The Texas economy continued to grow in December, with payrolls expanding at an above-average pace. The unemployment rate increased for the first time since January 2019.
The Texas Leading Index fell, and single-family home inventories tightened. Construction contract values ticked down. Migration to Texas between July 2018 and July 2019 increased.
Texas employment grew an annualized 2.6 percent in December, following a downwardly revised 3.8 percent in November (Chart 1). Growth remains above Texas’ long-run average pace of 2.1 percent. U.S. payrolls also expanded during the month, though at less than half the pace of Texas.
December job growth was strongest in Austin and Dallas, expanding at an annualized rate of 8.4 percent and 6.2 percent, respectively. All other major metros posted modest growth in the month except Fort Worth, which shed jobs.
The Texas unemployment rate edged up to 3.5 percent after holding steady at 3.4 percent for six months, while the U.S. unemployment rate stayed flat at a 50-year low of 3.5 percent (Chart 2).
Unemployment fell by roughly 0.1 percentage points in most major metros except McAllen, where it ticked up 0.1 percentage points.
The Texas Leading Index, which is used to estimate the Dallas Fed’s Texas Employment Forecast, sheds light on the future of the state’s economy.
After increasing 0.8 percent in November, the index fell by 0.2 percent in December. The three-month change, however, held steady at 0.6 percent (Chart 3).
In December, new unemployment claims, well permits and the U.S. leading index were drags on the Texas Leading Index, while average weekly hours made no significant contribution. All other components boosted the index.
Single-family home inventories fell to 3.5 months of supply in the U.S. and Texas in December (Chart 4).
Inventories in most Texas major metros also dipped last month, with the exception of Fort Worth and Houston, which held steady at 2.5 months and 3.8 months, respectively. Inventories are below their long-run averages in the U.S. and Texas and its major metros—partly due to solid demand.
The five-month moving average of construction contract values slipped 3.7 percent in December, following strong gains in November (Chart 5).
This dip is due to the 15.6 percent decline in nonbuilding construction values in December, following a 21.6 percent growth in November. In 2019, total construction values in Texas increased 4.2 percent relative to their 2018 values.
The majority of this increase came from the 19.1 percent growth in nonresidential building construction. Nonbuilding construction remained mostly flat with 0.4 percent growth over the year, and residential building construction slipped 4.3 percent.
Total construction amounts in December were 28.6 percent higher than the long-run average of $6.2 billion.
From July 2018 to July 2019, Texas grew by 367,000 people, with more than half the increase stemming from migration from other states (domestic) or other countries (international) (Chart 6).
The other large contributor to the net growth in the state during that period was a natural increase— births minus deaths—which added 176,000 people.
Net domestic migration to Texas climbed 50.0 percent from July 2018 to July 2019 to 126,000, while net international migration slipped 8.7 percent to 65,000—its lowest level since 1991.
Overall, Texas has consistently benefited from net in-migration. Domestic in-migration has outpaced international almost every year since 2006 with the exception of 2017.
In 2006, Texas saw its largest spike in net domestic migration as many people affected by Hurricane Katrina relocated from Louisiana to Texas.
NOTE: Data may not match previously published numbers due to revisions.
Permian Basin payrolls remained flat through November, and the unemployment rate has ticked up in recent months.
Oil production reached a new high in November, while the rig count was largely flat in December. Home price gains in the Permian have slowed, and homes sales dipped further.
While the Texas economy is growing at a healthy pace and has posted solid job gains, the Permian Basin labor market is sluggish. Data through November 2019 show that Permian employment is unchanged at 0.0 (Chart 1).
This marks the first time since 2016 that Permian Basin employment has lagged Texas job growth.
The energy slowdown has led to cuts in the Permian’s largest industry—mining, logging, and construction—which employs nearly 1 in 3 Permian workers.
Through November, this industry’s payrolls were down an annualized 4.2 percent (Chart 2). Government jobs have also posted declines throughout the year, falling an annualized 6.9 percent.
However, losses have been offset by gains in trade, transportation, and utilities, which climbed an annualized 4.1 percent, and leisure and hospitality, which rose 6.2 percent through November.
Unemployment in the Permian Basin has been ticking up since bottoming out at 2.0 percent in April 2019 (Chart 3). In November, however, the jobless rate was 2.4 percent for the second consecutive month.
While it has been edging up, the rate remains well below the state’s jobless rate of 3.4 percent.
Permian Basin oil production continues to climb, with production estimated to have reached an all-time high of 4.6 million barrels per day in November (Chart 4).
While the rig count was flat in December, it has fallen by 88 since its peak of 493 in November 2018.
Oil prices experienced a temporary boost in early January as tensions between Iran and the United States rose.
West Texas Intermediate’s January month-to-date price averaged $60.27 per barrel, slightly above December’s average of $59.82 (Chart 5).
Permian’s median home price was $303,730 in November, just above the October median of $302,615 (Chart 6). Meanwhile, monthly home sales continue to dip and averaged 366 in November, just below October’s average of 370.
NOTES: Employment data are for the Midland–Odessa metropolitan statistical area (Martin, Midland, and Ector counties), unless otherwise specified.
Energy data include the 55 counties in West Texas and southern New Mexico that make up the Permian Basin region. Data may not match previously published numbers due to revisions.
Source: Federal Reserve Bank of Dallas
Texas Economic Indicators – Questions can be addressed to Carlee Crocker at carlee.crocker@dal.frb.org.
Permian Basin Economic Indicators – Questions can be addressed to Marycruz De León at marycruz.deleon@dal.frb.org.
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