ray Perryman by ing info@perrymangroup.com or calling on Twitter. M. RAY PERRYMAN, PhD President and Chief Executive Officer, The Perryman Group Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies Dr. Perryman is a consummate economist, bringing a unique combination of credibility, creativity, energy, enthusiasm, excellence, and effective communication to every project. His experience and expertise run the gamut of academia, public policy, economic forecasting, popular writing, speaking engagements around the globe, and an active and diverse consulting practice. As President and CEO of The Perryman Group, he leads a team of skilled professionals specializing in all aspects of the strategic use of economic analysis. Dr. Perryman and his colleagues at The Perryman Group serve the information and analysis needs of hundreds of clients, including Fortune 500 corporations, government agencies, public utilities, financial institutions, investment bankers, economic development groups, trade associations, insurance companies, real estate developers, and numerous other public and private entities. Author: M. Ray Perryman Contributors: Virginia Gleghorn and Nancy Risinger Graphics & Layout Director: Shelia W. Smith Research/Editing Assistants: Karen Amos, Elodia Cavazos, and D Lee Garza, For subscription information, call For information about our corporate services, economic forecasts, and other reports, call Fax: info@perrymangroup.com Texas Economic Publishers, Inc. is a division of The Perryman Group 510 N. Valley Mills Dr., STE 300, Waco, TX Page 8 THE PERRYMAN GROUP