2 0 1 4 M i d - Ye a r T X E c o n o m i c O u t l o o k :
Strong Growth to 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 –
Millions, units
Billions, $2000
Weather
Impacted
Q1
Data
2.00
450
1.75
400
Real single-family
construction
350
1.50
300
1.25
250
200
1.00
150
0.75
Single-family
building permits
100
0.50
0.25
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
Source: Bureau of Economic Analysis, U.S. Census Bureau and author’s calculations.
50
0
2010
2014
Home Prices Increasing
Index, 2000=100
270
U.S.
250
Texas
California
230
Florida
Nevada
210
190
170
150
130
110
90
2000
2001
2002
2003
Source: FHFA House Price Index
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Lower Prices and Interest Rates Helping
Housing Affordability – No Bubble Now
(Percent of homes sold for which the median family income could qualify)
United States
1999:Q4
64
2014:Q2
63
Los Angeles
New York
Miami
Austin
Dallas
Houston
San Antonio
43
55
59
56
64
66
64
18
23
48
60
56
56
61
Date of Low
Low Point
Point
40
2006 : Q3
2006 :
2
Q1/Q2/Q3
5
2006 : Q3/Q4
10
2007 : Q1
50
2000 : Q4
54
2007 : Q3
47
2007 : Q3
47
2006 : 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
Student loan Other
9.6%
2.8%
Credit card
5.8%
1.35
U.S.
U.S.
Auto loan
7.8%
HE revolving
4.5%
1.19
Mortgage
69.6%
1.1
Texas
1
Texas
Student loan
10.9%
0.9
0.94 (Q1)
Credit card
7.1%
0.8
Auto loan
14.5%
0.7
0.6
1.01 (Q1)
Other
4.1%
HE revolving
1%
Note: Data are through second quarter, 2014
2000
2002
Source: Federal Reserve Bank of New York
2004
Mortgage
62.4%
2006
2008
2010
2012
2014
Job Growth Persistently Above 200K per Month
Over Past 6 Months
Thousands,SA
600
400
200
0
-200
-400
-600
-800
Source: Bureau of Labor Statistics
-1000
Jan-02 Jan-03 Jan-04 Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
U.S. Leading Index Suggests Continued Good
Annualized
Growth over Next 6 Months
% change
20
15
6-month
10
12-month
5
0
-5
-10
-15
-20
1960
1965
1970
1975
1980
Source: Conference Board, Federal Reserve Bank of Dallas
1985
1990
1995
2000
2005
2010
RGDP Grew 3.1% in 2013, August Blue Chip Survey
SAAR, Percent
Projects 2.9-3.0% Over Next Four Quarters
8.0
2013 3.1%
Q4/Q4
6.0
2012 2.0%
Q4/Q44.5
4.6
4.0
3.9 3.9
4.0
3.5
2.7 2.5
2.0
1.3
2014 1.9%
Q4/Q4
2.9
1.7
2.7
2.3 2.5
1.8
1.6
0.8
0.1
0.0
-0.5
-2.0
-1.5
-2.1
-4.0
-5.4
-6.0
-8.0
-8.2
-10.0
Source: Blue Chip Economic Indicators
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
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 2013 manufacturing and federal government slowed
somewhat. Energy and residential construction grew
strongly but moderated.
• This year I expect strong job growth around 3.5% - faster
than 2013 (2.7%)
Texas Economy Growing Above Trend
M/M SAAR
(Texas Business Cycle Index)
12
10
8
6
4
2
2.6% trend
0
-2
-4
-6
-8
NOTE: Shaded areas represent Texas recession.
Texas was Third Fastest Job Growth State in
Y/Y Percent Change,
2012
December 2012
7
6
5
4
TX
3
U.S.
2
1
0
-1
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
Source: Bureau of Labor Statistics
While Texas Slowed in 2013, It Remained Well
Above the National Average
Y/Y Percent Change,
December 2013
4
3.5
3
TX
2.5
2
U.S.
1.5
1
0.5
0
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
-0.5
Texas Continuing to Lead Most States
Annualized Percent Change,
Dec. 2013 - July 2014
6
5
4
TX
3
2
U.S.
1
0
-1
-2
-3
Source: Bureau of Labor Statistics
ND
UT
TX
NV
CO
WA
MT
DE
FL
ID
RI
OR
AZ
US
MO
OK
CA
MA
ME
KY
TN
LA
WV
GA
IN
NC
MI
DC
NY
SD
PA
NJ
VA
VT
CT
NH
IA
WI
OH
SC
AR
KS
AL
NM
MS
MN
HI
MD
WY
NE
IL
AK
-4
Texas Jobs Growing Faster Than Nation’s
Percent, Job
Growth Y/Y
5
U.S.
Texas
4
3
2.7
2.1 2.3
2.0
1.7
1.7
1.6
2
0.8
1
0
-1
-2
-3
-3.4
-4
-5
3.6
3.4
-3.8
Note: 2014 data annualized from Dec. 2013 to July 2014
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Texas Unemployment Rate Has Continued to
Fall Sharply since Second Half of 2013
Percent, SA
10.5
9.5
US unemployment rate
8.5
7.5
6.2
6.5
Texas unemployment rate
5.5
5.1
4.5
3.5
2000
2001
2002
2003
2004
2005
2006
2007
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
2008
2009
2010
2011
2012
2013
2014
Job Growth Broad-Based Across Industries
Dec/Dec
Percent Change
20
Energy, Mining &
(Job Growth 2011-2014)
Natural Resources
15
10
Construction
Manufacturing
Business
Services
Finance,
Insurance, &
Real Estate
Trade,
Transportation,
& Utilities
5
Leisure &
Hospitality
Information
Services
Health &
Education
Government
0
Share of Total Employment
(2.7%)
-5
(5.5%)
(20.1%)
(7.6%)
(13.4%)
(6.1%)
Note: 2014 employment data are annualized from Dec. 2013 to July 2014
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
(10.3%)
(1.8%)
(13.2%)
(15.9%)
Texas Construction Contract Values Continue to
Increase
Real $, Mil
5MMA, SA
8000
7000
Total
6000
5000
4000
Residential
Non Residential
3000
2000
1000
Non Building
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: F.W. Dodge, Federal Reserve Bank of Dallas
TX Home Inventories Remain at Historically
Months
Low Levels
18
Texas 3.6
16
U.S.
14
5.2
12
10
8
July
2014
6
4
2
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Source: Multiple Listing Service
Delinquent Mortgages Increased Slightly, but
Foreclosures in TX fell to Lowest in Decades
5
4.5
TX Delinquencies
TX Foreclosures Started
US Delinquencies
US Foreclosures Started
4
3.5
3
2.4
2.5
2
2.3
1.5
1
0.5
0.42
.35
0.31
0
1998
1999
2000
2001
2002
Source: Mortgage Bankers Association
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Texas Mortgages Less at Risk of Default
Percent of Mortgages "Under Water"
Q1 2013 - Q1 2014
Percent
50
45
40
35
30
29.4
26.9
25
20.1
20
18.5
15
11.2
12.7
10.5
10
5
3.3
0
Nevada
Source: CoreLogic
Arizona
Florida
Michigan
California
Idaho
Texas
U.S.
Low TX Office Vacancy Rate Corresponding to
Increasing Office Construction
Real, Millions $,
Percent
35
5MMA
450
Office and Bank
Buildings
Contract Value
400
350
30
Office Vacancy
Rate
300
25
250
20
200
150
15
100
10
50
0
5
'86
'88
'90
'92
'94
'96
Source: F.W. Dodge, CBRE, Federal Reserve Bank of Dallas
'98
'00
'02
'04
'06
'08
'10
'12
'14
Index
100
TX Manufacturing Production and Orders
Improving Since mid-2013
80
60
40
Aug-14
20
0
-20
-40
-60
Production
Volume of New Orders
-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 Jun-13 Dec-13 Jun-14 Dec-14
Texas Exports Increasing Faster than U.S.
Index, SA Real
Jan. 2000=100
110.0
240
Texas Value of the Dollar
105.0
220
100.0
200
95.0
180
90.0
Texas
85.0
160
80.0
140
75.0
120
100
70.0
U.S. minus Texas
80
65.0
60.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: U.S. Census, Bureau of Labor Statistics, Federal Reserve Bank of Dallas
Energy Prices, Drilling Rig Count Increased in
First Half
of 2014
Rig Count
1000
160
900
140
800
120
700
100
600
80
500
60
400
40
Oil price
300
20
Gas price(*10)
200
0
Source: Oil and Gas Journal, Baker Hughes
Texas State and Local Government Jobs
Growing after 2011 Fiscal Cliff
Index,
Jan 2000 = 100
125
Texas State and Local share of
Total Nonfarm Jobs - 14.3%
120
U.S.
Texas
115
110
105
100
95
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
U.S. State and Local Share of
Total Nonfarm Jobs- 13.8%
All Texas Metros Moved From Recovery to
Expansion Long Before U.S.
Nonfarm Employment Index
Aug. 2008=100
120
Austin
115
Houston
110
TX
San
Antonio
Dallas
Ft. Worth
El Paso
105
Corpus
Christi
100
U.S.*
95
90
2008
2009
2010
2011
*Indexed from U.S. Peak Employment in January 2008
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas
2012
2013
2014
Recent Gains in TLI Indicators Strong and
Broad-Based
Texas Leading Index Components, 3 month change
April - June
Net Change in Texas Leading Index
1.55
Texas Value of the Dollar
0.29
U.S. Leading Index
0.47
Real Oil Price
0.10
Well Permits
0.19
New Unemployment Claims
0.33
Texas Stock Index
0.02
Help Wanted Index
0.15
Average Weekly Hours
0.00
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2014 Texas Job Growth Likely to be about 3.5%
Index
Millions of Jobs
(1987=100)
135
12.5
12.0
130
Leading Index
125
11.5
120
11.0
115
10.5
110
Texas Nonfarm Employment
and TLI Forecast (with 80%
confidence band)
10.0
105
9.5
100
9.0
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Source: Bureau of Labor Statistics, Federal Reserve Bank of Dallas, author's calculations
Jan-12
Jan-14
95
Jan-16
Summary
• U.S. economy hit hard by cold weather, snow in first
quarter – rebounding since then.
• Texas has accelerated in first half of year with strength
across a broad range of industries.
• In second half of 2014 most sectors will continue strong.
Texas job growth likely will be faster this year than last –
around 3.5%
• San Antonio continues to do well despite the cuts in
federal government spending – going forward labor
supply will likely be a constraint on job growth
San Antonio Economic Indicators
•
•
•
•
Monthly San Antonio Economic
Indicators available
Includes analysis of regional
business conditions, labor and
housing markets, and leading
indicators
Published the fourth Thursday of
each month
http://www.dallasfed.org/researc
h/update/sa/index.cfm