Is Texas going to be a less robust economy in 2015 than 2014? Of course it is; however, we should keep the slowdown in the creation of new jobs and economic activity in Texas in perspective, which is the purpose of the commentary that follows.
The residents of Texas are coming off a boom. Quoting Keith Phillips, a senior economist with the Federal Reserve of Dallas, from written comments he made the week of January 5, 2015:
"While last year was pretty strong, during the recovery from the 2008-2009 recession, Texas had stronger growth than the nation every year."
Now, Texas is preparing to see the effects of the decline in oil prices. Per Phillips, “no one is panicking because the economy is helped by Texas’ steady population growth (about 1,000 people per day are moving into the state) and its stronger than expected real estate market.”
A few years ago, Texas avoided the housing crush experienced by other states during the recession, and the state has been a primary engine in creating the economic growth that the U.S. has experienced. Now, the grow rate will decline and Texas will see its job growth drop, cutting about 125,000 jobs across a variety of sectors.
Still, we expect net job growth to continue. Phillips’ report predicts a decrease from 3.6% growth in 2014 to approximately 2% to 2 ½% growth in 2015. Looking at this forecast in terms of jobs, Texas should create about 235,000 – 295,000 new jobs instead of the estimated 408,000 in 2014. (In November 2014, payrolls were up 447,900 from a year earlier, or 3.9%.)
This result will place Texas at the national average of about 2% job growth. Phillips believes that we will not repeat the collapse of the oil industry in the 1980s because our state’s economy is far more diversified. It just reduces job growth.
Pia Orrenius, a regional economist with the Dallas Fed, sees “the price bust washing through the Texas economy in both positive and negative ways.” For example, if one focuses on the Texas Gulf Coast and the Corpus Christi area specifically, a construction boom centered on petrochemical plants is well underway, which is creating more jobs. In turn, these plants and manufacturing in general will benefit from lower energy costs.
Alternatively, the drop in oil prices will hurt sectors—such as construction, transportation and business services—that have expanded to serve the oil industry, as well as consumer spending more broadly as workers lose their jobs.