Dallas Fed: Texas Job Forecast Calls for 1.4 Percent Growth in 2016, but Oil Prices Pose Risk
State Projected to Add 161,200 New Jobs in 2016 if Oil Prices Remain Near Current Levels, According to Bank’s Annual Texas Economic Outlook
For immediate release: January 12, 2015
SAN ANTONIO—Texas job growth in 2016 will likely be similar to last year at around 1.4 percent, but only if oil prices stay near $40 to $50, Federal Reserve Bank of Dallas Assistant Vice President and Senior Economist Keith Phillips said today in San Antonio.
“The biggest risk to the forecast is if oil prices are in the range of $20 to $30 for much of the year,” he said. “Then I expect job growth to slip into negative territory as Houston gets hit much harder and greater problems emerge in the financial sector. But we are constantly surprised by oil prices. If they jump up past $60 and hold, Texas will likely return to growth above the national average.”
Phillips presented the Bank’s annual Texas Economic Outlook before local business leaders at the Dallas Fed’s San Antonio Branch.
The forecast of 1.4 percent job growth equates to about 161,200 new jobs in 2016, a slight increase from the estimated 150,500 jobs added in 2015, but well short of the 410,900 new jobs in 2014.
Oil prices are expected to remain low for much of the year, which will likely lead to more bankruptcies in the oil and gas sector and further weakening in energy drilling activity, according to Phillips. Shale-producing areas including the Permian Basin in West Texas and the Eagle Ford Shale in South Texas will probably see steeper job declines in 2016, but these areas have a very small share of Texas jobs.
A more significant impact could come from Houston, which accounts for 25 percent of all jobs in the state. However, key forecasters expect the city’s employment to remain flat or grow slightly next year, largely as a result of new construction jobs that will be created with the further expansion of the petrochemical industry.
Dallas, Austin and San Antonio are forecast to post moderate to strong job growth, and Fort Worth may improve if manufacturing picks up, Phillips said.
Statewide, Texas trailed the U.S. in job growth in 2015 and while the unemployment rate remains below the national average, it rose steadily during the second half of the year. By industry, Phillips expects construction will pick up, while oil and gas and manufacturing will decline but not as steeply as last year. Health care will remain strong but will moderate somewhat, and leisure and hospitality will continue to post strong gains.
“All-in-all, this year will probably look very similar to 2015—which is below trend and thus a pretty weak outlook,” he said.
Federal Reserve Bank of Dallas