The first month of 2019 is in the rear-view mirror and so far, the Texas economy looks to continue the strong performance it had in 2018.
Wells Fargo Economist Charles Dougherty recently examined the Texas and Dallas-Fort Worth economy and has some ideas about what 2019 might hold.
Fort Worth Business Press Editor Robert Francis spoke with Dougherty.
FWBP: What did Texas see happen in 2018?
Dougherty: In terms of hiring, the state has seen job creation at a pace that’s much faster than the rest of the country. In fact, in 2018, the state added about almost 400,000 new jobs, really 392,000 jobs. It’s been really, really strong and really, really positive.
In December, the state added 38,000 just roughly, on par at the pace that state has seen. That pace, that rate is much quicker than the rest of the country.
We’ve seen it for basically for all 2018, which is sort of an up shift when you look at what happened in 2017. That year was a little bit slower. The state was still coming out of a slowdown associated with the slide in oil prices in 2015 and 2016.
So, we’re seeing state having a lot of momentum right now. The Dallas and Houston areas are two of the fastest growing metro economies in the entire country. So, a lot of growth in Dallas, a lot of growth in Houston.
FWBP: What about Austin?
We’re seeing a lot of growth, especially in the tech industry. Apple has made a recent announcement to hire a thousand new jobs there, so that’s a really growing part of Austin that we’re also seeing.
But we’re seeing a lot of employment growth across a lot of different industries.
In the Dallas area, it’s especially widespread. [We’re seeing growth in] financial services, a lot. And professional business services, and construction. It’s manufacturing. It’s basically everywhere.
FWBP: One announcement that I think sort of slipped pass some people because of the big Amazon HQ2 thing, is Fort Worth got chosen as one of the sites for the Amazon Air Project.
That’s a great growing part of the area: logistics. It’s such an important part of the economy.
We talk about the Amazon affect where a much higher percentage of retail going through e-commerce, which has really spread the need for really sophisticated supply chains and truck drivers.
Every retailer in the game right now is trying to very quickly expand those supply chains so we should get it. There’s a really hot demand for industrial properties, for warehouses, distribution facilities.
Basically, those factors increase the need for logistics. You need truck drivers, need more capacity at airports, higher capacity for freight. It’s just one thing we’re seeing across the country, but it’s especially prevalent in [North Texas].
FWBP: What do you see going on in the Permian Basin area?
It’s unbelievable. Midland is the fastest growing, in terms of employment growth, the fastest growing metro area in the entire country. There’s almost 400 different metro areas, some big, some small. But Midland is growing at an astronomical rate; it’s right around 10 percent year-to-year job growth.
I was there a few months ago and they can’t find the school bus drivers, they can’t find people to work in the hotels, there’s just … it’s all hands-on-deck, there. It also has one of the lowest unemployment rates in the entire country – 2.1 percent, which when you think about where we are in the nationals, it’s 3.9 percent, which is low enough.
The amount of oil that’s coming from West Texas is just absolutely astounding.
FWBP: Always tough to predict, but do you have any outlook on the energy over the next year?
We have had some recent volatility on oil prices.
It didn’t really go down to levels that we saw in 2015, which were closer to $30 or $25 dollars a barrel. To me that really good for the energy industry, as well, you know, projects that were planned [will likely continue].
One of the interesting things about the most recent employment report, there was a really strong gain in construction jobs.
And I think a lot of that’s relevant to the oil and gas sector because there’s just so many different projects underway. So many sort of midstream projects in order to ease a lot of the capacity constraints that you see in the Permian just because of the sheer volume of oil that’s being produced.
There’s a couple of companies here that are in the midstream business out there and they’re all growing pretty fast.
FWBP: We talked about unemployment and one of the things I hear a lot from the economic development and business people here is how difficult it is to attract workers, the right workers, because of education and the workforce needed, and the type of workforce that we have.
Are you seeing any constraints on that in Texas?
Dougherty: It’s a prevalent issue in Texas. It’s a problem everywhere. The downside of really low unemployment rates is our labor shortages, because you just can’t find the necessary people that you need and the advent of all the of technology.
Basically, every industry is gaining a lot of improvement in terms of productivity and they’re doing that through innovation and technological progress.
So, all of that demands really a much more trained or educated labor force. So, you combine that with … we’ve had throughout the U.S. for almost 100 consecutive months of positive monthly job gains in Texas. There’s been close to over two years of consecutive job gains.
So that really soaks up the available pool of labor, so it’s definitely a constraint. We actually think employment growth will moderate slightly this year. It’s going to be slightly more moderate and that’s one of the reasons why, it’s because you simply can’t just find the labor that you need to fill some of the positions that you would like to.
FWBP: Are you seeing any areas of the Texas economy where there is some weakness?
Dougherty: If you’d asked me last year, I think the headwinds were primarily centered around trade. A lot of areas in Texas depend heavily on trade. Texas is one of the top exporting economies in the entire country.
But it looks as though we have a preliminary agreement with Mexico, I think, that’s going to clear up a lot of the uncertainty, there.
It sounds kind of crazy to say, but I think the low unemployment rate’s actually – because that’s going to really keep labor at a premium – I think that’s going to be one of the biggest headwinds.
With rising wages, companies are trying to hire and trying to keep Texas affordable. That could put pressure on wages and prices and the overall cost of living. But overall, I mean, I’m wildly optimistic about Texas, Dallas and Houston and Austin and stuff out of West Texas just really great to see.