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Dallas Fed: Texas Economy Growing, but Impact of Low Oil Prices Seen in Energy-Dependent Areas

Unemployment, Business Bankruptcies Rise in Top Oil-Producing Counties

DALLAS—Texas economic growth likely decelerated in February relative to January, according to the latest Regional Economic Update from the Federal Reserve Bank of Dallas. Of particular note is the recent rise in unemployment and business bankruptcies in energy-dependent areas in Texas.

Business bankruptcies rose 18.8 percent in the Houston–Baytown–Sugar Land metropolitan statistical area (MSA), while they fell in most other large Texas MSAs, according to the report.

“Business bankruptcies accelerated in energy-intensive areas in Texas, even as they declined in less-energy-dependent metros such as Austin and Dallas–Fort Worth,” Dallas Fed Senior Research Economist Anil Kumar and Research Analyst Emily Gutierrez write in the report. “Although it’s unclear how many of the business bankruptcies were from the oil and gas sector, the tight link between energy dependence and the growth rate in bankruptcies points to increased financial stress from the energy contraction.”

The top oil-producing areas also experienced significantly larger increases in the unemployment rate relative to non-oil-producing areas. The top 10 percent of Texas counties in terms of oil production saw a nearly 1.4 percent increase in unemployment from 2014 to 2015, the report shows. Meanwhile, the unemployment rate for the state as a whole fell slightly to 4.5 percent in January from a revised 4.6 percent in December.

A similar story can be seen in the number of job gains across the state. Texas job growth strengthened in January at an annualized rate of 2.4 percent after expanding 1.3 percent in December. This was stronger than the U.S. rate and significantly better than the state’s growth rate of 1.5 percent in 2015. In energy-dependent Houston, however, job growth turned negative in January, declining at a –0.6 percent annualized rate, after posting gains in the second half of 2015.

Looking forward, the Dallas Fed’s Texas Leading Index—a single summary statistic that sheds light on the future of the state’s economy—declined in January for a third consecutive month. Meanwhile, the Texas Employment Forecast for 2016 has dipped from 1.1 percent growth to 0.9 percent growth, suggesting that the Texas economy will continue to expand but at a slower pace than in 2015.

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Media contact:
Alexander Johnson
Federal Reserve Bank of Dallas
Phone: (214) 922-5288
Email: alexander.johnson@dal.frb.org