Houston Economic Indicators - Federal Reserve Bank of Dallas

Houston Economic Indicators

DALLASFED

FEDERAL RESERVE BANK OF DALLAS • APRIL 26, 2016

Summary

Revised data suggest that Houston’s economy was slightly weaker than originally estimated at the end of 2015 and that it has weakened since. Port activity and industries driven by local demand, such as health care, are holding up but may begin losing steam as losses in the energy sector mount. With leading indicators still weak, the outlook for Houston is modestly negative.

Business-Cycle Index

The Houston Business-Cycle Index growth rate rose XX to an annualized –0.5 percent in March from a revised rate of –3.8 percent in February. The weak numbers came primarily from job losses. Cumulatively, the index is down an annualized 1.4 percent in 2016, the weakest three-month change since April 2015 (–1.7) and, before that, December 2009 (–2.3).

Percent*

15 10 5 Average since 2000 = 3.2 0

2015 growth = 1.0 2016 year-to-date growth = –1.4

-5

2013

2014

2015

2016

*Annualized month-over-month growth rate. SOURCE: Dallas Fed.

Employment Growth Total Trade, transp & utilities (20%) Professional & business svc (15%) Government (13%)

0.0 Mar. 2015 to Mar. 2016 -0.7 Dec. 2015 to Mar. 2016 -1.5 -5.6

Construction & mining (11%) -10.4 Leisure & hospitality (10%)

Manufacturing (8%)

0.8 1.3 1.3

Education & health services (13%)

-5.5

2.4 3.7 2.7 6.4

-9.9

-3.8

Financial activities (5%)

7.7

1.3 0.9 0.5 0.2 0.5

Other services (4%) Information (1%)

Total nonfarm employment contracted an annualXX ized 0.7 percent over the three months ending in March. Construction and mining (–6,042 and –1,259 jobs, respectively), manufacturing (–2,228) and professional and business services (–6,807) led decliners. Job growth came mostly from leisure and hospitality (5,712), education and health services (2,542) and trade, transportation and utilities (1,969).

-0.3

NOTES: Data show seasonally adjusted and annualized percentage growth by industry supersector. Numbers in parentheses represent share of total employment and may not sum to 100 due to rounding. SOURCES: Bureau of Labor Statistics; adjustments by the Dallas Fed.

Help Wanted Online Percent growth, monthly

10 5 0 -5 Employment New ads

-10 -15

2009

2010

2011

2012

2013

2014

NOTE: Job ad data are statistically optimized weighted moving averages, shifted forward two months. SOURCES: Conference Board; Bureau of Labor Statistics; adjustments by the Dallas Fed.

2015

2016

Year-over-year growth in total employment was a tepid XX –0.04 percent in March, up from –0.14 percent in February. The weaker job numbers come after recent revisions by the Dallas Fed reveal Houston touched on negative year-over-year employment growth in January. Houston’s unemployment rate rose from 4.7 percent in XX February to 5 percent in March. Despite overall weakness in the local economy, the labor force has continued to grow this year. The unemployment rate was 5 percent in the U.S. and 4.3 percent in Texas in March. The growth rate in the four-month moving average XX of new job ads fell to –2.3 percent in March after briefly climbing to 2.6 in January. Declines the past four months were driven primarily by professional occupations, but all sectors contributed, with the exception of services occupations, which were flat. This indicator suggests weak employment demand over the next three months—an interpretation supported by the job losses in professional and business services, which were centered on employment services (e.g., staffing firms).

Trade

Monthly declines in the total value of trade moving XX through the Houston–Galveston customs district continued unabated in January as oil and natural gas prices (and their derivatives) were testing new lows. However, the amount of product moving in and out of the region climbed for the third consecutive month.

Houston–Galveston Port Activity Billions of dollars, millions of metric tons

23 21 19 17

Vessel weight

15

Value

13

2011

2012

2013

2014

Year-to-year declines in the value of products shipped XX to Houston’s top export destinations in January and February was uneven. Brazil saw the largest percentage decline in the value of exports from Houston. The value of exports to Mexico—which lost its spot as Houston’s top trade partner in 2015 to China—saw the largest absolute decline.

2015

NOTE: Data displayed are centered three-month moving averages, seasonally adjusted. SOURCES: Census Bureau.

Those year-over-year declines in export values were XX driven principally by falling prices for commodities like petroleum and coal, chemicals, oil and gas, and agricultural products. Machinery and fabricated metals products also contributed strongly to declines, due in no small part to a strong dollar. The chief sector adding to the value of exports was transportation equipment.

2016 Top Export Destinations

Year/year growth

5 0 -5 -10 -15 -20 -25 -30

1.3

1.0

0.9

0.9

0.6

0.5

0.5

Mexico

China

Netherlands

Brazil

Belgium

Colombia

Saudi Arabia

NOTE: Figures in axis are values of 2016 exports through February in billions of dollars. SOURCES: Census Bureau.

Construction and Real Estate

Recent revisions to 2015 construction employment XX erased a large anomalous surge in construction jobs from the September 2015 to December 2015 period, indicating that the industry instead contracted a slight 0.7 percent over that time.

Job Growth–Construction Percent

40 30 20

6.4

10 0 -10

-0.7

-30

-0.9 -19.9

-23.4

-28.7

Since December, construction employment losses have XX accelerated dramatically across all sectors. However, there hasn’t been a corresponding decline in construction activity, although anecdotes and data from CBRE suggest that project backlogs across commercial and residential real estate are hollowing out.

3.2

-5.8

-20 -40

43.5

Sept. to Dec. 2015 Dec. 2015 to Mar. 2016 Average since 2000

Total construction Construction of buildings

Heavy & civil construction

-33.9 Specialty trades

Real estate & leasing

NOTE: Real estate and leasing is not a subsector of construction. SOURCES: Bureau of Labor Statistics; adjustments by the Dallas Fed.

Median Home Prices and Home Sales Dollars (thousands)

Sales (thousands)

225

7.5

Sales

7.0

200

6.5

Median home prices and home sales moved in lockstep XX through the second half of 2015 and both declined from January to February. Sales declines have been concentrated in luxury homes and, thus, have had an outsized impact on median home prices.

6.0

Median price

175

Growth in real estate and leasing—which belongs to XX the financial activities industry, not construction—has accelerated since December 2015.

5.5 5.0

150

2012

2013

2014

2015

NOTES: Data are seasonally adjusted. Sales are per the six-month moving average of payroll employment.

2016

4.5

SOURCE: Houston Association of Realtors.

NOTE: Data may not match previously published numbers due to revisions. CONTACT: For questions or information, contact Jesse Thompson at [email protected].

More Dallas Fed economic updates: www.dallasfed.org/research/update/