Economic slowdown likely in Texas
Fed economist sees good year but drop in growth, jobs
The Texas economy could have a bumpy 2019, with low oil prices, uncertainty over trade policy and a historically low jobless rate, a chief economist of the Federal Reserve Bank of Dallas said Tuesday.
While a recession doesn’t appear likely in the short term, the bank’s Keith Phillips said, those headwinds — in addition to the fading effect of last year’s federal tax cuts — will likely prompt employers to hire fewer workers this year than maybe they had originally planned.
“I think it’s going to be another good year in the state, but overall I think job growth will tamp down somewhat, as it also will in the national economy,” he said. “Businesses are scrambling to find workers to meet growing demand. In the meantime, new tariffs, trade uncertainty and a recent fall in oil prices have the state facing uncertain waters,”
Phillips gave his annual economic forecast Tuesday to about 120 San Antonio business leaders at the Dallas Fed’s San Antonio branch.
He predicted Texas employment to grow between 0.9 percent and 1.9 percent in 2019, down from 2.4 percent last year.
That 2018 growth rate wasn’t as robust as his 3-percent forecast a year ago, which Phillips attributed to the continued shortage of workers to meet hiring demands.
“Even if (oil prices) didn’t fall, I would expect job growth to
slow, simply because employers like yourself are constantly thinking of ways to add to output without adding to employment, simply because you can’t find the workers,” he said.
Texas had been one of the top five states from job growth coming out of the Great Recession, which ended in 2009. But the 2014 collapse in oil prices slowed the pace of hiring. Texas’ 2015 job-growth rate fell below the national average for the first time in 13 years.
Oil prices, Phillips said, are always the “elephant in the room” when it comes to the Texas economy.
With Houston’s energy-rich economy accounting for 25 percent of the state’s employment, the city was a drag on the Lone Star State’s economy in 2015 and 2016.
The rebound in oil prices in 2017 and 2018 re-energized hiring, he said, but the recent drop in prices to around $50 a barrel is likely to spark another retreat.
While activity had been booming in the Permian Basin and picking up in the Eagle Ford Shale, Phillips predicted continued prices around $50 would cause drilling-rig counts to fall over the next few months and slow job growth by 2019’s second quarter.
Houston’s job growth was 2.6 percent in 2018. That put it third for jobs gains among Texas’ major metros after Corpus Christi, which had a 3.2 percent rate and Austin, with a 3.1 percent rate.
San Antonio’s 2018 job growth rate slowed to 1.4 percent from 2 percent in 2017, with hiring strong in health care and leisure and hospitality, but weak in goods-producing industries and retail. Phillips said both San Antonio and Dallas, with its 1.8-percent 2018 growth rate, will be dogged by employers’ difficulty in finding workers.
San Antonio’s jobless rate was a “very low” 3.2 percent at the end of 2018, leading Phillips to predict a modest 1-percent to 2percent job growth rate this year.
Phillips didn’t expect the partial government shutdown to deal a major blow to San Antonio’s economy, at least in the near term. The Defense Department remained funded, he noted, and federal workers would eventually be repaid for lost time.
“The share of employment in the federal government in San Antonio is about twice the state average, so obviously we have a lot of federal government employees here,” he said. “The good news is we’ve kind of been through this before in San Antonio, so a lot of the agencies here are trying to help out, like (CPS Energy).”
“As you go forward, the costs not only just add up, they start to magnify,” he said. “If it keeps going and going it could create a pretty significant problem.”