Texas job growth is projected to slow to between 1%-2% in 2015 from 3.4% last year, according to an updated forecast in the latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy.
The new projection, which anticipates an increase of 117,000 to 235,000 jobs, is a downward revision from the Bank’s original 2015 forecast released in January.
Factors contributing to the latest estimate include a decline in the oil and gas industry, tight labor markets and weakening exports, write Dallas Fed economist Keith Phillips and research analyst Christopher Slijk in “Texas Facing Economic Headwinds in 2015.” It is one of three articles in Southwest Economy examining changes in the state’s economy in the wake of sharply lower oil prices.
While many sectors of the Texas economy remain strong, 2015 looks to be a year of mixed growth, according to Phillips and Slijk. The authors note that the energy sector has begun losing a significant number of jobs following the recent sharp decline in oil prices, while employment in health care and social assistance looks ready to continue growing rapidly this year.
“If the national figure remains constant or picks up slightly in 2015, there is a good chance that Texas will trail the nation in job growth for the first time in 12 years,” Phillips and Slijk write, pointing out that job growth nationally was 2.3% last year.
Dallas Fed economist Michael Plante says the outlook for the oil and gas sector has dimmed, citing a previously released model that predicts 140,000 jobs, or 1.2% of total Texas nonfarm employment, will be lost this year due to the decline in oil prices.
Falling oil prices are a boon and a bane for oil-producing economies, according to Plante. Lower prices reduce the cost of energy, generally viewed as a positive for economic activity, but they negatively affect oil-producing states because of reductions in drilling activity, royalty payments and government revenues.
“The 140,000 job-loss forecast estimates the number of jobs that currently exist but would disappear because of lower oil prices,” Plante writes. “The number should not be viewed as a forecast of an overall jobs contraction in Texas in 2015.”
Of the smaller metro areas, Midland and Odessa will be most affected by the oil and gas sector’s slump, while Houston will be most impacted among the larger metro areas, according to assistant economist Amy Jordan in “Texas Metros’ Rapid Growth Likely to Slow Following Energy Price Drop.”
Other larger Texas metropolitan areas may see activity slow, Jordan says, but they will avoid major fallout because of economic diversification that has occurred in recent decades.
“With crude oil prices down 52% in February from year-ago levels, Texas’ impressive advances since the recession will moderate in 2015, affecting its metropolitan areas to varying degrees,” Jordan notes.