Labor market growth in San Antonio eased to a an average 1.9 percent annualized rate in Q2 and Q3, following a 5.1 percent spike in payrolls in the first quarter of the year. Even so, San Antonio remains well above average for job growth in 2012. Development of the Eagle Ford Shale and increased local commitments from companies like Boeing will provide a further influx of jobs and activity into the San Antonio economy. As prices for natural gas liquids and crude oil have fallen from first quarter highs, however, drilling activity in the Eagle Ford region has slowed—by approximately 6.5 percent between the end of Q2 and Q3, according to Baker Hughes. Although the drop in drilling activity has been limited thus far, very low natural gas prices continue to pose a downside risk for San Antonio as drilling programs are reviewed. Already a shift in activity away from pure dry gas wells to more profitable wells that produce gas and liquids can be seen at Eagle Ford. Until natural gas prices rebound, we do not expect a significant increase in drilling activity.
Local area incomes grew by 3.8 percent in the second quarter, down from the first quarter 8.0 percent surge. San Antonio income growth is expected to outpace national growth for all of 2012 by approximately 0.7 percent, before moderating closer to the national trend. As natural gas prices have fallen over the course of the year, payroll growth has slowed, and income growth has eased.
The San Antonio housing market was insulated from the worst of the recessionary decline in home prices. 2011 home prices were flat from 2010 levels, compared to a 4.3 percent national decline over the same period. The region’s recent population influx, driven by the local shale play, has lifted home prices and residential construction activity. Home prices turned positive on a year-over-year basis in the second quarter, and are forecast to increase by 1.8 percent in 2012, before trending higher in 2013-2014.
Click here for a PDF version of the complete 2012Q4 San Antonio Regional Economic Update: SanAntonio 2012Q4.