Oct 8, 2015 - Chemical (7%) Computer & electronic ... energy (oilfield-related employment and manufactur- ... Housto
Houston Economic Indicators
DALLASFED
FEDERAL RESERVE BANK OF DALLAS • OCTOBER 8, 2015
Houston Business-Cycle Index
The Houston Business-Cycle Index declined at an anXX nual rate of 1.9 percent in August. July’s growth rate was revised down from 5.9 percent to 4.4 percent. Upstream energy (oilfield-related employment and manufacturing) weakness continues to be at least partially offset by strength in downstream energy (refining and petrochemicals). Leisure and hospitality and health care, two sectors driven in part by Houston’s robust population growth, also continue to log solid gains. On whole, the outlook for Houston is for job growth to remain flat.
Percent*
20 15 10 5 0 -5 -10
2012
2013
2014
2015
*Annualized month-over-month growth rate rate in overall economic activity.
Employment Growth Total Trade, transp & utilities (21%) Professional & business svc (16%)
May to August December to August
Construction & mining (10%) Leisure & hospitality (10%)
1.5 2.4 3.4 2.9 2.6 3.1
-0.1
Government (13%) Educational & health services (12%)
0.8
-0.1 -0.1
-5.5 -6.7 -4.7
Manufacturing (8%) -8.2 Financial activities (5%) -7.6
5.6
-5.2
Other services (4%) Information (1%)
0.0
7.6
8.2
2.1 1.2
NOTES: Data show seasonally adjusted and annualized percentage growth by industry supersector. Numbers in parentheses represent shares of total employment and may not sum to 100 due to rounding.
Manufacturing Employment 1.0
2.2
0.0
-2.7
-4.0
1.2
-4.6
-5.9
-4.1 -8.7
-10.7
May to August
December to August
-14.5 Non-durable Fabricated goods (33%) metal products (24%)
Machinery (24%)
Chemical (7%) Computer & electronic products (7%)
Petroleum & coal (4%)
NOTES: Growth rates are seasonally adjusted and annualized. Number in parentheses are percent shares of manufacturing employment.
Houston jobs increased at a slight 0.8 percent annual XX rate from May to August. Other services (auto mechanics, pet grooming, dry cleaning) and leisure and hospitality (restaurants, hotels, arts) were the fastest growing industries over the summer. The sectors that contracted the fastest were financial activities (credit and banking particularly) and construction and mining (mostly in construction). The top two contributors to year-to-date growth have remained leisure and hospitality and health care, adding a combined 18,100 jobs this year, while losses in construction and mining and manufacturing have totaled 29,100 jobs. The Houston-area unemployment rate held at 4.2 XX percent in August despite an increase in the labor force of 3,100 people. August unemployment rates for the U.S. and Texas dropped slightly to 5.1 percent and 4.1 percent, respectively.
Manufacturing lost over 14,000 jobs from December XX to August. The fabricated metals industry was hit hardest when drilling activity declined by nearly 60 percent in the first half of 2015. Machinery, computer and electronic products, and petroleum and coal industries have also contracted this year. These sectors have been negatively impacted by less drilling activity, lower than expected export growth (due in part to a slowing global economy and strong dollar) and lower expectations for domestic crude production. These negative factors have offset the positive impacts of improvements in the U.S. economy and the boom in chemical production and plant construction.
Rig Counts and Production Rig count
Millions of barrels
1,800
300 290 280 270 260 250 240 230 220 210 200
1,600 1,400
Oil-directed
1,200
U.S. crude production
1,000 800
Gas-directed
600 400 200 0
2013
2014
2015
The monthly U.S. rig count dropped in September after XX a modest rise in oil-directed rigs in August. There were 650 rigs drilling for oil in September and 198 rigs drilling for gas. U.S. crude production, which peaked in March, plateaued in June and July (the most recent data available) on a seasonally adjusted basis. With robust supplies and concerns about global demand growth, Dallas Beige Book contacts have been broadly indicating that oil prices and drilling will likely be “lower for longer” since midsummer, and access to credit is becoming more difficult for many firms. Thus, another round of industrywide layoffs, as occurred in the second quarter, is likely underway.
Thousands
Upstream Energy
Year to date, declines in Houston energy industry XX employment have come entirely from support activities for mining (contract and fee-based oilfield services and related—down 5,100 jobs). In contrast, oil and gas extraction and pipeline transportation employment in Houston has increased slightly since December.
NOTE: Crude production, seasonally adjusted.
Mining Employment Percent change
20
10
The September average price for West Texas IntermediXX ate crude was $45.48 and $2.65 for Henry Hub natural gas.
0 -10 Pipeline transportation
-20
Oil & gas extraction
-30
Support activities for mining
-40
2013
2014
2015
NOTE: Three-month growth rate, seasonally adjusted and annualized.
Refining and Petrochemicals Gulf Coast Refinery Production and Margins Millions of barrels
245
Dollars per barrel Production
Margins
25
Production
240
Margins
235
20
230
15
225 220
10
215 210
2011
2012
2013
2014
2015
NOTE: Seasonally adjusted.
Cents per pound
U.S. Ethylene Margins
80 70 60 50 40 30 20
Ethylene price
10 0
Margin* 2011
2012
2013
2014
2015
5
Seasonally adjusted refinery production on the Gulf XX Coast has been falling since December but remains historically high. The price of West Texas Intermediate crude remains cheaper than foreign crudes like Brent, which means that domestic refiners still have a cost advantage relative to foreign competitors. Gulf Coast export volumes of gasoline are healthy, and distillate exports hit record highs in July at nearly 37 million barrels. Margins for refiners are comfortably above historical averages by several measures. The September retail price of regular gasoline was $2.02 and diesel was $2.32 per gallon on the Gulf Coast. XXPetrochemicals continue to see erosion in price and margin. Much of the world’s petrochemical prices are impacted by the global price of oil, while U.S. petrochemicals are more closely tied to domestic natural gas. The ratio of the price of oil to natural gas has fallen by over one-third since last summer, eroding some of the cost advantage that domestic producers enjoy when oil prices are high. The strong U.S. dollar has also eaten away at the domestic cost advantage. August ethylene margins at $0.12 per pound are at their lowest point since November 2011. The September price of ethylene was $0.20 per pound—the lowest price since 2008. The average price since 2001 is $0.40. However, the production of basic petrochemicals continues to grow year to year and export volumes through July are up.
*Based on Gulf Coast ethane feedstock prices.
SOURCES: Business-cycle index: Federal Reserve Bank of Dallas; employment: Bureau of Labor Statistics (BLS) and Dallas Fed; manufacturing employment: Dallas Fed and BLS; upstream energy: Baker Hughes, Dallas Fed and BLS; refining and petrochemicals: Energy Information Administration, Wall Street Journal, Pace Consulting, Polymerupdate, and Muse, Stancil and Co. CONTACT: For questions or information, contact Jesse Thompson at
[email protected].
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