The sharp decline in oil prices will cool the Texas economy and job growth in 2015 but won’t arrest the state’s momentum, according to projections from the Federal Reserve Bank of Dallas.
If oil prices hold at current levels, Texas employers will add 235,000 to 295,000 jobs this year, a growth rate of 2 to 2.5 percent, said Keith Phillips, senior economist and research officer at the Dallas Fed, who delivered his forecast Tuesday at the Dallas Fed’s San Antonio branch.
That would be about 150,000 fewer positions than the state’s employers added in 2014, and it would bring Texas back down to or slightly below national rates of job creation.
“It’ll be tapping on the brakes this year,” Phillips said, “but not slamming on the brakes.”
The deceleration has already begun in the oil fields, with rig counts dropping and job cuts underway. While the state’s smaller oil towns could see outright economic declines, Phillips said, Houston and the other large metro economies, including Dallas-Fort Worth, are diversified enough to avoid contraction.
“Houston is much less sensitive to oil price shocks than it was in the ’80s, a lot less sensitive, partly because its economy has evolved into other sectors,” such as high-tech and petrochemical manufacturers that benefit from lower energy costs, he said.
Houston has already seen some signs of deceleration, and the effects of the energy slowdown will appear in Austin, Dallas and San Antonio about the second quarter of this year, Phillips said.
Texas will continue to enjoy healthy job and economic growth, but it will suffer a sharper impact on its gross state product because an oil worker’s typical output is greater than the average Texas worker, Phillips said.
Mining accounts for roughly 13 percent of the state economy, Phillips said, bouncing back to levels seen in the early 2000s thanks to the fracking boom. Employment, however, is far lower than it was in the 1980s heydays.
“So you might expect an energy price shock to have not as big an impact as it did in the ’80s but a bigger impact than it would’ve had in the ’90s,” he said.
Separately, Detlef Hellerman and Texas A&M University issued a more urgent take on the impact of oil prices.
Hellerman, a petroleum engineer and finance professor at Texas A&M, said that while lower energy prices benefit Texas consumers, they could delay or mothball more than $100 billion in energy-sector projects in Texas and parts of the South.
“The impact [of low oil prices] will be a tremendous slowdown in energy and industrial construction projects that are tied to the energy sector,” Hellerman said in an email.