Comerica Bank’s Texas Economic Activity Index grew 1.2 percentage points in December to a level of 111.1. The December reading is 40 points, or 55 percent, above the index cyclical low of 71.6. The index averaged 105 points for all of 2013, three points above the average for full-year 2012. November’s index reading was unchanged at 109.9.
“Our Texas Index showed its fourth consecutive increase in December, extending the breakout from flat early-2013 results. Payroll job growth continued to outpace the national average at the end of 2013, up 2.3 percent for the state, well above the 1.7 percent gain for the U.S. as a whole,” said Robert Dye, Chief Economist at Comerica Bank. “Besides payroll job growth, other components of our Texas Index that showed growth in December were state sales tax, hotel occupancy, residential building permits and the rig count. Negative components were limited to state exports and unemployment insurance claims. Texas will feel some secondary effects of the winter freeze affecting the broader U.S. economy, but we expect 2014 to be another strong year for the Texas economy.”
For a PDF version of the Texas Economic Activity Index, click here: TexasIndex_0214.
Southern California labor markets continue to recover heading into 2014. Regional nonfarm employment gained 115,600 jobs in the 12 months ending in December. Boosts to nonfarm payrolls in 2013 included professional and business services, education and health services, and leisure and hospitality. Declining manufacturing and information jobs were a drag on area labor markets in 2013. The unemployment rate for Southern California dropped to 8.3 percent in December. This trailed the U.S. unemployment rate which dropped to 6.7 percent in December. We expect the region to gain 136,000 jobs and the regional unemployment rate to drop to 7.5 percent in 2014.
Southern California housing markets are set to improve in 2014. Regional housing starts hit 36,811 in 2013. This is a 36.9 percent increase from the 2012 average of 26,898. The 2013 average was boosted by a strong 2013Q4 starts total at a 43,794 annual unit rate. We expect the boost from job creation and income growth to overcome the drag of increasing mortgage rates in 2014. Our forecast has Southern California housing starts averaging 36,010 in 2014, increasing to 39,386 in 2015. Pent-up demand continues to drive up home prices in the area. Southern California home prices are expected to grow 16.5 percent (FHFA Price Index) from a year ago in 2013Q4. We expect home price growth to decelerate as housing markets expand the supply of homes in 2014 and 2015.
Increased uncertainty and federal budget sequestrations were a drag on defense-related industries in 2013. Boeing, which has facilities throughout L.A. County and Orange County, saw military aircraft revenues decline by 1 percent in 2013. Boeing announced in September that it will be discontinuing production on its C-17 Airlifter by 2015. Workforce restructuring of the 3,000 supporting production team for the C-17 will begin in 2014, the majority of which will take place in California. The passing of the Bipartisan Budget Act in December will provide $31.6 billion in relief to the automatic spending cuts that would have otherwise gone into effect for FY2014 and FY2015. Under the act, defense spending will increase to $520.5 billion for FY2014 and $521.3 billion for FY2015.
Click here for the complete Southern California Regional Economic Update: SouthernCA 2013Q4.
Northern California labor markets improved in 2013. Nonfarm payroll employment has now surpassed its pre-recession peak, at 2,976,430 jobs in 2013Q4. We expect the Northern California economy to add another 56,000 jobs in 2014. The unemployment rate for the region dropped to 6.3 percent in 2013Q4. Labor force participation rates have been declining due in part to the retirement of the baby-boomers and also due to discouraged workers. We expect softer labor force participation growth in the region and moderate employment expansion to drive the unemployment rate down to 5.0 percent by the end of 2014.
Housing construction and home prices will increase in 2014. Housing starts grew by 32.7 percent from a year ago in 2013Q4. Most of this increase came from multifamily housing. Slower growth in single-family housing starts helped boost area existing home prices. Northern California home prices grew approximately 20.0 percent (FHFA Price Index) from a year ago in 2013Q4. Homeowners will see strong home prices into 2014. Pent up demand and increased income gains will be a boost for homes sales this year. Northern California housing starts are expected to climb to approximately 17,900 in 2014, supporting an increase in construction-related jobs.
The San Francisco 49ers will be moving to a new home, but not out of our Northern California region. The new $1.3 billion stadium is located in Santa Clara, approximately 40 miles outside of San Francisco. Levi’s Stadium is expected to be completed before the 2014 season. Additionally, a number of development projects are either pending or currently underway in the surrounding area. The City Center projects will be an approximately 224 acre commercial and entertainment district with office, hotel, retail, restaurant and residential developments. The proposed new City Center is comprised of two separate projects. The first, “Centennial Gateway,” is a $400 million joint venture between the Montana Property Group and Lowe Enterprises. The second, “City Place Santa Clara,” is a $1.5 billion project by Related California. The Santa Clara City Council approved design principles for both projects on December 3.
Click here for the complete Northern California Regional Economic Update: NorthernCA 2013Q4.
After facing a number of headwinds in 2013, Phoenix’s moderate economic expansion will continue into 2014. Increased uncertainty and federal budget sequestration were a drag on local defense-related businesses throughout 2013. Honeywell International, whose aerospace division is headquartered in Phoenix, saw flat aerospace-related sales growth in 2013. Boeing, which has facilities in Mesa, saw military aircraft revenues decline by 1 percent in 2013. The passing of the Bipartisan Budget Act in December eased the uncertainty surrounding the defense budget in 2014. Under the act, discretionary defense spending will increase to $520.5 billion in FY2014 compared to $498 billion under sequestration.
Phoenix regional housing markets regained momentum at the end of 2013. After gaining ground in the first half of 2013, Phoenix housing starts dipped in 2013Q3, hitting a 19-month low of a 12,800 unit annual rate in September. Increased mortgage rates were a drag on housing markets during this time period. Housing starts then bounced back to a 20,000 unit annual rate in December. Housing permits in the region are worth noting as they reached a 69-month high of a 30,400 unit annual rate in December. We expect housing starts for the region to total 17,341 for 2014, increasing to 19,136 in 2015.
Phoenix total nonfarm payrolls increased by 43,000 from a year ago in December. Mining and logging were down 300 jobs; manufacturing lost 2,100; and government lost 2,100. Trade, transportation and utilities were up 12,800 jobs; education and health services gained 10,900; and financial activities were up 8,300. Unemployment in the Phoenix region declined to 6.4 percent in December, below the U.S. average of 6.7 percent. The outlook for area labor markets is positive in 2014. Total nonfarm payroll employment is expected to gain an additional 44,000 jobs by the end of 2014Q4. The unemployment rate is expected to decline to 5.1 percent by the end of 2014.
Click here for the complete Phoenix MSA Regional Economic Update: Phoenix 2013Q4.
The Miami metro area was pummeled by the Great Recession. The area’s economy bled jobs for 23 consecutive months. Home prices and housing markets were hammered. Bankruptcies jumped, while incomes and consumer spending slumped. Seven years after the beginning of the economic downturn, the Miami economy is still recovering. We have a cautiously optimistic outlook for Miami for 2014.
Area labor markets have made consistent gains since 2010. At the pre-recession peak of June 2007, Miami had a total nonfarm payroll of 2,425,000 jobs. By January 2010, the area lost approximately 250,000 jobs or around 10 percent of its total nonfarm employed. Beginning in 2010, modest job growth resumed after the near three-year hiatus. As of December 2013, Miami has regained 170,000 of the jobs lost from the Great Recession, leaving about 80,000 jobs to get back to its pre-recession peak. We expect approximately 49,000 jobs to be added in Miami in 2014 and another 56,000 jobs in 2015. This will elevate Miami payrolls to its pre-recession peak by 2015Q3.
Miami housing markets were hit disproportionately hard in the recession. Housing starts peaked in 2005Q3 at a 42,072 unit annual pace. Housing starts then bottomed out in 2009Q2 at a 3,093 unit annual pace. Our forecast has Miami housing starts reaching a 17,400 annual rate by 2014Q4 increasing up to 19,100 by 2015Q4. A firming labor market, strengthening income growth and increasing pent-up demand will be a boost for housing markets in 2014, with some drag from increasing mortgage rates.
Consumer spending in the region steadily increased throughout 2013 and heading into 2014. Sales tax revenues from the Miami metro area increased 6.7 percent from a year ago in December. Tourism has also been a boost to the area’s economy in 2013. According to Smith Travel Research, hotel occupancy in Miami was at 78.2 percent in December. This was third in the U.S. only to Oahu and New York City. Miami’s tourism and retail industries will continue to benefit from a pick-up in the overall U.S. economy and a synchronized global economic expansion.
Click here for the complete Miami MSA Regional Economic Update: Miami 2013Q4.
The San Antonio MSA has benefited greatly from the Eagle-Ford Shale. The area will continue to benefit from the energy boom in 2014 albeit at a slower pace. Drilling activity moderated in second half of 2012 through 2013 as natural gas prices declined from more than $6/mmBtu in 2007-08 to less than $4 in 2012-13. Cold winter weather in much of the U.S. has elevated demand and brought natural gas prices up to more than $5/mmBtu recently. Our forecasts indicate natural gas prices to be around $4-5/mmBtu through 2014 as the weather returns to normal. We expect most of the job growth for San Antonio in 2014 to come from sectors like health care, tourism and small businesses.
The unemployment rate in San Antonio is expected to decline at a slower pace as the oil and gas drilling boom continues to moderate. San Antonio added more than 6,200 non-farm payroll jobs to the economy in 2013, most of them coming from services producing and construction sectors. Consequently, the unemployment rate in the area declined to 5.8 percent in 2013Q4 compared to 6.0 percent in the last quarter of 2012. Year-over-year payroll job growth is expected to grow moderately towards the national average in 2014. Both single and multifamily housing starts were up in 2013Q4 after consecutive drops in the previous two quarters. We expect San Antonio’s housing market to improve moderately, consistent with job and income growth in the area.
San Antonio is one of the five so-called “Promise Zones” designated by President Barack Obama to fight poverty. The federal grant and support received from the program is expected to create jobs in key growth areas like energy, construction, healthcare and manufacturing. The program goals also include improving child enrollment in high-quality pre-K programs, improving early college enrollment and adult education opportunities, expanding public safety programs, affordable housing opportunities, and providing tax credits for private businesses upon approval by the Congress.
Click here for the complete San Antonio MSA Regional Economic Update: SanAntonio 2013Q4.
The jobs machine known as North Texas ended 2013 on a flat note, with essentially no payroll jobs added in November, followed by a large 10,400 net job loss in December. Reduced federal spending through 2013 was certainly a drag for specific industries. However, the December jobs loss reported for North Texas was broad-based across industries in the official data, out of character with anecdotal evidence at year-end. This suggests that there is a possibility of an eventual upward revision to the year-end data. It also suggests that it is premature to change our view that the North Texas economy remains a strong job generator. Certainly, if we were to see ongoing weak job growth in 2014, that would cause us to re-evaluate our assumptions.
Positive business news for North Texas is abundant. Both DFW Airport and Love Field are increasing in importance as major air transportation hubs. American Airlines is hard at work combining with the former US Airways. Southwest Airlines will add 15 new nonstop destinations from Love Field this fall. Ground transportation is also an important sector for the regional economy. Several speculative warehouse/distribution facilities are under construction in the area. Rail transportation is in the news as state and local officials discuss the possibility of a high-speed commuter line connecting Dallas to Fort Worth. Separately, there appears to be growing momentum for north/south high speed rail, possibly running from Oklahoma City to Dallas to Houston to Monterrey, Mexico.
Oil prices have firmed up, now near $100/bbl for WTI as of this writing. Natural gas prices have been boosted by strong demand due to a colder-than-normal winter. NG futures crested $5/mmBtu in late January, and have since relaxed to about $4.75. Texas drilling activity remains strong.
Click here for the complete North Texas MSA Regional Economic Update: NorthTexas 2013Q4.