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8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
1/19
Richard W. FisherPresident and CEO
Federal Reserve Bank of Dallas
Dallas
December 3, 2014
Comments on Monetary Policy andan Annual Texas Economic Review
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
2/19
$1,530,000,000,000
2013 Texas Economic Output
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
3/19
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
4/19
A Record-Setting Year in Texas
State output continues to climb to new heights. Employment growth is broad-based across industries and
income groups.
New highs for income per person.
Another year as top migration destination from other states.
Highest percentage of home mortgages with positive equity.
Construction contract values reach a record.
Oil & gas production soars along with refining capacity and
exports of petroleum products.
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
5/19
The Lone Star State Shines Bright
In the past several years, growth in energy, exports, professionaland business services, manufacturing, and trade, transportationand utilities have helped drive growth.
Full-year 2014 job growth is expected be ~3.5%, the current year-to-date run rate is 3.7% annualized growth (strongest since 1998).
The unemployment rate is 5.1%, near a 6-year low and below theU.S. rate of 5.8%.
Notably, since the beginning of the recession, the Texas labor force
has grown at a rate 10 timesthe U.S. labor force
Factors contributing to Texas growth: Larger share of fast-growing, fundamental industries.
Favorable long-term factors.
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
6/19
Total Nonagricultural EmploymentSince 1990 in Selected States
SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.
90
100
110
120
130
140
150
160
170
1990 1995 2000 2005 2010
Index, January 1990 = 100
+67%
+9%
+28%
Increase
since 1990
+25%
+47%
+11%
+6%
+12%
CA
FL
TX
U.S.
NYIL
MI
MA
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
7/19
Employment Growth by State
Thousands of jobs
NOTE: Data are from Dec. 2013Oct. 2014.
SOURCE: Bureau of Labor Statistics.
-50
0
50
100
150
200
250
300
350
400
450
TXCAFLNCGANYWACOTNAZUTPAIN
MOOHMAORMNOKSCIL
KYALLAMINJNVNDWICTKSIA
WVIDD
ENMARNEVAMERI
WYSDMTMSHINHMDVTAK
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
8/19
NOTES: Calculations include workers over age 15 with positive wages and exclude the self-employed. Wage
quartiles constructed based on U.S. 2000 wage distribution.
SOURCES: Current Population Survey Merged Outgoing Rotation Groups 2000, 2013; Dallas Fed.
14.1
27.8
-2.8
0.0
-5
0
5
10
15
20
25
30
35
40
Lowest Wage Quartile Lower-Middle WageQuartile
Upper-Middle WageQuartile
Highest Wage Quartile
Texas U.S. Minus Texas
Percent change in employment
Texas Creates Mid- and High-Paying JobsJob Growth by Wage Quartile, 20002013
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
9/19
72.5
56.3
43.2 42.3 40.5
29.4
17.5 16.9
8.8
-0.1
-10
0
10
20
30
40
50
60
70
80
Prof. &BusinessServices(13.3%)
Trade, Transp& Utilities(20.0%)
Construction(5.7%)
Leisure &Hospitality
(10.3%)
Educational &Health
Services(13.2%)
Government(15.9%)
Oil & GasExtraction &
MiningSupport(2.6%)
FinancialActivities
(6.1%)
Manufacturing(7.6%)
Information(1.7%)
Thousands of jobs
NOTES: Numbers in parentheses are total share of Texas nonfarm employment accounted for by each sector.
These data are seasonally adjusted and early benchmarked by Federal Reserve Bank of Dallas.
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Dallas Fed.
Texas Job Gains by Sector
Year-to-date through October, Texas added
344,700 jobs (3.7% annualized growth)
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
10/19
Record Income Per Capita
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
'70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12
U.S.
Texas
Per capita personal income
NOTE: Quarterly data inflation-adjusted to 2009 dollars.
SOURCES: Bureau of Economic Analysis.
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
11/19
0
50
100
150
200
250
300
350
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
DomesticInternational
Hurricane KatrinaNet migration (thousands)
NOTE: Data are for July of the previous year to July of the year indicated. Decennial census years unavailable.
SOURCE: Census Bureau.
Texas Remains Top Destination
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
12/19
Texas Has the Highest Percentage of HomeMortgages with Positive Equity
NOTE: As of second quarter 2014.
SOURCE: CoreLogic.
26
24
19
15
109
30
5
10
15
20
25
30
Nevada Florida Arizona Michigan California Massachusetts Texas
Percent of mortgages with balance > home value
Texashas the nations lowest share ofunderwater mortgages
Houston and Dallas are the nations top majormetros for the highest percentage of residences with
positive equity (97.5% and 97.0%, respectively)
U.S. avg: 10.7%
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
13/19
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
14/19
Texas Is a Leader in the Energy Boom
Texas is the countrys No. 1 producer of oil and gas.
Record natural gas production.
Oil production has nearly doubled in Texas in the last fiveyears, reaching its highest level since 1976.
Texas 3.2 million barrels/day of crude oilis ~37% of U.S.total and ranks as the worlds sixth largestcrude oilcontributor, more than Iraq and slightly less than Canada.
Texas accounts for ~29% of U.S. natural gas productionand is the worlds third largestcontributor, more thanNorway and Saudi Arabia combined
Texas is home to 25% of U.S. refinery capacity and 60% ofU.S. petrochemical production. Record net exports of ~2 million barrels/day of petroleum
products.
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
15/19
Texas Energy Production Has Soared
Million barrels per day
NOTE: Annual data except for final end points, which show August 2014 estimates.
SOURCES: U.S. Energy Information Administration; Railroad Commission of Texas.
10
12
14
16
18
20
22
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
Natural gasCrude oil
Billion cubic feet per day
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
16/19
Some Current Challenges
Acute labor shortages:
Anecdotes of shortages for auditors, plumbers, welders, electricians,construction workers, truck drivers.
Wage gains statewide have increased to 4.3%yr/yr.
Emerging price pressures:
Houston is seeing wage inflation and shelter costs creep into overallprices: Core price inflation is 3.7%yr/yr.
Bottlenecks in ability to export various oil & gas products: Texas share of total world petroleum and coal products is ~6%; this
figure will likely grow rapidly if recent U.S. regulatory ruling allowingsome exports of condensate is expanded.
Declining affordability as housing prices have risen quickly and
mortgage lending has slowed: Q3 14 FHFA home prices increased 7.1% yr/yr in TX; 4.5% nationwide.
In sum, labor market tightness may restrain growth next year, theenergy sector may cool a bit, and regional price pressures may cool
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
17/19
Percent of homes considered affordable
NOTE: The Housing Opportunity Index assumes that the family spends 28 percent of its gross income on a 30-year, fixed-
rate mortgage with a 10 percent down payment.
SOURCES: National Association of Home Builders; Wells Fargo.
0
10
20
30
40
50
60
70
80
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
DFW
Chicago
U.S.
Boston
San Francisco
NYC
Housing Affordabili ty Declining
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
18/19
Texas growth continues to outpace the U.S., with broad-
based employment and income gains Texas has added 344,700 jobs year-to-date
2014 job growth is running a full percentage point strongerthan last year.
New records:
Employment and income per capita. Construction contract values.
Oil & gas production.
Yet, Texas is facing some growing pains:
Emerging labor shortages. Growing regional price pressures.
SUMMARY: Opportunities abound for Texas continuedsuccess; none of them have much to do with monetary pol icy
A Record-Setting Year
8/10/2019 Annual Texas Economic Review by Federal Reserve Bank of Dalls
19/19
Richard W. FisherPresident and CEO
Federal Reserve Bank of Dallas
Dallas
December 3, 2014