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Outlook for the Texas Economy - Texas A&M University

Outlook for the Texas Economy LUIS B. TORRES WESLEY MILLER PAIGE SILVA. RESEARCH ECONOMIST RESEARCH ASSOCIATE RESEARCH ASSOCIATE. 2 0 4 6. A U G U S T 2 019 DATA. TECHNICAL REPORT. About this Report .. 3. August 2019 Summary .. 4. Economic Activity .. 8. Gross State Product .. 8. Texas Business Cycle Index and Leading Index .. 8. Major Metros Business Cycle Index .. 9. Consumer Confidence Index .. 9. Financial Activity .. 10. 30-Year Mortgage Rate and 10-Year Bond Yield .. 10. Texas Mortgage Applications .. 10. Housing .. 11. Housing 11. Residential Construction Coincident 11. Energy .. 12. Crude Oil and Natural Gas Prices .. 12. Texas Production of Crude Oil and Rig Count .. 12.

Real Estate Center economists continuously monitor many facets of the global, national,and Texas economies. Outlook for the Texas Economy summarizes significant state economic activity and trends.

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Transcription of Outlook for the Texas Economy - Texas A&M University

1 Outlook for the Texas Economy LUIS B. TORRES WESLEY MILLER PAIGE SILVA. RESEARCH ECONOMIST RESEARCH ASSOCIATE RESEARCH ASSOCIATE. 2 0 4 6. A U G U S T 2 019 DATA. TECHNICAL REPORT. About this Report .. 3. August 2019 Summary .. 4. Economic Activity .. 8. Gross State Product .. 8. Texas Business Cycle Index and Leading Index .. 8. Major Metros Business Cycle Index .. 9. Consumer Confidence Index .. 9. Financial Activity .. 10. 30-Year Mortgage Rate and 10-Year Bond Yield .. 10. Texas Mortgage Applications .. 10. Housing .. 11. Housing 11. Residential Construction Coincident 11. Energy .. 12. Crude Oil and Natural Gas Prices .. 12. Texas Production of Crude Oil and Rig Count .. 12.

2 Employment .. 13. Unemployment Rate .. 13. Unemployment Insurance Claims: Initial Applications .. 13. Major Metros Unemployment Rate .. 14. Labor Force Participation Rate .. 14. Real Personal Income Per Capita .. 15. Total Private Employee Hourly Earnings .. 15. Major Metros Total Private Employee Hourly Earnings .. 16. Employment Growth Rate .. 16. Major Metros Employment Growth Rate .. 17. Manufacturing .. 18. Manufacturing Employment .. 18. Major Metros Manufacturing Employment .. 18. Manufacturing Employee Hourly 19. Major Metros Manufacturing Employee Hourly Earnings .. 19. Manufacturing Outlook Survey .. 20. Construction .. 21. Texas Construction Values .. 21. Major Metros Total Construction Values.

3 21. Construction Employment .. 22. Construction Employee Hourly Earnings .. 22. 1. Services .. 23. Services Sector Outlook Survey .. 23. Texas Retail Sector .. 23. CPI Inflation Rates .. 24. CPI Inflation Rates (Houston Components).. 24. Trade .. 25. Exports (All Commodities) .. 25. Manufacturing Exports .. 25. Crude Oil Exports .. 26. Real Trade Weighted Value of Dollar .. 26. Texas Exports by Country .. 27. 2. Real Estate Center economists continuously monitor many facets of the global, national, and Texas economies. Outlook for the Texas Economy summarizes significant state economic activity and trends. All measurements are calculated using seasonally adjusted data, and percentage changes are calculated month over month, unless stated otherwise.

4 This publication is designed to be a one-stop resource for economic indicators. We hope you find them as useful as we do. Your feedback is always appreciated. Send comments and suggestions to Dr. Luis Torres, Wesley Miller, and Paige Silva Data current as of October 4, 2019. 2019, Real Estate Center. All rights reserved. 3. Summary 1. Texas ' Economy remained healthy in the longest economic expansion on record. Payroll growth slowed, but unemployment rates hovered at historical lows. Hourly earnings failed to make positive headway after adjusting for inflation; second-quarter real income per capita, however, increased. Retail sales improved, but overall perceptions were tainted by political and trade-related concerns.

5 Energy prices remained low amid record-breaking production and lowered expectations of global demand in 2020. Escalating trade tensions, political uncertainty, and the slowing world Economy continue to be the largest headwinds to the current business-cycle expansion. Economic activity stabilized at percent on a seasonally adjusted annualized rate (SAAR) as indicated by the Dallas Fed's Texas Business-Cycle Index. Steady payroll expansions in Austin and Dallas held the indices above the statewide measure at and percent SAAR, respectively. Houston and San Antonio's metrics remained strong at and percent, respectively. The Fort Worth index slowed as employment contracted but registered percent growth.

6 The Texas Leading Economic Index (a measure of future directional changes in the business cycle). stumbled amid falling oil prices and some weakness in national economic data, suggesting slower growth in the coming months. The Texas Consumer Confidence Index ticked up for the third consecutive month, hovering just beneath record levels reached in October 2018 before oil prices slid at year-end. Increased tariffs and political gridlock in Washington, however, may pull sentiments down in the coming months. Continued concerns about global economic growth and trade uncertainty pulled interest rates down for the tenth consecutive month. Long-term rates remained lower than those for short-term instruments, inverting the yield curve and sustaining talks of a recession.

7 Economic fundamentals at the state and national level, however, are healthy and stable. Interest rates could fall further following the Federal Reserve's second rate cut of the year in September. The ten-year Treasury bond yield fell 40 basis points to a three-year low of percent, while the Federal Home Loan Mortgage Corporation's 30-year fixed-rate inched down to percent. Texans capitalized on lower rates, pushing mortgage applications for home purchases up percent year to date (YTD). Refinance mortgage applications, which are more sensitive to interest rate fluctuations, have more than doubled since year-end. 1. All measurements are calculated using seasonally adjusted data, and percentage changes are calculated month-over-month, unless stated otherwise.

8 4. Texas housing sales increased 1 percent in August, reaching a record-breaking 30,421 homes sold through a Multiple Listing Service (MLS). The Texas Residential Construction Cycle (Coincident). Index, which measures current construction activity, flattened as industry employment growth slowed and construction values stalled. The Residential Construction Leading Index, however, rose to its highest level since the Great Recession amid falling interest rates and upward-trending building permits. This suggests higher levels of construction in the coming months. (For additional housing commentary and statistics, see Texas Housing Insight at ). The average West Texas intermediate crude oil spot price dipped below $55 per barrel, falling within $ of the December trough.

9 An attack on a Saudi oil facility in August pushed prices up temporarily, but ample supply from the prevented a prolonged price spike. Disruptions in the Middle East are less likely to affect global prices in the long-term due to stable American output. Texas crude oil production exceeded five million barrels per day in July 2 although the active rig count fell to 449. On the natural gas front, built-up inventories restricted prices. The Henry Hub spot price fell to $ per million British thermal units (BTU). In the Permian Basin, the West Texas Waha spot price remained low but ticked up amid anticipation of the Gulf Coast Express pipeline beginning commercial in-service in September.

10 Texas nonfarm employment added 18,200 jobs in August, the smallest monthly change since January. Moreover, July gains were revised down from 35,200 to 27,200. The updates reduced the Dallas Fed's annual employment growth projection from to percent, on par with last year's growth. Hiring slowed, but overall labor market conditions remained strong. The unemployment rate posted percent for the third consecutive month. On the metropolitan level, joblessness remained at post-recessionary lows. Austin maintained the lowest unemployment rate at percent, followed by San Antonio at 3 percent. Unemployment in DFW and Houston stabilized at and percent, respectively. The state's labor force participation was unchanged at percent, even as 13,500 Texas entered the market, pushing the labor force to its highest level in series history.