Texas is facing what appears to be a tough year. Last year we saw the price of oil get cut in half and there’s been no meaningful uptick in the price since. So, what does this mean for the Texas economy?
Take a look at the report from the Texas Workforce Commission that reveals a loss of 25,400 jobs in March. In regards to job development, Texas, which has been creating jobs at a pretty fast clip is set for a slow down as the falling price of oil puts the brakes on the local economy.
Texas also stands to lose a large number of jobs outside of the oil industry. Most of these are service-based jobs in the shale regions.
The economist said, “Texas is currently finding the kind of job losses that will ordinarily happen in a downturn.”
Now, some will say that this time is different. That Texas is highly diversified when it comes to jobs but I don’t believe that to be the case. Take a look at the recent housing starts from the City of Houston. They’re basically zero. Now compare that data point to last years’ data point and we see a double-digit swing to the negative side.
Texas has diversified but most of the jobs are tied indirectly to the energy industry. As we get later in the year you’ll see that investment declines tied to the petroleum sector will impact Texas negatively.
Who’s Winning and Who’s Losing
Obviously, U.S. consumers and U.S. companies are the benefactors. Low-cost gasoline and petroleum have a direct impact on consumer discretionary income and it lowers operating expenses for small/medium businesses. Think of it like a tax cut improves spending power.
The biggest loser has to be the insulated economies that are solely dependent on oil and gas exploration. A perfect example is the California gold rush of 1849. Once the gold supply dwindled the jobs dried up and the towns sit empty.
I’d anticipate a couple more unsatisfactory months in the Lone Star state, but I wouldn’t expect a major bounce back in the local economies. Keep in mind that the hottest oil and gas towns will take the biggest fall. If you’re not in these areas then you’ll probably weather the downturn just fine.