Lower Natural Gas Prices Temper San Antonio’s Outlook

  • Job growth in San Antonio slowed to an annualized rate of 1.3 percent in Q4, following a 5.1 percent spike in payrolls in the first quarter of the year. The San Antonio labor market’s second half performance brought the area’s 2012 average for payroll growth down to 1.8 percent, roughly in line with the national average of 1.7 percent for the year. Major local employer Boeing poses a near-term downside risk to the local labor market, as the company struggles with a PR hit brought about by mechanical issues with its newly delivered Dreamliner series. Mitigating this risk somewhat is the fact that, while Boeing engineers work to address the Dreamliner’s issues, existing orders for older models should keep their workforce engaged. With low natural gas prices, currently near $3.30 per mmbtu at the Henry hub, drilling activity in the Eagle Ford region has slowed—by 6.9 percent between the area’s recent May 2012 peak in activity and January 2013, 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 3.0 percent in the third quarter, down from the revised first quarter 9.1 percent surge. San Antonio income growth is expected to outpace national growth for all of 2012 by approximately 1.3 percent, before moderating closer to the national trend in 2013. As natural gas prices have fallen over the course of the year, payroll growth has slowed, and income growth has eased.
  • San Antonio’s recent population influx, driven by the Eagle Ford 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 rose 0.7 percent in the third quarter. Home prices are expected to continue to trend higher in 2013.

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Click here for the complete San Antonio MSA Regional Economic Update: SanAntonio 2013Q1.

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