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‘End of the Texas Slump’ May Be in Sight, Says Dallas Fed Economist

For Immediate Release: Nov. 4, 2016

State employment growth exceeded U.S. for first time since 2014; headwinds from low oil prices, strong dollar beginning to wane

DALLAS—Recent data show the Texas economy gaining strength in the third quarter, a further indication that the state may have weathered the worst of the oil slump, said Federal Reserve Bank of Dallas economist Amy Jordan in the latest Texas Economic Update video.

“The data that we’re looking at indicates that we might be seeing the beginning of the end of the Texas slump,” Jordan said. “The employment growth numbers came in very strong in third quarter, more than tripling to 2.6 percent annualized in the third quarter. … In addition, we surpassed the national job growth rate in the third quarter for the first time since the fourth quarter of 2014.”

Jordan also pointed to results from the Dallas Fed’s Texas Business Outlook Survey, which showed continued strength in the service sector and accelerating growth in manufacturing activity in October.

“Additionally, we’re starting to see some of the headwinds for the Texas economy wane, namely increases for the West Texas Intermediate crude oil price and some lessening in the strength of the trade-weighted value of the dollar,” Jordan said.

Almost all of the state’s major metro areas saw job growth in the third quarter, including Houston, which has been hard hit by the drop in oil prices. Revisions to Texas employment data wiped out gains the energy sector had previously posted in the preliminary August data; however, the pace of losses has slowed.

“We recently incorporated the second quarter 2016 early benchmark to our Texas employment and the most notable revision that had was in the energy sector,” said Jordan. “The initial data showed that we had seen an increase in energy jobs in the third quarter of this year, but the revised employment data after incorporating this benchmark actually showed the energy sector continues to contract. We continue to see job losses in this sector, but the third quarter is at a much slower pace than we saw earlier in the year.”

The Dallas Fed’s most recent Regional Economic Update also showed the Texas housing market gaining strength, with the possible exception of Houston. The Texas median single-family home price rose 6.1 percent year over year in September, faster than the nation’s 4.2 percent increase.

Rising home prices are due in part to a shift in the composition of homes sold, according to a new article from the Texas A&M Real Estate Center and Dallas Fed. Sales of entry-level homes—those priced under $200,000—dropped from 69 percent of total sales in 2011 to 47 percent this year, according to the report. This drop is even more exaggerated across most of the major Texas metros, with Austin by far seeing the greatest shift away from homes sold in the entry-level range.

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