The North Texas economy is growing strongly. The Dallas–Fort Worth metro area is adding jobs at a rapid rate. October 2014 payrolls were up 3.7 percent over the previous year, well above the 2.0 percent year-over-year growth rate for the U.S. as a whole. Labor markets are tight. The DFW metro area unemployment rate dropped to 4.8 percent in October, a full percentage point below the U.S. average.
Lower oil prices will be a drag on growth for North Texas in 2015 and beyond. The current $57 per barrel spot price for WTI is nearly half the $102 price from late June. The NYMEX futures price for light crude oil three years out, December 2017, is down to $66.39 per barrel. We expect to see significant cooling in the oil and gas sector of the North Texas economy over the next two years as a result of lower oil prices.
That said, we emphasize that the North Texas economy is well diversified. A list of major companies in the area show several that will actually benefit from lower oil prices, including American Airlines, Southwest Airlines, General Motors and Toyota. Some major employers are in the consumer goods sector which will benefit from lower gasoline prices nationally. These include J.C. Penny and RadioShack. Other defense-related employers such as Lockheed Martin and the military division of Bell Helicopter will not be adversely impacted by lower oil prices. We expect North Texas to remain a location of choice for U.S. corporate headquarters.
We have taken a conservative stance and lowered our payroll employment forecast for North Texas to align with the national average growth rate by the end of 2016. Given the current oil price regime, we do not expect the North Texas economy to fall into recession because of weakness in the oil and gas sector. However, downside risk for the North Texas economy has increased significantly because of the major slide on oil prices. We will continue to monitor Texas regional economic data carefully in the months ahead.
Click here for the complete North Texas MSA Regional Economic Update: NorthTexas 2014Q3.