Job growth outlook slows for Texas

Business

Low oil prices, trade uncertainty and a tight labor market have hurt the 2020 job growth outlook for Texas, according to assistant economist Christopher Slijk of the Federal Reserve’s District 11 at the Hopkins County Economic Outlook Conference Wednesday in the Hopkins County Regional Civic Center.

“The index is mildly negative with a less than 1% decline, which isn’t huge but is an indication of some slowing in job growth,” Slijk said. “Our forecast this year is slightly below what we forecast last year.”

While oil prices, which feel to around $30 a barrel, have recovered from the bust in 2014-2016, the current oil prices do not provide enough of a profit margin for companies to drill new wells. According to Slijk, the average breakeven price is $50 a barrel, depending on location.

“If there’s some uncertainty there, if we see a 10- 15% decline in prices, that’s going to to put prices under the breakeven number,” Slijk said. “There’s a little trepidation in terms of starting new projects.”

Slijk noted Texas as a whole had not suffered as other energy states had during the oil bust, but it was rough for “areas in the Oil Patch.” Texas did fall below the national average in job growth, but job growth still occurred thanks to a construction boom and diversification in the energy industry, according to Slijk.

“1999 is another period where the state grew below the U.S. average, but it continued to grow,” Slijk said. “It’s a similar situation then where we’re in the middle of the tech boom where growth was strong in Texas and the U.S., and then oil prices dropped.”

Oil, gas and its related products make up a sizable portion of Texas exports which amount to $300 billion, placing the Lone Star State first in the nation, according to Slijk. Furthermore, 8% of Texas jobs are tied in some way to exports. Because of this relationship with trade, “any big shifts in that tend to have an outsized impact on Texas.”

The value of the dollar impacts Texas trading, according to Slijk. The oil bust of 2014 coincided with a strong dollar which hurt exports because buyers looked for cheaper options abroad.

“It was a bit of a one-two punch,” Slijk said. “We had the energy industry struggling, and we also have this big appreciation of the dollar which makes our exports less competitive internationally.”

Texas, and the nation as a whole, is facing an “an unusual period,” according to Slijk, with a record low unemployment rate statewide at 3.4% and 3.7% nationally.

“Something that we hear a lot from contacts across the state is the difficulty they have finding workers,” Slijk said. “A lot of people want to expand their operations and grow, but they’re really being constrained by the labor side of things.”