Texas, Once a Star, Becomes a Drag on the U.S. Economy

[question everything]

HOUSTON—Texas helped lead the U.S. out of recession, thanks in part to the shale drilling revolution. But after more than two years of slumping oil prices, the state is now a sore spot for the national economy.

Petroleum prosperity helped usher in an economic boom in Texas, which added one out of every seven new American jobs between 2010 and 2014. But since the end of 2014, the state has lost more than 91,000 jobs in oil-and-gas extraction and mining-support activities, nearly half of the total national job losses in those categories. Texas payrolls were up 1.6% in August from a year earlier, trailing the national pace of job growth for the 11th consecutive month.

(snip)

The hiring slowdown in Texas accounts for some of the national deceleration in job creation since last year. And the Texas-centered energy bust has helped drive a national pullback in business spending on structures and equipment, a drag on overall economic growth. While the pain in the oil patch hasn’t driven the state into recession, Houston, the nation’s energy capital and fourth-largest city, is on the brink.

The Houston metro area saw healthy growth in economic output during 2015, according to the Commerce Department. But the Federal Reserve Bank of Dallas has said its index of Houston-area economic conditions signaled a “modest contraction” in the first half of 2016 and that while the worst of the oil bust may be in the past, “Houston is not yet recovering.” Bill Gilmer, an economist at the Institute for Regional Forecasting at the University of Houston, estimates that 70,000 energy-related jobs have disappeared in the area since late 2014. He believes more losses are on the way.

(snip)

The region’s unemployment rate in August was 5.8%, up from 4.9% a year earlier—one of the largest year-over-year jumps among big U.S. metro areas. The vacancy rate in Houston skyscrapers has risen to nearly 16% from 11% when oil prices began falling in summer 2014, according to NAI Partners, a commercial real estate firm. Some laid off energy workers are jumping ship to other industries and cities, and questioning whether they will return.

(snip)

The bust has cut into the state’s coffers. Republican Gov. Greg Abbott, along with the state’s lieutenant governor and speaker of the house, in June called on all state agencies to cut 4% from their 2018-2019 biennial budgets. Houston City Controller Chris Brown said officials recently bridged a $160 million budget gap by deferring pension payments, refinancing debts and other measures.

More..

http://www.wsj.com/articles/texas-once-a-star-becomes-a-drag-on-the-u-s-economy-1476264601

[Thinkingabout]

1. This is reality in the oil industry, Houston felt the oil bust in the early eighties

And finally fought through the lean years to a high and now again it is low oil prices. I work in the Energy Corridor and I am seeing a few jobs coming back, it will be a while before it is back but is better.

[dem in texas]

2. Dallas/Fort Worth Area is Rockin'

Houston has always had a boom or bust economy based on the oil business which is based there, but Dallas has a more balanced business market. Right now, many major corporations are relocating to the DFW area, insurance, finance, warehousing to name a few. Toyota is moving their Corporate headquarter to the DFW area next year, bringing thousands of jobs with this move. Dallas leased over a million square feet of warehouse space this past year most in South Dallas county near the railroad center and in Tarrant county near the Alliance airport. Help wanted signs are everywhere. Yes, the bust in Houston is able to have a percent effect on the Texas economy, but Texas can't be based on Houston alone. Austin and San Antonio are doing quite well, too.

[question everything]

3. Hope you are right. From the same article

Although the state has pockets of robust growth, notably Dallas-Fort Worth and Austin, the Dallas Fed in September projected the state will add 138,200 jobs this year—only about one-third of its 2014 gain.

Many of the recently added jobs have been in lower-paying industries, according to the Texas Workforce Commission. Sectors that added jobs include health services, where the typical salary is $870 a week, and hospitality, where wages average under $400 a week.

Michael Feroli, an economist with J.P. Morgan Chase, predicted in late 2014 that Texas could see a recession during this downturn. He maintains his dim view.