By Mitchell Schnurman
mschnurman@star-telegram.com
With a bankruptcy filing, American Airlines is easily the bad-news headliner of the past month. But two other pillars of the Tarrant County economy are showing cracks, too.
Defense contracting, led by Lockheed Martin, faces growing pressure as Washington tries to cut the federal budget deficit. Big weapons programs like Lockheed's F-35 fighter are juicy targets in the budget battle. Bell Helicopter's V-22 could get in the crosshairs, too.
Then there's natural gas, the local economic X factor of the past decade. Production in the Barnett Shale remains robust, but it peaked in May, and the Haynesville field in Louisiana and East Texas now surpasses it. The number of drilling rigs in the Barnett recently fell to a seven-year low, a quarter of its 2008 high.
Companies are moving rigs to fields with more oil and natural gas liquids, where returns are higher. Local opposition from cities such as Southlake and growing fears of groundwater contamination add to the negative trend.
The future of American Airlines is diciest. Bankrupt companies usually shrink, sometimes significantly, and deep job cuts would have a ripple effect. American has about 24,000 employees in North Texas, and most will probably have less money to spend. Some retirees may be squeezed if pensions and retiree healthcare are trimmed.
Dallas/Fort Worth Airport will feel some pain because American accounts for the vast majority of traffic there. Landing fees could decline and renovations be delayed. The budgets of area cities could be pinched if American shrinks its tax base or asks for abatements.
In two to three years, each of these key sectors -- air transportation, defense and gas drilling -- could be smaller. Unfortunately, the economic recovery is still wobbly, and unemployment remains high.
North Texas has a well-diversified economy, and it's weathered many booms and busts, including in these industries. But the sectors play an outsize role in the region.
Air transportation and aerospace manufacturing account for a much larger share of jobs in Tarrant than in the rest of the nation -- nearly eight times the U.S. average. In Tarrant County alone, 46,305 people work in air transport and aerospace, said Cheryl Abbot, regional economist for the Bureau of Labor Statistics.
That's 7.3 percent of private jobs. And that number is half the story, because the pay stands out, too. The average weekly wage in Tarrant County was about $900 in 2010. Air transport workers were paid $1,221, aerospace manufacturing workers $1,791, according to the bureau.
In natural resources mining, the category that includes oil and gas, the average weekly pay in Tarrant was just over $3,000. Workers got a high hourly rate and racked up lots of overtime.
"Jobwise, oil and gas is a relatively small part of the regional economy, but wagewise, it's a big factor," Abbot said. "That's why the multiplier effect is so much greater."
Oil and gas accounted for 1.3 percent of private jobs and 4.3 percent of wages in Tarrant last year. The industry also supports many workers in accounting, construction, professional services and more.
The drilling boom was a major reason that DFW weathered the recession better than most metro areas. In the past decade, the Barnett Shale accounted for 38 percent of the incremental growth in the regional economy, according to a recent study by the Perryman Group.
Of the three sectors, oil and gas is most likely to bounce back quickly and become a powerhouse again. Natural gas prices are still below $4, and when they move up, drilling in the Barnett is poised to rise. XTO, a subsidiary of Exxon, told my colleague Jack Z. Smith that it has drilled 1,500 wells in the Barnett and plans to do 4,000 more.
Gas supplies have soared with more shale finds, and everyone is waiting for the demand side to rise. U.S. producers may export natural gas, and more big employers are converting fleets to run on the fuel. Several governors recently pledged to convert state vehicles, and Detroit automakers plan to put dual tanks on some 2013 trucks so they can run on gasoline or compressed natural gas.
In Texas, 25 to 30 more fueling stations have been funded for DFW, Houston and Austin, said Ken Morgan, director of the Energy Institute at Texas Christian University. Morgan said military bases are studying whether to convert their fleets, and he recently went to a meeting in Florida that included each branch of the military service.
"The dial is moving a lot, and we could see a tipping point soon," Morgan said. "When that happens, producers will respond very quickly. Several in North Texas could be major movers."
It's hard to see the fortunes of American and Lockheed changing that quickly. American's restructuring may take two years, and who knows what the growth prospects will be then -- or who will run the company. Management is often surprised in bankruptcy.
Lockheed hopes it can simply stabilize the workforce. It's already scaling back, expecting to eliminate 670 jobs at its Fort Worth plant by the end of 2011.
Full production for the F-35 has been pushed out several years. Many say that the timeline will be extended further and that fewer planes will ultimately be produced.
"We know the cycles in defense contracting, because we've been through them," said Terry Clower, an economist at the University of North Texas. "It's a short-term issue, but long-term, the international contractors will do well."
It would be a good time for beaten-down sectors to climb back. Residential construction remains low, in part because many college grads moved back into their parents' homes.
"They need jobs that pay more than the rent," Abbot said.
"We just need a little more job growth to get this engine going again."
You know where it won't come from.
Mitchell Schnurman's column appears Sundays and Thursdays. 817-390-7821Twitter: @mitchschnurman
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