The Texas economy and labor market should grow a little sunnier this year, but a few of the dark clouds that gathered in the past two years will linger into 2017, according to economists at the Federal Reserve Bank of Dallas.
Texas employers should expand payrolls by 2 percent this year, about 242,000 jobs, senior economist Keith Phillips said this week in San Antonio. While far lower than the state’s long-run average, which typically exceeds national job growth rates, the job gains in 2017 are expected to surpass the estimated 1.6 percent annual growth rate through November of last year.
“We think the worst is behind us, but there’s a lot of uncertainty out there,” said Mine Yücel, the Dallas Fed’s director of research.
Yücel reiterated Phillips’ 2017 job growth forecast Wednesday during a business forecast breakfast hosted by the University of Texas McCombs School of Business.
Despite the sharp drop in oil prices that sent the energy industry into a tailspin over the past two years, Yücel said, Texas did not drop into a recession at any point. And the modest recovery in commodity prices has helped stem the bleeding of oilfield services jobs and helped buoy statewide manufacturing outlooks, she said.
Yet the same factors that dragged on the state economy in 2015 and 2016 continue to weigh on growth at the start of the new year.
While rig counts and production levels have started to recover, energy prices remain below levels that typically spur new well drilling. Meanwhile, the strong U.S. dollar and economic weakness among some of the state’s primary trading partners are hampering Texas exporters, Yücel said.
Texas still fared better than most energy states, Philips said earlier in the week. And the Interstate 35 corridor, particularly Dallas and Austin, remained an exception to the otherwise modest growth in Texas, he said.
“Job growth picked up in the second half of 2016 due to a stabilization of the energy sector,” he said. “With that positive momentum, the Texas economy enters 2017 poised to shift into ‘second gear.’”
Dallas led the second-half rebound, the Fed economists noted, adding roughly 73,000 jobs through November.
Job growth in Austin, however, softened during the second half of the year despite a solid gain for 2016 as a whole.
“One reason is Austin is at full employment,” Yücel said, noting the metro area’s 3 percent unemployment rate. “It’s harder to grow when you’re at full employment.”