The Texas economy is feeling a persistent downdraft from the beleaguered energy sector. In March, Texas lost a net of 12,000 jobs, just the second monthly loss since late 2010. This kept the state’s unemployment rate steady at 4.3 percent, well below the national average of 5.0 percent for the month. We expect job growth to cool statewide, stepping down from a 2.4 percent annual gain in 2015, to about 1.5 percent this year. Real state GDP lost momentum in 2015Q3, the last data point available, when it barely increased at a 0.1 percent annual rate, following a weak 0.5 percent gain in 2015Q2. Over the four quarters from 2015Q4 through 2016Q3, we show a moderate decline in Texas real GDP, driven by the worst drilling conditions since the mid-1980s. Fortunately, oil prices have found some footing, increasing from the February low of $26 per barrel for West Texas Intermediate crude oil, to near $45 by late April. We expect drilling activity to stabilize by late summer as long as recent price gains are durable.
Following the energy downdraft, oil drilling activity cooled substantially in the San Antonio area. The oil and natural gas rig count in the Eagle Ford basin declined by 67/68 percent year-over-year by the first week of May, 2016. As a result, the region lost over 2,000 mining/logging jobs in the interval. Despite the energy shock, the area’s economy added more than 27,000 jobs in the year ending 2016Q1. Consequently, the region’s unemployment rate fell to 3.6 percent by March 2016. About 85 percent of the jobs created in the interval came from the service sector. A number of IT, biotech, and manufacturing companies have relocated or expanded their presence in the area, taking advantage of a favorable business environment. A German medical device company, Cytocentrics, relocated its international base to San Antonio in 2015. The company is expected to add over 300 high paying jobs in the next five years with over $15 million investment. Root9B, Holt Cat, Indo-MIM, and Alorica are expanding their footprints in the area adding hundreds of jobs. Alorica, an IT/Business Process Outsourcing company, added more than 1,400 jobs in the past 12 months.
San Antonio’s real estate market is still solid with median home prices appreciating at the rate of 6 percent year-over-year by March 2016. In 2016Q1, the number of home sales increased by 10 percent compared to a year ago. According to RealtyTrac Inc., multifamily apartment rentals also climbed with an annual gross rental yield of 9.2 percent in Bexar County. Tighter home inventories and higher demand are driving the San Antonio’s real estate market. We expect the area’s home prices to grow by 5-7 percent in the remainder of 2016.
Click here for the complete San Antonio MSA Regional Economic Update: SanAntonio 2016Q2.