215 Texas Economic Outlook: Strong Growth t o Continue Keith Phillips, Sr. Economist and Research Officer
National Economy Picking Up Last year, international weakness, policy uncertainty, sharp cuts in federal spending, and increased regulation restrained consumer and business spending. Meanwhile housing sector, consumer finances, and state and local government improved. Growth picking up this year despite slower growth due to weather in first quarter, strong second quarter bounce back - healthier growth likely to continue in rest of the year
Home Construction Has Picked Up Weather Impacted Q1 Data Millions, units Billions, $2 2. 45 1.75 1.5 Real single-family construction 4 35 3 1.25 25 1. 2.75.5 Single-family building permits 15 1 5.25 197 1974 1978 1982 1986 199 1994 1998 22 26 21 214 Source: Bureau of Economic Analysis, U.S. Census Bureau and author s calculations.
Index, 2=1 27 Home Prices Increasing 25 23 21 U.S. Texas California Florida Nevada 19 17 15 13 11 9 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Source: FHFA House Price Index
Lower Prices and Interest Rates Helping Housing Affordability No Bubble Now (Percent of homes sold for which the median family income could qualify) 1999:Q4 214:Q2 Low Point Date of Low Point United States 64 63 4 26 : Q3 Los Angeles 43 18 2 26 : Q1/Q2/Q3 New York 55 23 5 26 : Q3/Q4 Miami 59 48 1 27 : Q1 Austin 56 6 5 2 : Q4 Dallas 64 56 54 27 : Q3 Houston 66 56 47 27 : Q3 San Antonio 64 61 47 26 : Q3 Source: NAHB - Wells Fargo Housing Opportunity Index
Household Balance Sheets in Better Shape Ratio, personal debt per capita/personal income per capita 1.4 1.3 1.2 1.1 1.9.8.7.6 Auto loan 7.8% HE revolving 4.5% Student loan 9.6% Credit card 5.8% Other 2.8% U.S. Mortgage 69.6% Note: Data are through second quarter, 214 1.35 1.19.99 (Q2).91 (Q2) 2 22 24 26 28 21 212 214 Source: Federal Reserve Bank of New York U.S. Texas Student loan 1.9% Credit card 7.1% HE revolving 1% Auto loan 14.5% Other 4.1% Texas Mortgage 62.4%
Average Job Growth of 227K per Month in 214 Thousands,SA 6 4 2-2 -4-6 -8-1 Source: Bureau of Labor Statistics Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14
U.S. Leading Index Suggests Continued Good Growth over Next 6 Months Annualized % change 2 15 1 6-month 12-month 5-5 -1-15 -2 196 1965 197 1975 198 1985 199 1995 2 25 21 Source: Conference Board, Federal Reserve Bank of Dallas
RGDP Grew 3.1% in 213, October Blue Chip Survey Projects Around 3.% Over Next Four Quarters SAAR, Percent 8. 6. 4. 2.. 3.9 3.9 2.7 2.5 1.7 1.3 -.5 2.9.8 4.6 2.3 1.6 212 2.% Q4/Q44.5 4.6 214 2.1% Q4/Q4 3.5 2.5 2.7.1 1.8 213 3.1% Q4/Q4-2. -1.5-2.1-4. -6. -5.4-8. -1. Source: Blue Chip Economic Indicators -8.2 23 24 25 26 27 28 29 21 211 212 213 214 215
In Past Several Years, Texas Economy Has Grown Above Trend and Stronger than Nation In past three years growth in energy, construction and exports provided a stimulus to Texas. In 213 manufacturing and federal government slowed somewhat. Energy and residential construction grew strongly but moderated. This year Texas job growth has accelerated. I expect 214 job growth around 3.5% and growth to stabilize in 215 to near 3.%
M/M SAAR 12 1 Texas Economy Growing Above Trend (Texas Business Cycle Index) 8 6 4 2 2.6% trend -2-4 -6-8 NOTE: Shaded areas represent Texas recession.
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 Texas was Third Fastest Job Growth State in 212 Y/Y Percent Change, December 212 7 6 5 4 TX 3 2 U.S. 1-1 Source: Bureau of Labor Statistics
ND NV FL OR UT CO TX CA SC DE GA MN NC AZ WA IA IN US HI WI MA MO MI TN LA KS ID NY MT MS AL CT WY NH ME AK OH KY OK MD IL NE RI AR DC PA NJ SD VT VA WV NM While Texas Slowed in 213, It Remained Well Above the National Average Y/Y Percent Change, December 213 4 3.5 3 2.5 TX 2 U.S. 1.5 1.5 -.5 Source: Bureau of Labor Statistics
ND UT TX NV FL CO WA DE MT GA OR RI CA OK TN US NC ME IN KY AZ LA MO WV NY MA ID NM SD WI IA PA SC NJ AL VA NE MN OH AR MI WY KS HI DC IL VT CT MD NH MS AK Annualized Percent Change, Dec. 213 - Aug. 214 6 Texas Continuing to Lead Most States 5 4 TX 3 2 U.S. 1-1 -2-3 Source: Bureau of Labor Statistics
Texas Jobs Growing Faster Than Nation s Percent, Job Growth Y/Y 5 U.S. 4 Texas 3.4 3.6 3 2 1 2.1 2.3 2.7 1.6 1.7 1.7 2..8-1 -2-3 -4-5 Note: 214 data annualized from Dec. 213 to August 214 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas 199 1992 1994 1996 1998 2 22 24 26 28 21 212-3.8-3.4
Texas Unemployment Rate Generally Falling Since mid-213 Percent, SA 1.5 9.5 US unemployment rate 8.5 7.5 6.5 5.5 Texas unemployment rate 5.9 4.5 5.2 3.5 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Job Growth Broad-Based Across Industries Dec/Dec Percent Change 2 Energy, Mining & Natural Resources (Job Growth 211-214) 15 1 5 Construction Trade, Transportation, & Utilities Manufacturing Business Services Finance, Insurance, & Real Estate Leisure & Hospitality Information Services Health & Education Government Share of Total Employment -5 (2.7%) (5.5%) (2.1%) (7.6%) (13.4%) (6.1%) (1.3%) (1.8%) (13.2%) (15.9%) Note: 214 employment data are annualized from Dec. 213 to Sept. 214 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Texas Construction Contract Values Continue to Real $, Mil 5MMA, SA Increase 8 7 6 Total 5 4 Residential 3 Non Residential 2 1 Non Building 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Source: F.W. Dodge, Federal Reserve Bank of Dallas
TX Home Inventories Remain at Historically Low Levels Months 18 16 14 Texas U.S. 3.6 5.4 12 1 8 Sept. 214 6 4 2 Source: Multiple Listing Service
Delinquent Mortgages Increased Slightly, but Foreclosures in TX fell to Lowest in Decades 5 4.5 TX Delinquencies US Delinquencies TX Foreclosures Started US Foreclosures Started 4 3.5 3 2.5 2.4 2 2.3 1.5 1.42.5.35.31 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Source: Mortgage Bankers Association
Percent 4 Texas Mortgages Have Lowest Rate of Negative Equity in the Nation Percent of Mortgages "Under Water" Q2 213 - Q2 214 35 3 25 26.3 24.3 2 19 15 14.5 1 9.7 8.5 1.7 5 Nevada Arizona Florida Michigan California Idaho Texas U.S. Source: CoreLogic 2.7
Low TX Office Vacancy Rate Corresponding to Increasing Office Construction Percent Real, Millions $, 5MMA 45 4 35 3 Office Vacancy Rate Office and Bank Buildings Contract Value 35 3 25 25 2 2 15 15 1 5 1 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Source: F.W. Dodge, CBRE, Federal Reserve Bank of Dallas 5
Index 1 TX Manufacturing Production and Orders Improving Since mid-213 8 6 4 Sept-14 2-2 -4-6 Production Volume of New Orders -8-1 Jun-4 Dec-4 Jun-5 Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14
Texas Exports Increasing Faster than U.S. Index, SA Real Jan. 2=1 26 24 22 2 18 16 14 12 1 Texas Value of the Dollar Texas U.S. minus Texas 11. 15. 1. 95. 9. 85. 8. 75. 7. 65. 8 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Source: U.S. Census, Bureau of Labor Statistics, Federal Reserve Bank of Dallas 6.
1 Oil Prices Falling, Drilling Rig Count Stable Rig Count 9 16 14 8 12 7 1 6 8 5 6 4 4 Oil price 3 Gas price(*1) 2 2 Source: Oil and Gas Journal, Baker Hughes
Texas State and Local Government Jobs Growing after 211 Fiscal Cliff Index, Jan 2 = 1 125 12 U.S. Texas Texas State and Local share of Total Nonfarm Jobs - 14.2% 115 11 15 U.S. State and Local Share of Total Nonfarm Jobs- 13.8% 1 95 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
All Texas Metros Moved From Recovery to Expansion Long Before U.S. Nonfarm Employment Index Aug. 28=1 12 115 Austin 11 15 1 Houston TX San Antonio Dallas Ft. Worth El Paso Corpus Christi 95 U.S.* 9 28 29 21 211 212 213 214 *Indexed from U.S. Peak Employment in January 28 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Recent Gains in TLI Indicators Strong but Somewhat Mixed Texas Leading Index Components, 3 month change June -August 1.41 Net Change in Texas Leading Index -.2 Texas Value of the Dollar.61 U.S. Leading Index -.12 Real Oil Price.35 Well Permits 1.1 New Unemployment Claims -.8 Texas Stock Index -.17 Help Wanted Index -.16 Average Weekly Hours -.4 -.2..2.4.6.8 1. 1.2 1.4 1.6
Texas Job Growth Likely to be about 3.5% in 214 and 3.% in 215 Millions of Jobs 12.5 Index (1987=1) 135 12. 11.5 11. Leading Index 13 125 12 115 1.5 1. Texas Nonfarm Employment and TLI Forecast (with 8% confidence band) 11 15 9.5 1 9. 95 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas, author's calculations
Summary U.S. economy hit hard by cold weather, snow in first quarter rebounding since then. Texas has accelerated in first three quarters of year with strength across a broad range of industries. In fourth quarter of 214 most sectors will continue strong. Texas job growth likely will be faster this year than last around 3.5% Next year Texas job growth likely to moderate somewhat to about 3.% as labor market tightness likely to play bigger role