Texas Economy: The Oil Patch Setback
Notwithstanding continuing weakness in the oil and natural gas production and related industries over the past year, in 2016 the Texas economy added 190,600 non-farm jobs, for an annual increase of 1.6 percent. Private-sector employment rose by 1.5 percent while government employment (federal, state and local) grew by 2.1 percent.
Texas added more new jobs than any other states except California and Florida in fiscal 2016, and had the lowest unemployment rate among the 10 most populous states at the end of that year (4.7 percent, tied with Florida).
The Texas unemployment rate remained below the national rate in every month of 2016, as it has since January 2007. As of August 2016, Texas total non-farm employment stood at 12,053,400.
Consumer spending is a major component of the Texas economy. In 2016, for the first time since 2010, state sales tax collections fell (by 2.3 percent) from the previous year’s total. The decline was led by reduced sales tax collections from the oil and natural gas-related sectors, but collections from the manufacturing, retail trade, information, and real estate sectors were also down compared to 2015.
Growth continued in the construction, wholesale trade, finance and insurance, and food service sectors. In addition, sales activity for motor vehicles operating on Texas highways, as measured by state motor vehicle sales tax collections, rose by 2.3 percent over the prior year.
The Consumer Confidence Index is a monthly measure of consumer optimism, an important factor affecting the sales of housing, automobiles and other major purchases.
The index for the four-state West South Central (WSC) Region, which includes Texas, fluctuated during fiscal 2016 but ended the year unchanged from the end of 2015. The index for the nation as a whole was also unchanged.
Oil and gas
As a result of the precipitous decline in oil and natural gas prices — the monthly average NYMEX price for oil fell from $102.39 per barrel in July 2014 to $44.80 in August 2016, a decrease of 56 percent — the Texas mining and logging industry lost 35,800 jobs in 2016.
Industry employment peaked in December 2014 at 319,600 and has declined steadily since then, reaching 224,400 in August 2016.
In addition to substantial exploration activities within the state and in the Gulf of Mexico, Texas is headquarters for many of the nation’s largest oil and natural gas refining and distribution companies, and has a large number of energy-related jobs in other industries. The recent fall in oil and natural gas prices had significant negative effects on those industries, as well.
Construction was the only one of three goods-producing industries to have a net increase in employment in 2016, adding 8,800 jobs (1.3 percent) to reach 693,600 in August 2016.
Employment in the construction of buildings sector increased the most of any construction sector, growing by 9,700 (6.1 percent). The other specialty trade contractors sector had the largest decline, down 6,500 (9.2 percent).
Housing construction activity was down moderately from fiscal 2015. Total single-family building permits issued in the year ending in July 2015, at 101,131, were down by 1.1 percent from the same period one year earlier, while multi-family permits fell by 5.4 percent.
According to Multiple Listing Service data from the Texas A&M Real Estate Center, the median sales price for an existing Texas single-family home rose by 6.7 percent, from $202,000 in July 2015 to $215,500 in July 2016.
In July 2016, Texas had a 4.0-month inventory of existing homes for sale, slightly higher than a year before and a substantial improvement from the recent high of 8.7 months in mid-2011.
Services: Education, Health, Hospitality
Texas’ service-providing industries, which account for more than 85 percent of the state’s total non-farm employment, saw job growth of 2.5 percent in fiscal 2016.
All eight service-providing industries saw job increases, with the highest growth rates in leisure and hospitality and education and health services, each at 3.9 percent.
The professional and business services industry added 26,000 jobs (up 1.6 percent) in fiscal 2016. Employment changes varied considerably among industry sectors, with the largest increases in management, scientific, and technical consulting services (9.9 percent) and computer systems design and related services (5.5 percent).
The largest percentage decrease was in the architectural, engineering, and related services sector (2.2 percent). Employment services employment declined by 1.5 percent.
This sector includes temporary help agencies and many of its jobs represent temporary and/or part-time positions. Total professional and business services employment was 1,624,300 in August 2016.
The education and health services industry added 61,500 jobs in fiscal 2016, a growth rate of 3.9 percent. The relatively small educational services sector saw an increase of 9,400 jobs (5.0 percent). The much larger health care and social assistance sector grew at a 3.7 percent rate (52,100 jobs).
Within the health care and social assistance sector, home health care services had the highest absolute increase (15,500), while offices of physicians had the largest percentage gain (6.6 percent). In all, Texas education and health services employment reached 1,652,800 in August 2016.
Along with education and health services, the leisure and hospitality industry saw the highest rate of job growth among all industries in 2016, adding 48,400 jobs for a 3.9 percent increase. The majority of the industry’s job gains occurred in the food services and drinking places sector, which added 38,800 jobs (up 3.9 percent).
The largest percentage increase was in the amusement, gambling, and recreation industries sector, which increased by 15.3 percent (15,700 jobs). Total leisure and hospitality employment in August 2016 was 1,296,700, representing about 11 percent of total employment.
The other services industry is a varied mix of business activities including repair and maintenance services, laundry services, religious, political and civic organizations, funeral services, parking garages, beauty salons and a wide range of personal services.
Personal and laundry services led employment gains in this industry, with a 3.5 percent growth rate in fiscal 2016.
In all, other services industry employment rose by 7,300 (1.7 percent) to 427,800 in August 2016.
Trade, Transportation and Utilities
The trade, transportation and utilities industry, the state’s largest employer with 20 percent of total non-farm jobs in August 2016, added 37,500 jobs (1.6 percent) during the year.
Employment in two of the three industry sectors — retail trade, wholesale trade and transportation, warehousing and utilities — rose during fiscal 2016.
Employment in retail trade increased by 28,300 (up 2.6 percent), with the largest net increases in food and beverage stores (6,800) and motor vehicle and parts dealers (6,400).
Employment in clothing and clothing accessories stores fell by 3.0 percent (3,500 jobs) during the year. Wholesale trade employment rose by 2.3 percent in 2016, or 14,000 additional jobs.
Transportation, warehousing and utilities sector employment, however, decreased by 4,800 (1.0 percent). In all, the trade, transportation and utilities industry provided 2,440,900 Texas jobs in August 2016.
The information industry is a collection of diverse sectors, representing established sectors of the economy (newspaper publishing, data processing, television broadcasting, and wired telephone services) as well as some newer sectors (cellphone service providers, internet providers, and software).
Industry employment was 203,600 in August 2016, an increase of 1,900 (0.9 percent) from August 2015. Job growth was led by data processing, hosting, and related services (up 5.6 percent), while publishing industries employment decreased by 2.9 percent.
Government employment increased by 2.1 percent (39,700) over the year. Federal government employment increased by 4,600, state government employment by 12,100, and local government employment by 23,000. Total government employment in Texas was 1,898,500 in August 2016.
Excepted from the State of Texas Annual Cash Report 2016, Comptroller of Public Accounts.