Presentedby

Jenna Saucedo-Herrera, President & CEO

@SanAntonioEDF @JLeighSaucedo

San Antonio Hispanic Chamber of Commerce | August 25, 2016

Propelling San Antonio’s Economy to a Positionof Prominence and Prosperity

BUSINESS

ATTRACTION

ENTREPRENEURIAL

DEVELOPMENTWORKFORCE

DEVELOPMENTBUSINESS

RETENTION& EXPANSION

To propel San Antonio to the forefront of

today’s top performing cities

COLLABORATION

New Energy IT / Cyber Security AerospaceAdvanced

Manufacturing Bioscience

Develop Action Plans & Performance Goals

8/25/2016

1

2016 Texas Economic Outlook:Takes a Licking But Keeps on Ticking

Keith PhillipsAssistant Vice President and Senior Economist

The views expressed in this presentation are strictly those of the presenter and do not necessarily reflect the positions of theFederal Reserve Bank of Dallas or the Federal Reserve System. Any secondary distribution of this material is strictly prohibited.

• Job growth so far in 2016 has slowed to 1.6% from 2.0% in 2015, while RGDP growth has slowed to 1.0% from 2.0%.

• Manufacturing sector continues to be hit by global weakness and strong dollar.

• Health care sector has picked up with greater insurance coverage. Retail and leisure and hospitality has remained healthy, but positive impact of lower energy prices smaller than expected.

• RGDP growth expected to pick up in the second half of the year.

National Economy Slowing Slightly in 2016

Consumer Spending in 2015-2016 not as Strong as Expected

‐12

‐10

‐8

‐6

‐4

‐2

0

2

4

6

8

'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15

Real Personal Consumption Expenditures

Real Retail Sales

Percent Y/Y

Sources: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis.

US Households Have Reduced Debt

1.19

0.97 (Q1)

1.35

0.97 (Q1)

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

2000 2002 2004 2006 2008 2010 2012 2014 2016

Ratio, personal debt per capita/personal income per capita

U.S.

Texas

Mortgage68.2%HE revolving

3.9%

Auto loan9.0%

Credit card5.9%

Student loan10.1%

Other2.9% U.S.

Mortgage60.7%

HE revolving1.0%

Auto loan16.0%

Credit card7.0%

Student loan11.0%

Other4.4%

Texas

Note: Data are through second quarter 2016, except where noted.Sources: Federal Reserve Bank of New York, Bureau of Economic Analysis.

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2

Job Growth Averaging 186K Per Month So Far in 2016, Down from 229K in 2015

‐1000

‐800

‐600

‐400

‐200

0

200

400

600

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Thousands,SA

Source: Bureau of Labor Statistics

U.S. Leading Index Suggests Continued Growth in Months Ahead

‐20

‐15

‐10

‐5

0

5

10

15

20

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Percent change, annualized

12‐month6‐month

Note: Shaded areas represent U.S. recessions.Sources: Conference Board, Federal Reserve Bank of Dallas.

RGDP Growth Slipped to 2.0% in 2015, August Blue Chip Survey Projects 1.8% in 2016

3.9

1.7

3.9

2.72.5

‐1.5

2.9

0.8

4.6

2.7

1.9

0.50.1

2.8

0.8

3.1

4.0

‐1.2

4.0

5.0

2.32.02.6

2.0

0.90.8

1.2

‐10.0

‐8.0

‐6.0

‐4.0

‐2.0

0.0

2.0

4.0

6.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

SAAR, Percent

2013 2.5% Q4/Q4

2014 2.5% Q4/Q4

Source: Blue Chip Economic Indicators

2015 2.0% Q4/Q4

2016 1.8% Q4/Q4

• In five years prior to 2015, growth in energy, construction and exports provided a strong stimulus to Texas.  

• In 2015, low oil prices, strong dollar and labor market tightness reduced job growth.

• Health care and government remain strong—offsetting some of the weakness in energy and manufacturing.

• Q1 2016 job growth revised downward significantly.

• In 2015, jobs grew 1.3% (157,000 jobs), a drop from 3.7% in 2014. In 2016, if oil prices average $30‐$50, growth will be between 0% to 1.5%.  If prices average below $30, job growth could turn negative. 

Texas Economy Weakened but Continued to Add Jobs in 2015, Similar Growth Expected for 2016

8/25/2016

3

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

NV

ND CO TX FL GA

OR UT

WA CA SC DE MA TN ID NC US

AR AZ RI LA OK MI

NY

OH KY WY

WI

NM IN IL

MO

MD AL PA MN SD KS CT NJ

NH IA NE

MS

DC VA ME

MT HI VT AK WV

Percent Change,Dec. 2013 ‐ Dec. 2014

U.S.

TX

NOTE:  Black bars represent major energy‐producing states.SOURCE:  Bureau of Labor Statistics

Texas Ranked 4th in Job Growth in 2014, Growth in Energy States Varied Widely

‐6

‐5

‐4

‐3

‐2

‐1

0

1

2

3

4

5

ID UT FL OR AZ CA TN CO GA SC WA VA DE NV AR HI

NJ

NC US KY MI

IN MD

NH NE

MN

OH

MS

NY TX MT IA MA RI SD WI

AL VT DC ILMO PA CT ME

NM KS AK OK LA WV

WY

ND

Percent Change,Dec. 2014 ‐ Dec. 2015

U.S.

TX

NOTE:  Black bars represent large energy‐producing states.SOURCE:  Bureau of Labor Statistics

Texas Ranked 29th in Job Growth in 2015; Jobs Contracted in Most Energy States

2.5

0.8

0.1

1.5

0.91.1

-1.2

-0.3

-2.4

1.5

0.91.1

-3

-2

-1

0

1

2

3

Jan Feb Mar Apr May Jun

Dallas Fed employment before Q1 benchmark

Dallas Fed employment after Q1 benchmark

Percent change, month/month*

*Seasonally adjusted, annualized rate. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by the Federal Reserve Bank of Dallas.

Employment Revision Shows Weaker First Quarter for Texas

‐5

‐4

‐3

‐2

‐1

0

1

2

3

4

UT

OR FL NV

WA VT MA NC

CO HI

MI

SD CA ID GA

MO

ME

MD NY

WI

MN DE US

NH SC AZ CT IA IL DC OH TN RI NE PA IN VA NM AK AL NJ

TX MT

AR LA MS

WV KY OK

ND KS WY

Annualized Percent ChangeDec. 2015 ‐ Jul. 2016

U.S.

TX

NOTE:  Black bars represent large energy‐producing states.SOURCE:  Bureau of Labor Statistics

Texas Hit Hard in Q1 2016, But Jobs Still Positive for the Year

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Texas Job Declined in Q1 2016 but Rebounded in Q2

‐2

‐1

0

1

2

3

4

5

2011 2012 2013 2014 2015 2016

NOTE: Shaded bars represent  July/June annualized growth.SOURCE: Bureau of Labor Statistics.

Percent, Q/Q, SAAR

U.S.

Texas

2016 Growth Weaker Across Major Metros Compared to 2015

‐3

‐2

‐1

0

1

2

3

4

5

Texas Houston(24.8%)

Dallas(20.6%)

San Antonio(8.4%)

Fort Worth(8.4%)

Austin(8.2%)

El Paso(2.6%)

CorpusChristi(1.6%)

Job Growth, 2013‐2016

Percent, Dec./Dec.

NOTE: Figures in parentheses represent shares of total state employment. Shaded bars indicateJuly 2016/Dec. 2015 annualized growth.SOURCES: Bureau of Labor Statistics, Federal Reserve Bank of Dallas.

Texas Unemployment Rate Still Holding Below National Rate

(July)4.6

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Percent, SA

US unemployment rate

Texas unemployment rate(July)4.9

Source: Bureau of Labor Statistics.

‐8

‐6

‐4

‐2

0

2

4

6

8

10

12

M/M SAAR

NOTE:  Shaded areas represent Texas recessionsSOURCE: Federal Reserve Bank of Dallas

3.7% trend

Texas Economy Dampening but Continues to Expand

Texas Business Cycle Index

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5

Energy & Manufacturing Sectors Continue to Decline

‐30

‐25

‐20

‐15

‐10

‐5

0

5

10

15

20

Trade, Transp& Utilities(20.2%)

Government(15.9%)

Health &Private

Education(13.7%)

Professional &Business Svcs

(13.4%)

Leisure &Hospitality(10.6%)

Manufacturing(7%)

FinancialActivities(6.1%)

Construction(5.8%)

NaturalResources &Mining (1.7%)

Information(1.6%)

(Job Growth 2013‐2016)Dec/DecPercent Change

Note: Figures in parentheses represent shares of total nonfarm employment. Shaded bars indicateJuly 2016/Dec. 2015 annualized growth.Source: Bureau of Labor Statistics, adjustments by Federal Reserve Bank of Dallas.

TX Construction Contract Values Weakening

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Real $, Mil5MMA, SA

Residential

Non Residential

Non Building

Total

Source: F.W. Dodge, Federal Reserve Bank of Dallas

Texas Office Markets Generally Healthy

5

10

15

20

25

30

35

0

50

100

150

200

250

300

350

400

450

'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Real, Millions $, 5MMA Percent

Office Vacancy Rate

Office and Bank Buildings

Contract Values

Note: Shaded areas represent Texas recessionsSource: F.W. Dodge, CBRE, Federal Reserve Bank of Dallas

16%

TX Manufacturing Indicators Improving But Remain Weak

-100

-80

-60

-40

-20

0

20

40

60

80

100

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16

Production

Volume of New Orders

Company Outlook

Index

July '16

SOURCE: Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey.

8/25/2016

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65.0

70.0

75.0

80.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0

 80

 100

 120

 140

 160

 180

 200

 220

 240

 260

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

U.S. minus Texas

Texas 

Index, SA, RealJan. 2000=100

Texas Value of the Dollar

Source: U.S. Census, Bureau of Labor Statistics, WISERtrade, Federal Reserve Bank of Dallas

IndexJan. 1988=100

Rising Value of the Dollar Continues to Dampen Exports

Average Private Sector Earnings Weakened in Texas with Decline in High-Wage Energy Jobs

20

21

22

23

24

25

26

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Average hourly earnings, $/hr

Note: Data are seasonally adjusted, five‐month centered moving averages.Source: Bureau of Labor Statistics.

U.S.

Texas

$25.57

$24.49

2015 Job Losses Concentrated in High-Paying Sectors

NOTES: Numbers in chart are 2014 average hourly earnings for each sector; numbers in parenthesis are each sector’s share of total nonfarm employment.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by Federal Reserve Bank of Dallas.

‐22

‐17

‐12

‐7

‐2

3

8

Info. (2%) Oil & GasExtract.,Mining

Supp. (2%)

Fin. Act.(6%)

Prof. &Bus. Serv. (14%)

Gov. (16%)

Constr.(6%)

Educ. &HealthServ. (13%)

Mfg. (7%)

Trade,Transp. &

Util. (20%)

Leisure& Hosp.(11%)

Percent change (Dec/Dec)

$21.47$27.15$29.45

$14.09

$31.03

$24.87

$26.85

$31.29

$34.49

$24.90

Drilling Rig Count Picking up Slightly in Recent Weeks

0

20

40

60

80

100

120

140

160

0

100

200

300

400

500

600

700

800

900

1000

Gas price(*10) 

Oil price

Rig Count

Sources: Oil and Gas Journal, Baker Hughes.

Number Nominal $

8/25/2016

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Eagle Ford, Permian Basin Jobs Declining

90

95

100

105

110

115

120

125

'07 '08 '09 '10 '11 '12 '13 '14 '15

Rest of Texas

Eagle Ford counties

Permian Basin counties

Index, 2007:Q1 = 100*

*Quarterly, seasonally adjusted.SOURCES: Bureau of Labor Statistics, seasonal and other adjustments by Federal Reserve Bank of Dallas.

Which Metros Performed the Best in 2015? Size of Energy Sector Explains a Lot

0 5 10 15 20 25

Midland (‐8%)Odessa (‐9.9%)

Longview (‐4.2%)Corpus Christi (‐0.7%)

Houston‐Baytown‐Sugar Land (0.2%)San Angelo (‐0.4%)

Wichita Falls  (0.5%)Laredo (1.3%)Abilene (0%)Tyler  (2.1%)

College Station‐Bryan (3.2%)Fort Worth‐Arlington (1.3%)

McAllen‐Edinburg‐Mission (1.6%)Beaumont‐Port Arthur (‐1.3%)

San Antonio (3.2%)Amarillo (1.1%)

Sherman‐Denison (2.4%)Dallas‐Plano‐Irving  (4.3%)Austin‐Round Rock (4.7%)

Lubbock (2.2%)Waco  (2%)

Texarkana (2.2%)Killeen‐Temple‐Fort Hood (4.8%)

Brownsville‐Harlingen (1.6%)El Paso (3.1%)

Mining sector share of total employmentNote: Data in parentheses are total nonfarm job growth Dec. 2014 ‐ Dec. 2015.  Mining share data as of 2014.Sources: Texas Workforce Commission, Bureau of Labor Statistics, Federal Reserve Bank of Dallas.

San Antonio (3.2%)

Houston‐Baytown‐Sugar Land (0.2%)Corpus Christi (‐0.7%)   

Correlation: ‐0.88

Austin‐Round Rock (4.7%)Dallas‐Plano‐Irving (4.3%)

Fort Worth‐Arlington (1.3%)

Noncurrent C&I Loans Have Ticked Up Regionally Over the Last Two Years

0

1

2

3

4

5

6

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Other

Consumer

Commercial & Industrial

Commercial RE

Residential RE

U.S. 11th District

Percent of Total Loans

1.55

1.12

NOTE: 2016 data are YTD through Q1.SOURCE: Quarterly Reports of Conditions and Income, Federal Financial Institutions Examination Council.

0.17

-0.85

0.26

-0.03

-0.07

0.29

0.18

-0.69

-0.74

-1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4

Average Weekly Hours

Help Wanted Index

Texas Stock Index

New Unemployment Claims

Well Permits

Real Oil Price

U.S. Leading Index

Texas Value of the Dollar

Net Change in Texas Leading Index

NOTE: Seasonally adjusted.SOURCE: Federal Reserve Bank of Dallas.

Net contributions to change in the Texas Leading Index(May ‐ July)

Leading Index Components Mixed

8/25/2016

8

Texas Jobs Forecasted to Grow 0-1.5% in 2016

90

95

100

105

110

115

120

125

130

135

140

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Index, 1987=100

Leading Index

Texas nonfarm employmentand forecast

(with 80% confidence band)

SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas.

Millions, seasonally adjusted

Oil Futures Suggest Flat Prices, But Highly Uncertain

45.87(Dec.'16)

49.70(Dec.'17)

30.77(Dec.'16) 22.80

(Dec.'17)

68.37(Dec.'16)

108.36(Dec.'17)

0

20

40

60

80

100

120

Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018

WTI spot price

Futures prices (Aug 12)

95% futures confidence interval

SOURCES: Bloomberg; Energy Information Administration; calculations by FRB Dallas.

Dollars per barrel

WTI Futures Prices and Confidence Intervals

• In 2015 Texas weakened sharply but continued to grow ‐ did much better than 1980s and better than other energy states.

• Tight real estate markets and continued growth in sectors such as health care and government are offsetting some of the decline in energy and manufacturing.

• Big downward revision in Q1 job growth makes Texas look much weaker than we thought – data somewhat suspicious

• Despite revision, Texas still growing ‐ 2016 Texas job growth likely to be between 0% and 1.5%.  

• Biggest risk to the forecast is sharp decline in oil prices. 

Summary

8/25/2016

1

Presented by: Steve Nivin, Ph.D.Please contact Steve Nivin with any questions or comments at snivin@saberinstitute.org or 210-517-3609.

2016 ECONOMIC FORECAST UPDATE: GROWTH IN SAN ANTONIO SLOWING AS

FORECAST

Presented on:August 24, 2016

Business cycle index shows slowing growth across most major metropolitan economies.

2

Source: Federal Reserve Bank of Dallas

Major metros experiencing slowing growth in employment, while Houston is seeing declines.

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

3

Employment growth in San Antonio leads all major metropolitan area at 2.15% in July.

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

4

8/25/2016

2

Employment growth in San Antonio fell below the long-term trend in July.

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

5

Average annual growth = 2.40%

6

Most sectors still showing growth in employment, but it is slowing across almost all sectors.

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

Unemployment rate in San Antonio is third lowest among major metropolitan economies in Texas.

Source: Bureau of Labor Statistics; Federal Reserve Bank of Dallas

7

Unemployment rates still low across major metro economies with slight increases in most MSAs in the past few months including San Antonio.

Source: Bureau of Labor Statistics; seasonal adjustment by Federal Reserve Bank of Dallas

8

8/25/2016

3

2016 Forecast Update Employment growth of 2.25-2.75%

Growth of 22,300 to 27,300 jobs Unemployment rate at 3.4-3.7% Continued low oil prices, slow global growth, and tight labor markets causing

growth to slow, as predicted at beginning of the year. Forecast remains the same, but… Reasonable chance for employment growth below 2.25% and unemployment

above 3.7% by end of year. Risks to forecast

Low oil prices Slowing growth around the world

Brexit Strong dollar Uncertainty of presidential election Tight labor market

9

Thank you

Questions?

10