Outlookfortexaseconomy

Outlook for the Texas Economy

LUIS TORRES

RESEARCH ECONOMIST

WAYNE DAY

RESEARCH ASSISTANT TECHNICAL REPORT

2 0 4 6

S E P T E M B E R 2 016

TR

Contents About this Report ................................................................................................................................ 3 July 2016 Summary .............................................................................................................................. 4 Economic Activity ................................................................................................................................ 7 Texas Business Cycle Index and Leading Index ................................................................................. 7 Major Metros Business Cycle Index ................................................................................................. 7 Border Metros Business Cycle Index ................................................................................................ 8 Manufacturing ..................................................................................................................................... 8 Manufacturing Outlook Survey ........................................................................................................ 8 Housing ................................................................................................................................................ 9 Housing Sales ................................................................................................................................... 9 Major Metros Housing Sales ............................................................................................................ 9 Border Metros Housing Sales ......................................................................................................... 10 Single-Family Housing Construction Permits ................................................................................. 10 Major Metros Single-Family Housing Construction Permits .......................................................... 11 Border Metros Single-Family Housing Construction Permits ......................................................... 11 Months of Inventory ...................................................................................................................... 12 Major Metros Months of Inventory ............................................................................................... 12 Border Metros Months of Inventory .............................................................................................. 13 Housing Opportunity Index (Affordability Index) ........................................................................... 13 Housing Price Index ........................................................................................................................ 14 Major Metros Housing Price Index ................................................................................................. 14 Services .............................................................................................................................................. 15 Services Sector Outlook Survey ...................................................................................................... 15 Texas Retail Sector ......................................................................................................................... 15 Major Metros Retail Sales .............................................................................................................. 16 Border Metros Retail Sales ............................................................................................................. 16 Energy ................................................................................................................................................ 17 Texas Production of Crude Oil and Rig Count ................................................................................ 17 Crude Oil and Natural Gas Prices ................................................................................................... 17

Employment ...................................................................................................................................... 18 Employment Growth Rate .............................................................................................................. 18 Major Metros Employment Growth Rate ...................................................................................... 18 Border Metros Employment Growth Rate ..................................................................................... 19 Unemployment Rate ...................................................................................................................... 19 Major Metros Unemployment Rate ............................................................................................... 20 Border Metros Unemployment Rate .............................................................................................. 20 Unemployment Insurance Claims: Initial Applications ................................................................... 21 Labor Force Participation Rate ....................................................................................................... 21 Manufacturing Employment .......................................................................................................... 22 Major Metros Manufacturing Employment ................................................................................... 22 Border Metros Manufacturing Employment .................................................................................. 23 Construction Employment ............................................................................................................. 23 Real Personal Income ..................................................................................................................... 24 Real Personal Income Per Capita .................................................................................................... 24 Total Private Employee Hourly Earnings ........................................................................................ 25 Major Metros Total Private Employee Hourly Earnings ................................................................. 25 Border Metros Total Private Employee Hourly Earnings ................................................................ 26 Manufacturing Employee Hourly Earnings ..................................................................................... 26 Major Metros Manufacturing Employee Hourly Earnings ............................................................. 27 Prices .................................................................................................................................................. 27 CPI Inflation Rates (Dallas) ............................................................................................................. 27 CPI Inflation Rates (Houston) ......................................................................................................... 28 Trade .................................................................................................................................................. 28 Exports (All Commodities) .............................................................................................................. 28 Manufacturing Exports ................................................................................................................... 29 Texas Exports by Country ............................................................................................................... 29 Real Trade Weighted Value of U.S. Dollar ...................................................................................... 30

2

About this Report Real Estate Center economists continuously monitor many facets of the global, national, and Texas economies. Outlook for the Texas Economy summarizes significant state economic activity and trends.

This publication is designed to be a one-stop resource for economic indicators. We hope you find them as useful as we do. Your feedback is always appreciated. Send comments and suggestions to info@recenter.tamu.edu.

Dr. Luis Torres and Wayne Day

Data current as of September 9, 2016 Š 2016, Real Estate Center. All rights reserved.

3

July 2016 Summary

The Texas economy exhibited steady although mixed signals in July. The number of jobs in the state increased by 23,600 for the month. Employment grew due to the services sector. Manufacturing and mining and logging employment in Texas declined while overall services continued a positive trend. Texas housing sales decreased across the state as building permits cooled.

The Dallas Fed’s Texas Leading Index, which signals future directional changes in the business cycle, increased during the month. The index was positively affected by the U.S. leading index, oil prices, stock prices of Texas companies, and average weekly hours worked. The index was negatively affected by the appreciating Texas value of the dollar, decreasing well permits, new unemployment claims, and a slowdown in the amount of new workers sought after. The Texas Business Cycle Index that measures current economic activity continued to grow but decelerated.

Texas housing demand took a hit during July after a long stretch of positive activity. Statewide housing sales decreased 7.9 percent year-over-year on a seasonally adjusted basis (negative 7.6 percent not seasonally adjusted), while continuing a monthly slowdown that began in April. Austin (negative 4.5%), Dallas-Fort Worth (negative 7.3%), Houston (negative 8.8%), and San Antonio (negative 1.3%) all decreased annually. Most other Texas metros declined on a monthly basis as well. (Preliminary data for August show that July was not representative of a new trend as housing sales rebounded in August.)

On the supply side, the number of building permits issued for new single-family homes decreased.

In recent months, Texas’ building permits showed signs of slowing compared with the increasing trend in prior years. Dallas-Fort Worth was the only major metro to post gains year-over-year.

Despite the decline, Houston (2,939) and Dallas-Fort Worth (2,666) still led the nation in the number of single-family permits issued, followed by Atlanta (1,842), Phoenix (1,382), and Charlotte (1,247).

Months of inventory of Texas houses for sale remained low at 3.7 months compared with 4.4 for the nation, seasonally adjusted (around 6.5 months of inventory is considered a balanced housing market). Overall, supply has been restricted due to limited lot inventory and construction labor shortages.

Rising Texas home prices reflect the low inventories resulting from constrained supply. Since 2011, Texas home prices have increased more rapidly than the rate of increase for the U.S. In 2Q2016, the U.S. and Texas FHFA Purchase-Only Housing Price Indexes increased from the year prior by 5.6 percent and 7.0 percent, respectively.

West Texas Intermediate crude oil prices averaged $44.90 per barrel compared with $51.17 a year earlier. Oil prices started an upward trend in February 2016 and have stabilized in recent months.

High oil output and large inventories have been constraining oil price increases. The number of operating rigs in Texas ticked up for the second straight month from a previous negative trend, while oil production maintained recent production levels.

4

Texas employment continued to register a positive annual growth rate at 1.5 percent seasonally adjusted, gaining 23,600 jobs over the month prior. After the employment growth rates in the United States and Texas converged in 3Q2015, Texas has continued below the seasonally adjusted annual employment growth rate for the U.S. Most of the annual employment growth occurred in the services sectors – primarily trade, transportation and utilities, financial activities, professional services, education and health services, and leisure and hospitality – while the information sector continues to decline over the prior year.

Of the goods-producing industries, construction is the only to add jobs. According to the Dallas Fed’s Texas Retail Sector Survey, retailer’s perceptions of economic conditions in the retail sector increased after showing negative sentiment in prior months. The continued expansion in the services sectors follows the favorable expectations presented by the Dallas Fed’s month of July Texas Service Outlook Survey.

The major monthly losses in employment occurred in manufacturing, mining and logging, information and financial services. Manufacturing employment, with a negative 3.7 percent yearover-year change, continued a year-over-year decline that started in April 2015. Concurrent with manufacturing employment contracting, the Dallas Fed’s Manufacturing Outlook Survey remained in negative territory, suggesting continued weakness in the manufacturing sector. Mining and logging employment continues to fall after reaching a peak in December 2014. The information sector has consistently down sized over that past decade and maintains that trend.

Houston continued to register a more drastic slowdown in overall employment versus the other major metros in the state. Surprisingly, even in the presence of dramatically lower oil prices and drilling activity, total jobs in Houston were still 0.2 percent greater than July 2015.

Job growth in Texas helped to keep the unemployment rate below the national average. Texas’ seasonally adjusted unemployment rate equaled to 4.6 percent from 4.5 in June and compared with a July 4.9 percent rate for the United States. Unemployed insurance claims, which measure initial applications for unemployment insurance, were down 0.8 percent year-over-year in Texas and have flattened out. Labor force participation edged down after increasing in prior months, in accordance with the long-run trend in the U.S. and Texas labor markets of workers leaving the job market.

Real total private employee hourly earnings fell 0.4 percent year-over-year, registering a lower growth rate than the nation since August 2015. Real earnings in Texas have not consistently remained above January 2007 levels on a seasonally adjusted basis because of the fall in the energy industry and loss of energy related jobs. Additionally, nominal earnings have not kept pace with inflation. Real earnings for Austin increased above January 2007 levels while Dallas, Fort Worth, and San Antonio have not. Houston real earnings have decreased over the past year as a response to the energy decline.

5

Increases in the Consumer Price Index have been suppressed and remain low in the U.S. as a consequence of low oil prices and a strong dollar that has made imports cheaper. The Consumer Price Index for Dallas continued to post a positive value of 1.3 percent year-over-year after registering negative rates in the majority of 2015. The Consumer Price Index for Houston year-overyear change was 1.6 percent in June.

Because of weakening global demand, lower oil prices, and a stronger dollar, U.S. and Texas exports of all commodities and manufactured goods fell in July year-over-year with Texas exports falling for the fourth straight month. Both the U.S. and Texas traded value of the U.S. dollar appreciated in July and June, respectively. The dollar value reflects the appreciation of the U.S. dollar with respect to world currencies, making U.S. and Texas exports more expensive to foreign buyers.

6

Economic Activity

Texas Business Cycle Index and Leading Index (Index Jan 2007 = 100) 140 135

120 Business Cycle Index

115

Leading Index (Right Axis)

110

125

105

120

100

115

95

110

90

105

85

100

80

95

75

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

130

Note: Seasonally adjusted. For more information see Texas Business Cycle Index.

Source: Federal Reserve Bank of Dallas

Major Metros Business Cycle Index (Year-over-Year Percent Change; Index Jan 2007 = 100) 14 12 10 8 6 4 2 0

Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-Sugar Land-Baytown San Antonio

-2 -4 -6 -8 -10

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Note: Seasonally adjusted. For more information see Texas Business Cycle Index.

Source: Federal Reserve Bank of Dallas

7

Border Metros Business Cycle Index (Year-over-Year Percent Change; Index Jan 2007 = 100) 14 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 -14 -16

Brownsville-Harlingen El Paso Laredo McAllen-Edinburg-Mission

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Note: Seasonally adjusted. For more information see Texas Business Cycle Index.

Source: Federal Reserve Bank of Dallas

Manufacturing

Manufacturing Outlook Survey (Index)

30 20 10 0 -10 United States

Texas

-20

-40

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-30

Note: Seasonally adjusted. For more information see Manufacturing Outlook Survey.

Sources: Federal Reserve Bank of Dallas and Institute for Supply Management. United States index is adjusted -50 to be on scale with Texas index.

8

Housing

110 105

Housing Sales (Index Jan 2007 = 100) United States

Texas

100 95 90 85 80 75 70

60

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

65

Note: Seasonally adjusted and detrended. For more information see Housing Sales.

Sources: Real Estate Center at Texas A&M University and National Association of Realtors

125 120 115 110 105 100 95 90 85 80 75 70 65 60 55

Major Metros Housing Sales (Index Jan 2007 = 100) Austin-Round Rock Dallas-Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Note: Seasonally adjusted sales reported by MLS and detrended. For more information see Housing Sales.

Source: Real Estate Center at Texas A&M University

9

120 115 110

Border Metros Housing Sales (Index Jan 2007 = 100) Brownsville-Harlingen

El Paso

Laredo

McAllen-Edinburg-Mission

105 100 95 90 85 80 75 70 60

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

65

Note: Seasonally adjusted sales reported by MLS and detrended. For more information see Housing Sales.

Source: Real Estate Center at Texas A&M University

110 100

Single-Family Housing Construction Permits (Index Jan 2007 = 100) United States

Texas

90 80 70 60 50 40

20

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

30

Note: Seasonally adjusted and detrended. For more information see Single-Family Housing Construction Permits.

Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University

10

110 100 90

Major Metros Single-Family Housing Construction Permits (Index Jan 2007 = 100) Austin-Round Rock Dallas-Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels

80 70 60 50 40

20

Note: Seasonally adjusted and detrended. For more information see Single-Family Housing Construction Permits.

Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University

110

Border Metros Single-Family Housing Construction Permits (Index Jan 2007 = 100) Brownsville-Harlingen

El Paso

Laredo

McAllen-Edinburg-Mission

100 90 80 70 60 50 40 30

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

30

Note: Seasonally adjusted and detrended. For more information see Single-Family Housing Construction Permits.

Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University

11

12 11

Months of Inventory (Months) United States

Texas

10 9 8 7 6 5

3

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

4

Note: Seasonally adjusted and detrended. For more information see Months of Inventory.

Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University

Major Metros Months of Inventory (Months)

9 8 7 6 5 4

2 1

Austin-Round Rock Dallas-Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

3

Note: Seasonally adjusted and detrended. For more information see Months of Inventory.

Source: Real Estate Center at Texas A&M University

12

Brownsville-Harlingen Laredo

El Paso McAllen-Edinburg-Mission

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

17 16 15 14 13 12 11 10 9 8 7 6 5 4

Border Metros Months of Inventory (Months)

Note: Seasonally adjusted and detrended. For more information see Months of Inventory.

Source: Real Estate Center at Texas A&M University

Housing Opportunity Index (Affordability Index) (Index)

90 80 70 60

United States Austin-Round Rock

50

Dallas-Plano-Irving Fort Worth-Arlington

40 30

Houston-Sugar Land-Baytown San Antonio-New Braunfels I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

16

Note: Seasonally Adjusted. For more information see Affordability Index.

Sources: National Association of Home Builders and Wells Fargo

13

Housing Price Index (Index Q1 2007=100)

140 135 130 125 120 115 110 105 100 95 90 85 80 75

United States

Texas

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II 2007

2008

2009

2010

2011

2012

2013

2014

2015

16

Note: Seasonally adjusted. For more information see Housing Price Index.

Source: Federal Housing Finance Agency

Major Metros Housing Price Index (Index Q1 2007=100)

165 160 155 150 145 140 135 130 125 120 115 110 105 100 95 90 85

Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels El Paso

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II 2007

2008

2009

2010

2011

2012

Note: Seasonally adjusted. For more information see Housing Price Index.

Source: Federal Housing Finance Agency

2013

2014

2015

16

14

Services

Services Sector Outlook Survey (Index)

50 40

United States

Texas

30 20 10 0

-20

Note: Seasonally adjusted. For more information see Services Sector Outlook Survey.

Sources: Federal Reserve Bank of Dallas and Institute for Supply Management. United States index is adjusted -50 to be on scale with Texas index.

Index

Texas Retail Sector (Index; Year-over-Year Percent Change)

Year-over-Year

50

Percent 25

40

20

30

15

20

10

10

5

0

0

-10

-5

-20

-10

-30 -40 -50

-15 Dallas Federal Reserve Bank Retail Survey

Retail Sales (Right Axis)

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-10

Note: Seasonally adjusted and inflation adjusted. For more information see Texas Retail Sector.

Sources: Retail Sector Outlook Survey from the Federal Reserve Bank of Dallas, Retail Sales from Texas Comptroller of Public Accounts

-20 -25

15

Major Metros Retail Sales (Year-over-Year Percent Change) 80

Austin-Round Rock Dallas-Plano-Irving

60

Fort Worth-Arlington Houston-Sugar Land-Baytown

40

San Antonio

20 0 -20 -40 I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV 2007

2008

2009

2010

2011

2012

2013

2014

2015

Note: Seasonally adjusted and inflation adjusted. For more information see Texas Retail Sector.

Source: Retail Sales from Texas Comptroller of Public Accounts estimated by Dallas Federal Reserve Bank

Border Metros Retail Sales (Year-over-Year Percent Change) 15 10 5 0 -5

-10

Brownsville-Harlingen El Paso Laredo McAllen-Edinburg-Mission

-15 -20 -25

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV 2007

2008

2009

2010

2011

2012

2013

2014

Note: Seasonally adjusted and inflation adjusted. For more information see Texas Retail Sector.

Source: Retail Sales from Texas Comptroller of Public Accounts estimated by Dallas Federal Reserve Bank

2015

16

Energy

Texas Production of Crude Oil and Rig Count (Count)

(Number of rigs)

1200

(Millions of barrels)

Production of Crude Oil (Right Axis)

1100 1000

130

Number of Operating Rigs

120 110 100

800

90

700

80

600

70

500

60

400

50

300

40

200

30

100

20

Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16

900

Note: For more information see Texas Production of Crude Oil and Rig Count.

Sources: Baker Hughes and U.S. Energy Information Administration

$/Barrel

140

Crude Oil and Natural Gas Prices ($) Crude Oil

120

$/million BTU

Natural Gas (Right Axis)

14 12 10

80

8

60

6

40

4

20

2

0

0

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

100

Note: For more information see Crude Oil and Natural Gas Prices.

Source: U.S. Energy Information Administration received from Thomson Reuters

17

Employment

5 4 3

Employment Growth Rate (Year-over-Year Percent Change) United States Texas

2 1 0 -1 -2 -3 -4 -6

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-5

Note: Seasonally adjusted. July 2016 is preliminary. For more information see Employment Growth Rate.

Source: Bureau of Labor Statistics

Major Metros Employment Growth Rate (Year-over-Year Percent Change) 6 5 4 3 2 1 0 -1

Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-Baytown-Sugar Land San Antonio

-2 -3 -4 -6

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-5

Note: Seasonally adjusted. July 2016 is preliminary. For more information see Employment Growth Rate.

Source: Bureau of Labor Statistics

18

Border Metros Employment Growth Rate (Year-over-Year Percent Change) Brownsville-Harlingen Laredo

El Paso McAllen-Edinburg-Mission

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6

Note: Seasonally adjusted. July 2016 is preliminary. For more information see Employment Growth Rate.

Source: Bureau of Labor Statistics

Unemployment Rate (Percent) 11 United States

10

Texas

9 8 7 6 5

3

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

4

Note: Seasonally adjusted. July 2016 is preliminary. For more information see Unemployment Rate.

Source: Bureau of Labor Statistics

19

Major Metros Unemployment Rate (Percent) 9 8 7 6

4 3 2

Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-Baytown-Sugar Land San Antonio Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

5

Note: Seasonally adjusted. July 2016 is preliminary. For more information see Unemployment Rate.

Sources: Bureau of Labor Statistics and Real Estate Center at Texas A&M University

Border Metros Unemployment Rate (Percent) 13 12 11 10 9 8 7

5 4

Brownsville-Harlingen El Paso Laredo McAllen-Edinburg-Mission Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

6

Note: Seasonally adjusted. July 2016 is preliminary. For more information see Unemployment Rate.

Sources: Bureau of Labor Statistics and Real Estate Center at Texas A&M University

20

Unemployment Insurance Claims: Initial Applications (Year-over-Year Percent Change) 140

U.S.

120

Texas

100 80 60 40 20 0

-40

Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16

-20

Note: Seasonally adjusted. For more information see Unemployment Insurance Claims: Initial Applications.

Source: Department of Labor

Labor Force Participation Rate (Percent) 67 United States

Texas

66 65 64

62

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

63

Note: Seasonally adjusted. For more information see Unemployment Rate.

Source: Bureau of Labor Statistics

21

Manufacturing Employment (Year-over-Year Percent Change) 6 4

United States

Texas

2 0 -2 -4 -6 -8 -10

-14

Note: July 2016 is preliminary. For more information see Employment Growth Rate.

Source: Bureau of Labor Statistics

10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 -14 -16 -18 -20

Major Metros Manufacturing Employment (Year-over-Year Percent Change)

Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-Baytown-Sugar Land San Antonio Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-12

Note: July 2016 is preliminary. For more information see Employment Growth Rate.

Source: Bureau of Labor Statistics

22

Border Metros Manufacturing Employment (Year-over-Year Percent Change) 20 15 10 5 0 -5 -10 -15

Brownsville-Harlingen

-20

El Paso Laredo

-25

Note: July 2016 is preliminary. For more information see Employment Growth Rate.

Source: Bureau of Labor Statistics

10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 -14 -16 -18 -20

Construction Employment (Year-over-Year Percent Change) United States Texas

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

McAllen-Edinburg-Mission Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-30

Note: July 2016 is preliminary. For more information see Employment Growth Rate.

Source: Bureau of Labor Statistics

23

Real Personal Income (Year-over-year Percent Change) 12 United States

10

Texas

8 6 4 2 0 -2 -4 -6 -8 I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II 2007

2008

2009

2010

2011

2012

2013

2014

2015

16

Note: Seasonally adjusted. For more information see Real Personal Income.

Sources: Bureau of Economic Statistics and Real Estate Center at Texas A&M University

Real Personal Income Per Capita (Year-over-year Percent Change) 8

United States

6

Texas

4 2 0 -2 -4 -6 -8 -10 I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II 2007

2008

2009

2010

2011

2012

2013

2014

2015

16

Note: Seasonally adjusted. For more information see Real Personal Income.

Sources: Bureau of Economic Statistics and Real Estate Center at Texas A&M University

24

Total Private Employee Hourly Earnings (Year-over-Year Percent Change) 5

United States

4

Texas

3 2 1 0 -1 -2 -3

-5

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-4

Notes: Inflation adjusted, seasonally adjusted and detrended. July 2016 is preliminary. For more information see Total Private Employee Hourly Earnings.

Source: Bureau of Labor Statistics

Major Metros Total Private Employee Hourly Earnings (Year-over-Year Percent Change) 10 8 6 4 2 0 -2 -4

Austin-Round Rock-San Marcos

-6

Dallas-Plano-Irving

-8

Fort Worth-Arlington

-10

Houston-Sugar Land-Baytown

-12

San Antonio-New Braunfels Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-14

Notes: Inflation adjusted, seasonally adjusted and detrended. July 2016 is preliminary. For more information see Total Private Employee Hourly Earnings.

Source: Bureau of Labor Statistics

25

Border Metros Total Private Employee Hourly Earnings (Year-over-Year Percent Change) 28 24 20

Brownsville-Harlingen

El Paso

Laredo

McAllen-Edinburg-Mission

16 12 8 4 0 -4 -8 -16

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-12

Notes: Inflation adjusted, seasonally adjusted and detrended. July 2016 is preliminary. For more information see Total Private Employee Hourly Earnings.

Source: Bureau of Labor Statistics

Manufacturing Employee Hourly Earnings (Year-over-Year Percent Change) 25 United States

Texas

20 15 10 5 0

-10

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-5

Notes: Inflation adjusted. July 2016 is preliminary. For more information see Total Private Employee Hourly Earnings.

Source: Bureau of Labor Statistics

26

Major Metros Manufacturing Employee Hourly Earnings (Year-over-Year Percent Change) 35 30 25 20 15

Dallas-Plano-Irving Fort Worth-Arlington Houston-Sugar Land-Baytown San Antonio-New Braunfels

10 5 0 -5 -15

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-10

Notes: Inflation adjusted. July 2016 is preliminary. For more information see Total Private Employee Hourly Earnings.

Source: Bureau of Labor Statistics

Prices

CPI Inflation Rates (Dallas) (Year-over-Year Percent Change) 7 6

United States

Dallas

5 4 3 2 1 0 -1 -3

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-2

Note: For more information see CPI Inflation Rates.

Source: Bureau of Labor Statistics

27

CPI Inflation Rates (Houston) (Year-over-Year Percent Change)

6

United States

5

Houston

4 3 2 1 0 -1

-3

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-2

Note: For more information see CPI Inflation Rates.

Source: Bureau of Labor Statistics

Trade

35

Exports (All Commodities) (Year-over-Year Percent Change)

30

United States

25

Texas

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

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-20

Note: Adjusted for inflation with Bureau of Labor Statistics export indices. For more information see Exports.

Sources: International Trade Administration, Foreign Trade Division, and U.S. Census Bureau

28

Manufacturing Exports (Year-over-Year Percent Change)

35

United States

30

Texas

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

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

-20

Note: Adjusted for inflation with Bureau of Labor Statistics export indices. For more information see Manufacturing Exports.

Sources: International Trade Administration, Foreign Trade Division, and U.S. Census Bureau

Texas Exports by Country (Percent) 100 90 80 70 60 50 40

Netherlands Mexico China Canada Brazil ROW

30 20 10 0 2007

2008

2009

2010

2011

2012

2013

2014

Note: For more information see Exports.

Sources: International Trade Administration, Foreign Trade Division, and U.S. Census Bureau

2015

thru July 2016

29

Real Trade Weighted Value of U.S. Dollar (Index January 2007 = 100)

115 United States

Texas

110 105 100 95 90

80

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

85

Note: For more information see Real Trade Weighted Value of U.S. Dollar.

Sources: Federal Reserve Bank of Dallas and Federal Reserve Bank of St. Louis

30

MAYS BUSINESS SCHOOL Texas A&M University 2115 TAMU College Station, TX 77843-2115

http://recenter.tamu.edu 979-845-2031

DIRECTOR GARY W. MALER

ADVISORY COMMITTEE RUSSELL CAIN, CHAIRMAN Port Lavaca

DOUG JENNINGS, VICE CHAIRMAN Fort Worth

MARIO A. ARRIAGA Conroe JACQUELYN K. HAWKINS Austin TED NELSON Houston DOUG ROBERTS Austin

KIMBERLY SHAMBLEY Dallas RONALD C. WAKEFIELD San Antonio C. CLARK WELDER San Antonio BILL JONES, EX-OFFICIO Temple

i