The Economist: The Economic Forecast for Texas’ Major Cities
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The outlook for Texas’ metropolitan areas is positive, although the slowdown in the energy sector is affecting them to varying degrees. The Perryman Group recently updated the short-term forecast through 2019 in light of changing oil prices.
The Austin-Round Rock MSA continues to be among the strongest performers in the nation and the state, remaining the top market in the nation in numerous rankings. Austin is poised for expansion in most private sector industries, with enough gains to offset weakness in the government sector.
Through 2019, the Austin area is forecast to see gains in output (real gross product or RGP) at a 4.27% yearly rate, for an overall increase of almost $25.3 billion. Nearly 110,851 net new jobs are projected to be added (2.25% per annum growth) to bring wage and salary employment to more than a million jobs over the next five years.
The Dallas-Plano-Irving Metropolitan Division has been generating more jobs than almost any other of the United States’ largest metropolitan divisions. While the area has been affected by the oil price decline, the effect is much less than in other oil-driven areas such as Houston, and the area will be a growth leader among major metropolitan areas in Texas. The Perryman Group’s most recent forecast indicates output (RGP) expansion at a 4.06% pace, for a gain of more than $73.1 billion through 2019. Wage and salary employment is likely to expand by 259,377 jobs over the period as well (a 2.11% yearly pace).
The Fort Worth-Arlington Metropolitan Division is growing faster than the nation as a whole, led by gains in personal services and construction. Although the area has shed jobs recently, the unemployment rate in the area remains a healthy 3.8% (as of April). The Perryman Group’s forecast indicates expansion at a rate outpacing much of the United States, with RGP forecast to increase at a 4.01% annual rate through 2019 for a gain of almost $25.4 billion. Over the same 2014-2019 period, wage and salary employment is likely to grow by 103,362 jobs, a 1.97% per annum gain.
The large military presence in the El Paso area continues to constitute a base for the local economy. Total employment has fluctuated recently, but last month saw gains of 2,300 jobs in the region. The area is projected to see modest growth over the next five years, with output (RGP) expected to grow at 3.28% annually for a gain of close to $4.7 billion through 2019. Employment is forecast to increase by nearly 29,000, a 1.68% yearly growth rate.
As anticipated, the slowdown in the oil industry is affecting the Houston-area economy. Energy had been a key reason for the economic strength of the Houston-The Woodlands-Sugar Land MSA, and businesses engaged in oil and gas exploration and production have begun to shed jobs. Despite that weakness and the ripple effects through the economy, expansion in other sectors is expected to moderate the overall negative impact of the end of the most recent oil surge. Over the next five years, output in the area is projected to expand at a 4.10% annual rate, leading to an increase of more than $109.7 billion. Wage and salary employment is forecast to grow by 307,115 jobs (1.96% per year). Much of this growth is concentrated in the latter part of the forecast horizon.
The San Antonio-New Braunfels area economy has also seen some fallout from the slowing in activity related to the nearby Eagle Ford Shale, with total employment remaining steady after declining slightly in March. Even so, the economy has accelerated in recent months and is on track to outpace the national average. The MSA is expected to experience relatively healthy growth in output (RGP) at a 3.67% yearly pace and a gain of $18.8 billion through 2019. Wage and salary employment will grow by an estimated 1.90% per annum over the next five years with the addition of almost 99,000 net new jobs.
While the oil price decline is affecting economic growth in most parts of the state, the diversification of the state’s business complex leaves Texas far less vulnerable to fluctuations in the energy sector than in the past. My latest forecast indicates that the worst of the slowing will be relatively short lived, with the pace of hiring and other business activity picking up after 2015. Over the five-year forecast horizon, all of the state’s metropolitan areas are forecast to see overall growth.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.