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Texas Economic Indicators

Economic Indicators
March 13, 2018

Texas economic growth remained strong in January. The state posted solid job gains, and unemployment remained low. Texas employment increased at a solid pace in 2017 but slower than estimated prior to the benchmark revision. The Dallas Fed’s Texas Business Outlook Surveys indicated expansion in manufacturing and service sector activity as well as mounting wage and price pressures in January and February. Oil prices and the state’s rig count are above their 2017 averages, although the price of natural gas is below its 2017 average. Texas exports remained elevated in January, and existing-home sales dipped.

Labor Market

Texas employment expanded an annualized 2.5 percent in January (Chart 1). The Dallas Fed’s Texas Employment Forecast suggests 3.3 percent job growth in 2018 (December/December). The state’s employment expanded a solid 2.1 percent last year, revised down from the previous estimate of 2.4 percent.

Chart 1

Payrolls in Austin posted a robust 7.1 percent expansion in the month, accelerating from the 4.7 percent December growth rate. Houston and Dallas also added jobs, while employment in Fort Worth and San Antonio dipped.

January employment growth was widespread across industries. Payrolls expanded 3.9 percent in the goods-producing sector and 2.3 percent in the service-providing sector. Employment in the energy sector soared at 24.2 percent.

The Texas unemployment rate held steady at 4.0 percent in January—just above the lowest point in the history of the series. Unemployment ticked up in all the major metros. Austin’s 3.0 percent unemployment rate was the lowest among the major metros, while Houston’s was the highest at 4.7 percent.

Texas Business Outlook Survey

The headline indexes of the Dallas Fed’s Texas Business Outlook Surveys indicated continued expansion in the manufacturing and service sectors in February. The three-month moving average of the Texas Manufacturing Outlook Survey (TMOS) production index reached an 11-year high, and the three-month moving average of the Texas Service Sector Outlook Survey (TSSOS) revenue index remained near its 2017 average.

Firms Report Rising Prices

Firms responding to the surveys reported growing upward pressure on input and selling prices (Chart 2). The three-month moving average of the TMOS prices paid for raw materials index ticked up in February to its highest point since July 2011. The three-month moving average of the TMOS prices received for finished goods index rose for the seventh consecutive month in February, rising to its highest point since September 2008. The three-month moving average of the TSSOS input prices index also increased for the seventh straight month, reaching its highest point since June 2011. The three-month moving average of the TSSOS selling prices index in February rose to its highest point in the history of the series. All four indexes are well above their 2017 averages.

Chart 2

Firms Indicate Mounting Wage Pressures

The wages and benefits indexes indicate mounting wage pressures in the manufacturing and service sectors (Chart 3). The three-month moving average of the TMOS wages and benefits index surged in February to its highest point since March 2007. The three-month moving average of the TSSOS wages and benefits index ticked up in the month and was above its 2017 average.

Chart 3

Energy-Sector Activity

The price of West Texas Intermediate crude oil inched down to $61.65 per barrel the week of March 9 but is 22.1 percent above year-ago levels (Chart 4). The price had risen to $65.32 in early February after remaining under $60 throughout 2016 and 2017.

Chart 4

The price of natural gas ticked up the week of March 9 to $2.71 per million Btu, but remained below its 2017 average of $2.96. It had spiked above $5 for a brief period in early January due to unusually cold weather.

The Texas rig count edged up to 490 the week of March 9, above the 2017 average of 431 rigs and up 2.3 percent from the week of Feb. 9 to the week of March 9.

Exports

Texas exports edged down in December and January after reaching their highest point in the history of the series, which begins in January 1994, in November. U.S. exports ticked down 1.3 percent in January after expanding in December. In 2017, Texas exports expanded 10.8 percent, and U.S. exports rose 3.9 percent.

In fourth quarter 2017, Texas exports climbed 13.3 percent (Chart 5). Exports of petroleum and coal products—Texas’ largest export sector—advanced 17.6 percent in the quarter, and exports of computers and electronics—the state’s second-largest export sector—rose 4.0 percent. Mining exports—the state’s third-largest export sector—soared 45.2 percent.

Chart 5

Exports to Mexico—the destination of 35.2 percent of the state’s exports—expanded 4.5 percent, and exports to other large trading partners grew at a faster pace.

Housing Market

Texas’ existing-home sales declined 6.2 percent in January, but the five-month moving average inched up 1.9 percent in the month, after posting 4.6 percent growth in 2017 (Chart 6). Over a quarter of the state’s January existing-home sales were in Houston, where sales declined 2.0 percent in January, but the five-month moving average rose 5.3 percent. Existing-home sales expanded by more than 3.0 percent in 2017 in all the major metros.

Chart 6

The median existing-home sales price in Texas ticked up 0.7 percent and was 4.4 percent above year-ago levels in January. Home inventories in the state ticked down to 3.4 months, remaining well below the six months of inventory considered balanced. Permits for single-family housing expanded 3.2 percent in the month, and housing starts rose 14.0 percent.

NOTE: Data may not match previously published numbers due to revisions.

About Texas Economic Indicators

Questions can be addressed to Stephanie Gullo at stephanie.gullo@dal.frb.org. Texas Economic Indicators is published every month on the Monday after Texas employment data are released.