More Evidence of a Turn in the Texas Economy

For the first time since the first quarter of 2015, Texas put together back-to-back quarters of positive state-level real GDP growth in the second half of 2016. We expect the string of real gains to state gross domestic product to continue through 2017 and 2018. Two factors are at work stabilizing the Texas economy. First is the momentum generated by the state in recent years that is non-energy-related. Strong in-migration leading to significant population growth and the expansion of non-energy employment and infrastructure has been a life preserver for the state. Second, oil prices have stabilized while oil producers have become much more efficient in their operations. This supportive combination of factors will allow for consistent moderate growth for the state economy even as the support from massive projects on the downstream side of the energy sector in the Houston area eases as they are completed this year and next. Oil prices have been soft this year with stubbornly high U.S. inventories. However, recently, prices have firmed, with WTI approaching $50 per barrel as OPEC ministers discuss the possible limited extension of OPEC production cuts. Meanwhile, the Texas drilling rig count continues to climb, reaching 451 active rigs by the middle of May. Employment in the state’s resources and mining sector has done a similar U-turn, following the rig count upward, adding 13,000 jobs over the six months ending in March 2017. The state’s unemployment rate has edged up from a low of 4.4 percent in July 2015, to 5.0 percent as of this March. We look for the unemployment rate to turn the corner this year and gradually decline through 2018.

For a PDF version of the complete Texas Economic Outlook, click here:  TX_Outlook_0517.

 

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