Full text of The Southwest Economy : First Quarter 2019

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Federal Reserve
Bank of Dallas
FIRST QUARTER 2019

Southwest
Economy

}

Position as Top Exporting
State Exposes Texas to
Shifting Trade Policy
PLUS
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Lower Oil Prices, Tight Labor Markets
to Restrain Texas Growth in 2019

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On the Record: Civic Leader Seeks to Bolster
Texas Attributes by 2036 Bicentennial

}}
Spotlight: Abundant Sunshine Not Enough
to Power Texas Residential Solar Energy

}}
Go Figure: Shale Revolution Boosts Texas Refiners’
Competitiveness

PRESIDENT’S PERSPECTIVE

E

} Dallas Fed economists

expect GDP growth to
slow in 2019 primarily
due to waning fiscal
stimulus, global growth
deceleration and slowing
job growth due to a

mployment in Texas rose 2.3 percent in 2018,
as the state ended the year with a recordlow unemployment rate of 3.7 percent, and
the U.S. is estimated to have grown gross domestic
product (GDP) approximately 3.1 percent. Dallas Fed
economists expect GDP growth to slow in 2019
primarily due to waning fiscal stimulus, global growth
deceleration and slowing job growth due to a tight
labor market. There is an unusually high level of
uncertainty embedded in our forecast due to trade
uncertainties and other geopolitical risks.
Dallas Fed economists expect Texas job growth will
slow to between 1.5 and 2 percent in 2019. This slowing is due to a number of uncertainties as well as the
impact of a historically tight labor market.
In “Position as Top Exporting State Exposes Texas
to Shifting Trade Policy,” Jesus Cañas and Stephanie
Gullo assess the state’s rapid export growth by measuring the global market shares of the manufactured
goods that Texas exports. Texas has a comparative
advantage in energy-related products, including
petroleum products and petrochemicals, but also in
computer equipment and motor vehicle parts, among
others. The authors note that tariffs can make Texas
producers less competitive domestically and abroad
by driving up the costs of intermediate goods imports
used in the production process.
Keith Phillips and Judy Teng note in their economic
outlook article that one of the biggest constraints facing
Texas in 2019 will likely be the tight labor market. The
record-low unemployment rate has led to widespread
reports of labor shortages, and our Dallas Fed surveys
show that 71 percent of employers who cannot find
qualified workers say it’s due to a lack of applicants.
Dallas Fed economists will continue to produce
research that explores key economic trends and
discusses their implications. This work has critical implications for how we think about economic growth in
our region, the U.S. and the global economy.

tight labor market.

Robert S. Kaplan
President and Chief Executive Officer
Federal Reserve Bank of Dallas

Position as Top Exporting
State Exposes Texas
to Shifting Trade Policy
By Jesus Cañas and Stephanie Gullo

}
ABSTRACT: Texas enjoys
a strong position in
world trade, benefiting
from its comparative
advantage in energyrelated manufacturing
and intermediate goods
exports. As the nation's
No. 1 exporting state,
Texas faces challenges
from shifting trade policies,
which tend to erode the
cost advantages that
benefit the state's leading
sectors globally.

T

exas is the nation’s largest exporting state. With about $260 billion
worth of goods exported annually
over the past decade, the state has become a powerhouse that benefits from
a central geographical location as well
as accessible sea and land ports.
Texas exports have soared since the
end of the oil bust in late 2016, driven
by a large increase in both the volume
and price of oil and natural gas exports.
Moreover, since 2000, the state has
derived 67 percent of its export growth
from manufacturing.
However, the state’s comparative
advantage in the global marketplace
has come under growing pressure. A
shift in U.S. trade and tariff regulations
threatens to directly and indirectly
contribute to increasing costs for many
leading Texas export sectors that could
benefit competitors.
Accounting for 19 percent of U.S.
exports, Texas leads California, with
a 10.7 percent share, and New York at
4.9 percent in 2018.1 Texas’ annualized
6 percent growth in exports is almost
double the U.S. annualized 3.6 percent
growth since 2000 (Chart 1).
Texas is one of the nation’s manufacturing hubs, belying lore of the
state as an epicenter of cowboys and
cattle. Texas represents 8.4 percent of
U.S. gross domestic product, but 9.4
percent of U.S. manufacturing output, second only to California’s 13.6
percent share.
Thus, it is not surprising that the
bulk of goods exports from Texas, 78.5
percent, in 2018 were manufactured
goods. Texas is also the top producer of
oil and gas in the country, responsible
for more than 4.7 million barrels of
oil per day and 22.5 trillion cubic feet
of gas. After the removal of a long-

standing federal crude oil export ban
in 2015, these exports have boomed.
Oil and gas represents 18 percent of the
state’s total goods exports.
By comparison, agricultural and
ranching products—including corn,
cotton, wheat and soybeans—account
for 2 percent.2

Manufacturing Across Metros
Houston is a leader in energy-related
manufacturing, including machinery
and fabricated metal manufacturing and petrochemicals.3 Dallas and
Austin are the computer and electronic
components manufacturing centers
of the state, while San Antonio and
Fort Worth specialize in transportation
equipment manufacturing. Fort Worth
also boasts a concentration of machinery and fabricated metals production.
Texas offers a central location within
North America, a flexible labor market,
a low cost of living and an attractive
business environment.4 In addition,
Texas shares a border with four of
Mexico’s most industrialized states.
This proximity to Mexico has likely
helped Texas manufacturing improve
productivity and remain competitive in
a globalizing business environment.
Texas accounts for 1.6 percent of overall world exports, well above the global
market share of other U.S. states. The
state ranks second in per capita manufacturing exports behind Louisiana.

Diversified Products, Destinations
Manufactured goods accounted for
the largest share of the state’s exports,
78.5 percent, last year (Table 1). Petroleum and coal products was Texas’ No.
1 manufacturing export sector, at $55.7
billion and 17.7 percent of the total.
Computer and electronic products

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

3

CHART

1

Texas Export Growth Almost Double National Rate Since 2000

Index, Jan. 2002 = 100*
300

275

Texas total exports
Texas manufacturing exports
U.S. ex. Texas total exports
U.S. ex. Texas manufacturing exports

250

225

200

175

150

125

100

75

Recession
’02

’03

Recession
’04

’05

’06

’07

’08

’09

’10

Oil bust
’11

’12

’13

’14

’15

’16

’17

’18

*Real dollars, seasonally adjusted.
NOTES : Data are through December 2018. Recession shading refers to Texas recessions; oil bust shading refers to peak to trough of Texas oil and gas employment.
SOURCES: Census Bureau; Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas.

($47.9 billion/15.2 percent share) and
chemicals ($46.1 billion/14.6 percent
share) followed. Transportation equipment and machinery rounded out the
top five. These five sectors together
represented 62.6 percent of the total.
The second-largest export sector was
mining—largely oil and gas—at 18.3
percent of exports. Oil and gas and
oil-dependent manufactured goods
(petroleum and coal products and
chemicals) together make up over half
of Texas exports.
Mexico was Texas’ No. 1 export
destination, receiving 34.8 percent of
the state's exports, notably computer
and electronic products (23 percent),
petroleum and coal products (19 percent) and transportation equipment
(10 percent).
The state’s No. 2 market destination, Canada, received 8.7 percent of

4

Texas’ exports, followed by China at
5.3 percent.
By region, Asia was the secondbiggest destination (25.7 percent of
exports), followed by Europe (14.4
percent) and Latin America, excluding
Mexico (13.7 percent).

Global Comparative Advantage
Comparative advantage refers to
potential gains from trade arising from
differences in resources or technology
that allow a given country to produce a
particular good at a lower cost. The revealed comparative advantage (RCA)
index, which measures the relative
advantage or disadvantage of a country by industry based on that country’s
export mix, is a widely used method to
quantify comparative advantage.
The RCA index is the ratio of two
shares: The numerator is a specific

good’s share of a country’s total exports, while the denominator is the
share of the same good relative to total
world exports.
A country has a comparative advantage in a good if its RCA exceeds
1, and it has a comparative disadvantage if the RCA is below 1. The logic
behind RCA is that a country will have
a higher share of global exports of a
specific good if it has a comparative
advantage producing it.
The same methodology can be applied to states. If the RCA for a Texas
good exceeds 1, Texas’ export share of
the product is higher than the world’s
corresponding share, indicating a comparatively more concentrated production of the item in Texas.
The 17 industries with RCAs greater
than 1.1—indicative of a clear competitive advantage—represent two-thirds

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

of Texas’ total manufacturing exports
(Chart 2). As expected, Texas shows a
manufacturing edge in energy-related
products; the industry with the highest
RCAs is petroleum and coal products.
The resin, synthetic rubber, and fibers
and filaments industry and basic chemicals round out the top three.
Petroleum products manufacturing is
the transformation of crude oil into usable products. Typically, it involves the
refining of petroleum into gasoline and
diesel. It also includes the production
of asphalt coatings and lubricating oils.
Basic chemicals manufacturing is the
production of petrochemicals such as
ethylene, propylene and butadiene—the
latter used to make synthetic rubber.
Texas, as the main trade intermediary between the U.S. and Mexico,
holds a comparative advantage in
intermediate goods exports.5 Computer equipment and aerospace
products and parts have high RCAs
and significant export shares. Computer equipment manufacturing
includes computers, peripherals and
communications equipment as well
as intermediate components such as
capacitors and resistors.
Companies in the aerospace products
and parts manufacturing industry produce aircraft, aircraft components, missiles and space vehicles. Texas also has
a comparative advantage in producing
motor vehicle parts, fabricated metals,
engines and machinery.

Competing with Asia, Europe
RCAs help to identify countries
and states with similar comparative
advantages, which tend to be direct
competitors for export market share.
The countries exhibiting RCA patterns
that best resemble those of Texas are its
likely competitors.6
Based on that assumption, Table 2
shows Texas’ top five competitors in
global manufacturing markets and
their top products vis-á-vis the state.
Texas competes in manufacturing
exports mainly with Asian countries—
Japan, Korea and Singapore—followed
by Germany and Israel. Texas competes head to head with Asian countries in industrial machinery, electrical

TABLE

1

Bulk of Texas Exports Are Manufactured Goods
NAICS description

Billions of dollars

Share of total

Manufacturing
Petroleum & coal products

$55.7

17.7

Computer and electronic products

$47.9

15.2

Chemicals

$46.1

14.6

Transportation equipment

$25.1

8.0

Machinery ex. electrical

$22.6

7.2

Electrical equipment, appliances and components

$12.4

3.9

Fabricated metal products

$8.3

2.6
1.8

Primary metals

$5.7

Plastics & rubber products

$5.5

1.8

Miscellaneous mfg.

$5.5

1.7

Food products

$5.3

1.7

Paper products

$2.0

0.6

Textile mills

$1.4

0.5

Nonmetallic mineral products

$0.8

0.3

Leather & allied products

$0.7

0.2

Furniture & related products

$0.5

0.2

Beverages & tobacco products

$0.5

0.2

Wood products

$0.5

0.1

Apparel

$0.4

0.1

Printing & related support activities

$0.3

0.1

Textile product mills

$0.3

0.1

Manufacturing total

$247.4

78.5

$57.3

18.2

Mining
Oil & gas extraction
Mining, ex. oil & gas

$0.3

0.1

Mining total

$57.6

18.3

Agriculture
Crop production

$5.4

1.7

Animal production & aquaculture

$0.1

0.0

Agriculture total

$5.6

1.8

Total Texas exports

$315.3

NOTES: All data refer to 2018. Industry values may not add up to total due to rounding. NAICS refers to the North
American Industry Classification System. Miscellaneous other categories are not listed but are included in the total. The
forestry and logging and fishing, hunting and trapping industries each total less than $500 million and are not included.
SOURCES: Census Bureau; Bureau of Labor Statistics.

and computer components, and motor
vehicle parts.
In general, Texas, Germany and Israel vie for market share in the control
instruments (transmitters, Ethernet
equipment), power transmission, electrical equipment and plastic products
industries. Over the past decade, Japan
has topped the list of competitors,
while Korea has moved up to second

place and Singapore has slid to third.
Germany and Israel have recently
gained relevance as Texas competitors.

Trade Uncertainty, Tariff Impacts
Economists agree that trade has a
net positive effect on economic output.
However, opening markets to trade
remains controversial largely because
of its short-term distributional effects,

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

5

CHART

2

Texas Has Outsized Concentration in Petroleum and Coal Products Exports
Petroleum & coal products (17.0%)

4.3

Basic chemicals (8.7%)

2.5

Computer equip. (8.0%)

2.3
2.8

Resin, synthetic rubber & fibers & filaments (6.2%)
1.4

Motor vehicle parts (4.5%)

2.0

Aerospace products & parts (4.0%)
1.5

Other electrical equip. & components (2.9%)

1.7

Other fabricated metal products (2.6%)
1.2

Agriculture, construction & machinery (2.3%)

1.3

Engines, turbines & power transmision equip. (2.2%)

1.1

Electrical equip. (2.0%)

1.4

Industrial machinery (1.9%)
Audio & video equip. (1.4%)

1.2

Meat products & meat packaging products (1.3%)

1.2
1.4

Other chemical products & preparations (0.8%)

2.5

Railroad rolling stock (0.5%)

2.5

Finished & coated textile fabrics (0.3%)
0

1

2
3
Revealed comparative advantage

4

5

NOTES: The revealed comparative advantage (RCA) index is a measure an entity has in a specific industry that indicates its relative strength; shown are all industries with an
RCA greater than 1.1 (indicating a comparative advantage) in 2016. Numbers in parentheses are the share of Texas exports in 2016.
SOURCES: Census Bureau; UN Comtrade; authors' calculations.

which often bestow a relatively small
benefit on a large number of consumers while harming a small number of
workers by a large amount.
For Texas, trade openness has been
favorable on net given that Texas
exports have thrived, particularly since
implementation of the North American Free Trade Agreement (NAFTA)
in 1994.7 Texas intermediate goods
exports gained global competitiveness
due to the state’s proximity to Mexico’s
maquiladora industry, the backbone of
U.S.–Mexico intra-industry trade.
Conversely, disrupting the U.S.–
Mexico trade relationship could
adversely affect Texas manufacturing’s
world market standing. For example,
the recently renegotiated (though not
ratified) redo of NAFTA—dubbed the
U.S.–Mexico–Canada Agreement—
proposes stricter rules of origin for the
automotive sector along with higher
wage requirements that together
would likely raise production costs and
reduce the competitiveness of motor
vehicle parts exports.
Tariff increases involving electronic
components imported from China

6

diminish the competitiveness of the
computer and electronic products
industry. Tech product manufacturers
use China-made components, whose
cost has increased as much as 25
percent. Tariffs make it harder for Texas
to compete for market share against
Japan, Korea and Singapore, which may
be utilizing the same electronics supply
chain, absent the tariff.
Steel and aluminum tariffs directly
disrupt Texas manufacturing. Metal
fabrication, for example, frequently
involves welding, cutting, forming and
machining pipes and perforation tools
destined for the oil and gas industry.
Texas’ eighth-largest export is fabricated metals, and additional tariff
costs could be passed on to petroleum
products firms that depend on nowcostlier infrastructure.
Additionally, steel and aluminum
tariffs render equipment makers in industrial, agricultural and construction
machinery industries less competitive
when facing Germany and Israel in the
global arena.
Retaliatory tariffs imposed on U.S.
goods sent abroad present another

cost. In total, retaliatory tariffs have
been applied on more than $120 billion
worth of goods, representing around 8
percent of U.S. exports.8
The future direction of Texas manufacturing exports hinges on trade policy.
The state is poised to draw further
benefit from its location and resources,
gaining market share worldwide in
its industries of comparative advantage. However, disadvantageous trade
policies could cause the state to lose
ground to its competitors, perhaps
curbing manufacturing employment
and the state’s prosperity.
Cañas is a senior business economist
and Gullo is a research analyst in the
Research Department at the Federal
Reserve Bank of Dallas.

Notes
Exports are measured by origin of movement, or the
state from which the merchandise starts its journey
to a port of export. For example, goods produced in
Chicago and sent directly for export through the port of
Houston are measured as Illinois’ exports, but if the same
goods are first sent to a warehouse in Dallas for further
processing or packaging, they would be considered

1

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

TABLE

2

Industry Breakdown Among Top Texas Export Competitors
Japan

Japan RCA

Texas RCA

Industrial machinery

3.5

1.4

Motor vehicle parts

2.1

1.4

Engines, turbines & power transmission equip.

1.8

1.3

Navigational, measuring, medical & control instruments

1.5

1.0

Electrical equip. & components not elsewhere specified

1.5

1.5

Korea RCA

Texas RCA

2.1

2.8

Korea
Resin, synthetic rubber & fibers & filaments
Electrical equip. & components not elsewhere specified

1.9

1.5

Communications equip.

1.5

1.0

Petroleum & coal products

1.5

4.3

1.2

2.5

Singapore RCA

Texas RCA

Petroleum & coal products

3.0

4.3

Industrial machinery

2.3

1.4

Basic chemicals
Singapore

Resin, synthetic rubber & fibers & filaments

1.8

2.8

Aerospace products & parts

1.6

2.0

1.4

2.3

Germany RCA

Texas RCA

Aerospace products & parts

2.0

2.0

Engines, turbines & power transmission equip.

1.7

1.3

Computer equip.
Germany

Motor vehicle parts

1.6

1.4

Agriculture, construction & machinery

1.6

1.2

Electrical equip.

1.5

1.1

Israel RCA

Texas RCA

2.3

2.0

Israel
Aerospace products & parts
Navigational, measuring, medical & control instruments

1.6

1.0

Industrial machinery

1.5

1.4

Plastics products

1.5

1.1

Basic chemicals

1.1

2.5

NOTES: Countries shown are Texas' top five 2016 competitors. RCA refers to revealed comparative advantage index, a measure an entity has in a specific industry. Only industries
that make up over 1 percent of Texas exports and that have 2016 RCAs greater than 1 for both the country and Texas are included. Among these industries, each country's top five
industries by 2016 RCA are shown.
SOURCES: Census Bureau; UN Comtrade; authors' calculations.

Texas exports. For more information, see “State Export
Data: Origin of Movement vs. Origin of Production,”
by Andrew J. Cassey, Journal of Economic and Social
Measurement, vol. 34, no. 4, 2009, pp. 241–68.
2
Trade in services represents 34 percent of U.S. exports
but isn’t discussed here because data by state are
unavailable.
3
“At the Heart of Texas: Cities' Industry Clusters Drive
Growth,” Federal Reserve Bank of Dallas Special Report,
second edition, December 2018.
4
Ten-Gallon Economy: Sizing up Texas’ Economic
Growth, by Pia M. Orrenius, Jesus Cañas and Michael
Weiss, eds., New York: Palgrave MacMillan, 2015.

See “Intra-Industry Trade with Mexico May Aid U.S.
Global Competitiveness,” by Jesus Cañas, Aldo Heffner
and Jorge Herrera Hernández, Federal Reserve Bank of
Dallas Southwest Economy, Second Quarter, 2017.
6
We compute Spearman’s rank correlation coefficients,
which measure the strength of association between two
ranked variables, involving Texas’ and each country’s
RCA indexes for each manufacturing sector.
For more information, see note 4, “Texas Comparative
Advantage and Manufacturing Exports,” by Jesus Cañas,
Luis Torres and Christina English, pp. 159–78.
7
See “Texas Border Cities Illustrate Benefits and
Challenges of Trade,” by Jesus Cañas, Federal Reserve
5

Bank of Dallas Southwest Economy, Fourth Quarter, 2016.
8
See “Which U.S. Communities Are Most Affected by
Chinese, EU, and NAFTA Retaliatory Tariffs?” by Joseph
Parilla and Max Bouchet, Brookings Institution, October
2018.

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

7

ON THE RECORD
A Conversation with Tom Luce

Civic Leader Seeks
to Bolster Texas Attributes
by 2036 Bicentennial

interested in, leaving some core challenges without the broad base of advocates
needed to ensure sustained action.
Finally, I would also say that the “tyranny of the urgent” is a big challenge. Legislators in Texas have a lot to do in a short
period, and so too often the larger, looming problems that may not be felt yet, but
will be here soon, go unaddressed.

Tom Luce, a Dallas attorney, has been involved in a variety of state,

Q. What is Texas 2036 and why is it
important? Who is behind it?

federal and civic projects. He played a key role in Texas education
reform in the 1980s and served as an undersecretary for education
during the George W. Bush administration. He is currently leading
Texas 2036, which aims to create a policy roadmap for Texas as it
heads toward its bicentennial.
Q. Many know you for your work on
behalf of public education reform
in Texas. What did you learn from
that effort?
I learned several valuable lessons that
continue to influence how I approach
policy development. First, I learned the
power of bringing data to a policy conversation. Without data, you’re just another person with an opinion. But if you
can really show people data indicating
what is happening, they’re more likely
to focus on the real problem at hand.
Second, I learned that changing policies that actually change lives takes a long
time. If you make a change in the K–12
education system, it’s going to be five, 10,
15 years before the students in the system
today graduate. This means you have to
be thinking long term. If you think about
how long it takes to get a road built or a
dam constructed or change a health care
delivery model, the same holds true for
other policy areas as well.
I also learned that the successful
adoption of a policy is really only part of
the equation; you also have to pay close
attention to implementation of that
policy, both in agency rulemaking and
in enforcement.
In 1983, I wrote the legislation that
ultimately passed and banned social

8

promotion in Texas. But you know what
happened? Social promotion continued
because the mechanisms for defining
what that meant to thousands of educators was not transparent. I also learned
the value of focusing on incremental yet
persistent progress.
We made a number of important
changes in education in the early ’80s
in Texas. Those changes were sustained
and advanced over the next 20 years,
and we saw continuous, positive growth
in student achievement across five governors from two political parties. Progress didn’t happen overnight, but it happened and our state was the better for it.

Q. In your time working to achieve
policy reforms in the state, what have
been the most significant challenges?
Data have always been a big challenge, both the lack of available, trustworthy data to inform policymaking and
a lack of the utilization of available data
by both policymakers and state agencies. I would also say keeping a broad
coalition active and focused on achieving and sustaining success over time.
There are so many competing priorities, and it is easy once some sort of policy
victory or defeat has occurred for people
to drift off toward other issues they are

Texas 2036 is a nonpartisan, nonprofit
organization dedicated to ensuring
Texas remains the best place to live and
work through the state’s bicentennial,
in 2036 [as the Texas Republic], and
beyond. I founded the organization
a couple of years ago based upon my
belief that we have some serious storm
clouds gathering on the horizon but, if
we act now, we can adjust course and
overcome the challenges.
These are not challenges that can be
easily addressed. They are large and
systemic and have long timelines, which
means there has to be a coordinating
force that is working toward long-term,
integrated and collaborative solutions;
that’s the role that Texas 2036 plays.
As I’ve traveled around the state sharing the data we’ve collected and the vision for what we want to accomplish, the
response has been overwhelmingly positive; people understand we’ve got challenges up ahead and want to do their
part to ensure future generations have
the same opportunities they did. I’m
grateful that many individuals, foundations and companies in Texas, who we’ve
acknowledged at texas2036.org/support,
have generously enabled our work.

Q. What has the Texas 2036 effort told
you about what the state could be
like in two decades?
Texas is going to continue growing,
and our population will likely surpass 40
million residents, with the majority of
that growth occurring within the state’s
Hispanic population. That population
growth is going to require substantial
job creation—around 6 million jobs—if

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

has a unique and incredible legacy since
} Texas
its founding nearly 200 years ago, and I want to
focus on what we want Texas to be like for its
third century.

we are going to keep unemployment
where it is today.
To put that in context, that is roughly
the number of jobs that exist in the Dallas–Fort Worth and Houston metro areas
today. Those jobs are going to require a
much higher level of education on average than jobs do today.
Approximately 65 percent of jobs that
will exist then will require a national
training certificate, a two-year degree
or a four-year degree, which our state is
currently not doing a great job of helping students achieve. Today, about 22
percent of our high school graduates
achieve one of these milestones within
six years of graduating from a Texas public high school.
Increases in state health care expenditures have outpaced tax base growth
and, if left unchecked, could consume as
much as 75 percent of the state budget in
2036; this leaves little money for other priorities, like education and infrastructure.
On the infrastructure front, we need
to make sure we have the transportation and technical infrastructure to
ensure that people can access jobs and
that goods and services can be moved
around and exported from the state.
At our present pace, we aren’t going to
have the infrastructure to sufficiently
support anticipated growth.

Q. What do you see as Texas’
greatest strengths? What makes
Texas different?
Texas has so many things going for
it: the diversity of people and industry;
the abundance of natural resources; its
strategic location in the middle of the
U.S., North America and Central/South

America and large coastline accessible
for international trade; and tremendous
business and philanthropic leadership.
But I think the state’s greatest asset is really the spirit of my fellow Texans.
Back in 1982, then-Gov. [William P.]
Clements established the Texas 2000
Commission, which focused on ensuring the success of the state in the year
2000. If you go back and look at the
priorities the commission members
set, they were extremely successful in
achieving them, and all of us in Texas
today greatly benefited from their work.
In the preface of their report, they
said, “Rather than yield the future to a
course of events imposed from outside,
we are confident that Texans will choose
to rely on a great, longstanding asset:
the determination to shape their own
destinies.” I think that sums up well who
we are as Texans and why I am confident
that we’ll be able to address the challenges before us.

Q. With the biennial session of the
Legislature under way, what advice
can you offer lawmakers?

in addressing future issues now but also
evaluate success not on a two- or fouryear cycle but over time and hold state
agencies accountable for the implementation of policy over time.

Q. As one of Texas’ senior statesmen,
what do hope your legacy will be?
That’s one of the nicest ways someone
has ever called me old. But, seriously,
I hope that my seven grandsons have
children (sooner rather than later and
at least one girl) who get to grow up in
Texas and have the same opportunities
for a quality education and an affordable cost of living and to begin a career,
launch a business and start a family like
I did in my early 20s.
That’s really the driving force behind
Texas 2036—ensuring the prosperity and
quality of life of this great state for the
generations to come. Texas has a unique
and incredible legacy since its founding
nearly 200 years ago, and I want to focus
on what we want Texas to be like for its
third century.

This is a very big state with many
needs and not much time during the
legislative session to address them. On
day one, lawmakers face the “tyranny
of the urgent,” which often, though not
always, is focused on issues that are
not necessarily the most important for
the long-term growth and health of our
state. That said, I hope to see more conversations in Austin that are based on
quality data.
The last thing I’d encourage our representatives in Austin to do is to really
think about the long term. Be assertive

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

9

Lower Oil Prices, Tight Labor Markets
to Restrain Texas Growth in 2019
By Keith R. Phillips and Judy Teng

}

E

ABSTRACT: Texas’ economy
should expand in 2019,
though at a slower rate
than in the prior year. A
decline in oil prices in late
2018, tight labor markets
and the possibility of
restrictive U.S. trade and
tariff policies weigh on the
outlook for the state.

policy and tariffs remained elevated.
Meanwhile, firms throughout the state
scrambled to hire qualified workers.

xpected slowing in the energy,
manufacturing and construction
sectors along with continued tight
labor markets will likely result in a deceleration of Texas job growth this year.
Leading indicators suggest a 2019
increase of between 1 percent and 2
percent, following an estimated 2.3
percent expansion in 2018.1 Labor
markets are anticipated to remain very
tight, with the unemployment rate hovering around the historically low levels
reached at year-end 2018.
The Texas economy began to slow
in fourth quarter 2018, and leading
indicators and business outlooks weakened following strong growth earlier in
the year, as indicated in the Federal Reserve Bank of Dallas business surveys.
Oil prices peaked in early October, and
in late January, they slipped to near the
minimum price that producers need
for new drilling to begin.
Outlooks from survey respondents
improved at the start of 2019, though
uncertainty surrounding future trade
CHART

1

Goods Producers Shine
While job growth was broad based
across industries in 2018, goods-producing sectors performed particularly
well (Chart 1). Construction-sector
employment continued its upward
trend, expanding a strong 3.0 percent,
or 22,000 new jobs.
Job growth in mining (principally oil
and gas) slowed slightly from 2017 but
remained the strongest sector for a second consecutive year. Manufacturing
jobs rose 4.1 percent—the best rate of
growth since 2011 and the third highest
since 1984.
Residential construction was robust
through most of 2018. But three indicators of homebuilding activity weakened
late in the year. The five-month moving
average of single-family housing construction permits in the state steadily
increased through September but fell

Texas 2018 Job Growth Broad Based Across Industries

Percent, December/December
15

10.7

10
5

1.5

0
-5
-10

0.9

3.5

2.8

1.9

4.1

1.6

3.0

0.8

’16
’17
’18

-15
-20

Trade,
Govt.
Prof.
Health
Leisure
Mfg.
transp. &
& bus. & private
&
utilities
svcs
edu. Hospitality
(19.9%) (15.5%) (13.8%) (13.6%) (10.8%) (7.1%)

Fin.
Activities
(6.2%)

Natural Information
resources
& mining
(1.6%)
(5.9%) (1.9%)
Const.

NOTE: Numbers in parentheses show share of total state nonfarm employment accounted for by each sector. Job
growth data are current as of March 1, 2019.
SOURCES: Bureau of Labor Statistics; adjustments by the Federal Reserve Bank of Dallas.

10

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

slightly through November, the latest
month for which data are available.
Multifamily permits and overall home
starts also rose through most of the
year before declining sharply in September and October. Starts rebounded
slightly, while multifamily permits
continued to decline in November.
Historically high rainfall across
the state in September and October
sharply curtailed construction starts.
Rising mortgage rates and tariffs on
imported building materials likely also
played a role in residential softness.
Heightened home-price appreciation over the past six years has reduced
housing affordability across the state’s
large metro areas. The percentage of
homes sold that a family earning the
median income could afford dropped
in the 2012–18 period, from 73 percent
to 55 percent in Austin; from 72 percent
to 46 percent in Dallas; from 71 percent
to 58 percent in Houston; and from 73
percent to 55 percent in San Antonio,
according to the National Association
of Home Builders-Wells Fargo Housing
Opportunity Index.
The manufacturing sector enjoyed a
historically strong year in 2018, though
production growth slowed sharply
near year-end. According to Dallas
Fed Texas Business Outlook Survey
(TBOS) contacts, tariffs implemented
during the year and ongoing uncertainty regarding future tariffs weakened
manufacturing growth in the last four
months of the year.
Of company executives responding
to the Texas Manufacturing Outlook
Survey (TMOS) in September, 35
percent said tariffs had negatively
affected their firms, while 5 percent
cited a positive net impact. Survey
contacts also noted that weakening
global demand, a stronger dollar and
tight labor markets also played a role
in the slowing.
While oil prices fell in fourth quarter
2018, the state’s oil and gas industry
also expanded strongly during the
year. The average monthly rig count
increased by 19 percent, as West Texas
Intermediate oil prices rose from an
average of $51 per barrel in 2017 to $65
per barrel in 2018.

CHART

2

Global Demand Propels Texas Energy-Related Exports

Index, 2000: Q1 = 100*
550
500
Texas energy-related exports
Texas total
Other states' exports
Texas non-energy-related exports

450
400
350
300
250
200
150
100
50
’01

’03

’05

’07

’09

’11

’13

’15

’17

’19

*Seasonally adjusted, real dollars.
SOURCE: Federal Reserve Bank of Dallas.

Oil production increased from 3.5
million barrels per day in 2017 to more
than 4.4 million barrels per day last
year—the highest level since the Energy
Information Administration data series
began in 1981. Texas oil output made
up 41 percent of the nearly 12 million
barrels per day produced in the U.S. (as
of latest-available figures, for November), the highest U.S. output since 1970.
Strong global demand aided energy
production and energy-related manufacturing (Chart 2). Despite a strong
increase in the Texas value of the dollar
in 2018, which made Texas exports relatively more expensive for foreign buyers,
exports climbed throughout the year.
Petroleum products, chemicals and
oil and gas production have been key
sources of the strength of Texas exports, with oil exports playing a key role
since a federal ban on them ended in
December 2015. Oil exports increased
37.4 percent for the first three quarters of 2018, while non-energy-related
exports increased just 2.0 percent.
Appreciation of the dollar relative to
the currencies of Texas’ export partners
affects oil exports less than non-energy
related exports. Since oil is priced in
dollars around the world, dollar appreciation raises the cost of oil outside the
U.S., reducing world consumption, but
it does not specifically affect the price
of Texas oil relative to oil from other

countries. Moreover, since oil is a major
input in refining and petrochemicals,
appreciation of the dollar raises the relative costs of production outside of the
U.S. and offsets much of the relative cost
increases of Texas refined products and
petrochemicals.

Broad Regional Job Growth
Job growth was broad based across
the large metropolitan statistical areas—with growth picking up notably in
regions with higher concentrations of
goods-producing sectors—consistent
with the analysis by industry (Chart 3).
For example, activity accelerated
in Houston as a center of energy and
energy-related manufacturing, and in
Fort Worth, with a high concentration in
manufacturing. Dallas and San Antonio,
which grew rapidly in 2015 and 2016
(despite the energy downturn), slowed
over the past two years, indicating the
effects of labor market constraints.
Austin was an exception. Despite
strong growth over the previous three
years and with an unemployment rate
that averaged 2.9 percent in 2018, job
gains continued at a healthy pace last
year. Historically, Austin has had the
highest net domestic in-migration rate
of large Texas metros, which has provided labor for additional growth. In
2018, the Austin labor force expanded
3.3 percent—the strongest perfor-

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

11

mance among large metros—aided by
young workers drawn to its tech presence and popular culture environment.

Labor Availability Constraints
Texas job growth was slower than
expected last year, reflecting a lack
of available workers. The 2.3 percent
increase in jobs in 2018, up from 2.1
percent in 2017, was weaker than last
year’s forecast of 2.9 to 3.9 percent.2
Historically tight labor markets suppressed job growth.
The Texas unemployment rate fell to
3.7 percent in the final three months of
2018, the lowest since the data series
began in 1976. A total of 66 percent of
business contacts responding to the
CHART

3

TBOS special questions in November
noted they had difficulty hiring qualified workers (Chart 4).
While the number of businesses
reporting trouble finding qualified
workers has been elevated the past two
years, at year-end 2018, a record share
of firms responded that they increased
wages and benefits to recruit and retain
employees. More notably, a sharply
higher number noted difficulty hiring
due to a lack of applicants.
Migration to the state alleviates
tight labor markets and speeds up job
growth.3 Statewide, however, after a
surge in net migration since 2005, a
slight slowing occurred in 2015–16 with
the oil bust.

Texas Job Growth Broad Based Across Metros Since 2017

Percent, December/December
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5

3.3
2.4

’16

2.1

1.7

3.1

1.4

1.4

’17

’18
Texas

Houston
(24.6%)

Dallas
(20.9%)

San Antonio
(8.4%)

Austin
(8.5%)

Fort Worth
(8.5%)

El Paso
(2.5%)

NOTE: Numbers in parentheses show share of total state nonfarm employment accounted for by each metro. Data are
current as of March 1, 2019.
SOURCES: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.

CHART

4

Texas Firms Experiencing Shortage of Workers

Percent of respondents
75
70

Feb. 2017

Nov. 2017
66

Feb. 2018

May 2018

Aug. 2018

Nov. 2018
71

67

65
60
55
50
45
40
Having problems hiring
qualified workers

Increasing wages and/or
benefits to recruit and
retain employees

Difficulty finding qualified
workers due to lack of
available applicants/
no applicants*

*Percent of respondents is taken as a percent of those who answered "Yes" to the question: "Are you having problems
finding qualified workers when hiring?"
SOURCE: Federal Reserve Bank of Dallas Texas Business Outlook Surveys.

12

The sharp decline in the energy
sector likely resulted in fewer energy
workers coming to the state and more
energy workers leaving. As the Texas
economy recovered in 2017–18, migration remained slightly suppressed, as a
strong national economy provided opportunities elsewhere, and many labor
markets tightened.
Thus, with most of the country
growing at above-average rates, Texas,
nonetheless, experienced the largest
numerical population gain among the
states in 2017–18.

Delayed Oil Price Impacts
The Texas rig count was generally flat
in the fourth quarter, and employment
in the mining sector increased at an
annualized rate of 14.2 percent, despite
fourth-quarter oil price weakness.
Past data suggest that the impact
of softer prices has yet to be felt. The
Texas rig count moves closely with the
oil price, with a three-month lag. This
is likely because oil and gas companies
usually wait to ensure a change in price
is not short term, generally have sixmonth drilling contracts with oilfield
service companies and cannot immediately change drilling plans.
This past relationship suggests that the
rig count would begin declining by midJanuary 2019. Weekly data show that the
Texas rig count peaked in the week that
ended Jan. 4, at 534 rigs and two months
later had declined by 31 rigs.
The impact of oil price changes on
drilling activity can also change based
on technological developments and
supplies of drilling equipment and
labor that can affect the cost of drilling.
These can affect the breakeven price—
the level below which a firm loses
money drilling a new well.
Based on the Dallas Fed’s Energy Survey for first quarter 2018, the breakeven
oil price for new drilling in the Permian
Basin in West Texas ranged from $20 to
$75 per barrel, with an average of about
$50 per barrel. For those drillers with
breakeven prices above $55 per barrel,
new drilling activity in 2019 is anticipated to be greatly reduced unless prices
remain above early first-quarter levels.

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

2019 Economic Outlook
One way to gauge the Texas outlook is through the Dallas Fed energy,
manufacturing and service sector
surveys. Respondents to the fourthquarter Dallas Fed energy survey
reported a deteriorating outlook for the
first time since first quarter 2016. While
more firms said they were increasing
planned capital expenditures than said
they would lower them, the difference
was small—the narrowest since second
quarter 2016 when the sector was coming out of the last slump.
Overall, Texas companies reported
a sharp weakening of business conditions at the end of 2018, according to
the TBOS. However, outlooks improved
in January and February.
The Dallas Fed forecasting model,
which uses recent momentum in job
growth and movements in the Dallas
Fed’s Texas Leading Index (TLI), predicts
job growth between 1 and 2 percent in
2019. Changes in the TLI, which consists
of eight economic indicators that tend to
change directions prior to movements
in the overall economy, have reflected
growth expectations in TBOS and
the Energy Survey. The leading index
declined sharply in fourth quarter 2018,
though it rebounded in January.
For the three months that ended in
January, the TLI declined, suggesting
weaker growth this year. Four of the
index’s eight components weighed
negatively on the index, led by falling
oil prices (Chart 5). The rebound in
the energy sector over the past two
years has been an important source of
strength in the Texas economy, and the
oil price decline may cause the sector
to slow sharply, although a collapse is
not expected.4
The increase in the Texas value of the
dollar, which weights the real exchange
rates of the dollar with foreign currencies based on the countries to which
Texas exports, will likely continue
to damp non-energy-related Texas
exports. As the dollar rises in value,
the cost of goods produced in Texas
increases relative to the same goods
produced in other countries, depressing international demand for products
produced in the state.

Broad leading indicators of the labor
market also weakened. The help-wanted
index declined slightly, suggesting that
firms may be curtailing plans to hire new
workers. Initial claims for unemployment insurance rose, a sign that more
workers leaving jobs may expect not to
immediately find new employment.
The U.S. leading index was unchanged, amid heightened uncertainty
in the national economy toward the end
of 2018. Continued growth in the U.S.
economy is vital for growth in Texas.
Mildly positive changes in the average weekly hours worked in manufacturing, permits to drill oil and gas wells,
and the Texas stock index slightly offset
the negative signals. Significant stock
market gains in January counterbalanced much of the impact of a sharp
year-end sell-off. Still, the very slight
gain overall suggests that future, discounted corporate profits are expected
to grow more slowly in 2019 than last
year; this is due in part to uncertainty
about economic growth attributable
to a weakening of the global economy
and lingering tariff and trade concerns.

Main Risks to Outlook
Many potential issues may change
the trajectory of the economy in 2019.
Unexpected declines in world oil demand or increases in world supply can
drive crude oil prices below breakeven
prices for more companies, further
curtailing drilling activity.
CHART

5

Labor markets are historically tight
in both Texas and the U.S. With a relatively unchanged labor force participation rate over the past three years in
Texas and slower labor force growth,
tight job markets are expected to continue restraining employment growth.
Also, international trade policy negotiations this year present a high degree
of uncertainty for many industries.
Since Texas is the nation’s No. 1 exporting state, a significant trade disruption
would likely reduce growth more than
is currently projected.
Phillips is an assistant vice president and
senior economist, and Teng is a research
assistant in the San Antonio Branch at
the Federal Reserve Bank of Dallas.

Notes
The job growth numbers reported are based on earlybenchmarked employment data produced by the Dallas
Fed. See, “DataBasics, Early Benchmarking,” Federal
Reserve Bank of Dallas.
2
See “Texas Economy Starts 2018 Firing on All
Cylinders” by Keith Phillips and Christopher Slijk,
Federal Reserve Bank of Dallas Southwest Economy,
First Quarter, 2018.
3
See “Gone to Texas: Migration Vital to Growth in the
Lone Star State” by Pia Orrenius, Alexander T. Abraham
and Stephanie Gullo, Federal Reserve Bank of Dallas
Southwest Economy, First Quarter, 2018.
4
For more analysis on the Texas energy outlook, see
“Dallas Fed Energy Survey Suggests Oil Price Drop Won’t
Cause Sector Collapse in 2019,” by Michael D. Plante and
Kunal Patel, Dallas Fed Economics, Feb. 14, 2019.
1

Negative Contributions Dominate, Send Index Lower
(Net contributions to change in Texas Leading Index)

-1.70

Net change in Texas Leading Index
0.13

Well permits

0.08

Average weekly hours*

0.02

Texas stock Index

0.00

U.S. leading index
Help-wanted index

-0.18

Texas value of the dollar* **

-0.32

New unemployment claims**

-0.56
-0.88
-2.0

-1.5

-1.0

Real oil price
-0.5

0.0

0.5

*This component has been estimated by the Federal Reserve Bank of Dallas for the latest month.
**These components are inverted in the Texas Leading Index.
NOTE: Three-month percent change through January, seasonally adjusted.
SOURCE: Federal Reserve Bank of Dallas.

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

13

SPOTLIGHT

Abundant Sunshine Not Enough to Power
Texas Residential Solar Energy
By Benjamin Meier and Jesse Thompson

T

he Texas electricity market
doesn’t shine in residential
solar energy despite plentiful
sunlight. While Texas is No. 1 in wind
power, its residential solar capacity per
capita was less than one-third that of
the U.S. average in 2017 (Chart 1).
One advantage of solar electricity
generation is a reduction in greenhouse gas emissions, which have been
tied to climate change.
Hot Texas summers and population
growth continue to drive record electricity demand. Converting sunlight
that would otherwise heat attics into
power would seem to hold promise
for homeowners.1 However, compared
with other states with similar sunlight
penetration, Texas has been slow to
adopt residential solar.
Solar energy, while experiencing
robust growth in recent years, still only
provides 0.5 percent of Texas’ total
electricity generation, with residential
solar supplying a meager 0.1 percent of
total generation. Small-scale residential solar capacity accounted for 15.6
percent of the more than 13,500 megawatts of new net generation capacity
added in 2017.

Variety of Factors
Texas is one of only two states in
the nation that do not require utility
companies to purchase excess energy
from residential solar panels, a process
called net metering. It allows homeowners to pay only for the net energy
they consume or receive a credit if they
generate a surplus.
Low electricity prices is another
reason Texas homeowners haven't
installed solar panels. In fact, even with
net metering, the rate at which utilities
buy back electricity from homeowners is
below the national average. Texas’ average price for electricity is 8.38 cents per
kilowatt hour, 20 percent less than the

14

CHART

1

Texas Trails Many States in Residential Solar Capacity

Capacity (megawatts) per million residents
120

Cents/kilowatt hour

Residential solar capacity

Electricity price

100
80
60
40
20
0
California Arizona

New
Mexico

U.S.

New
York

Louisiana

South Missouri
Carolina

Texas

18
16
14
12
10
8
6
4
2
0

NOTES: Data shown are 2017 average small-scale net metered installed capacity and average retail electric price by
state. U.S. capacity is calculated from sum of states.
SOURCES: Energy Information Administration, U.S. Census Bureau.

U.S. average. The comparatively inexpensive electricity translates into a relatively longer repayment period to recoup
an initial residential solar investment,
which nationally averages $17,000.2

Renewable Energy Targets
Texas’ low renewable energy generation requirements may also have
hindered adoption. States that lead
in residential solar capacity, such as
Arizona and California, have adopted
renewable energy production targets of
15 percent or more of total power sold,
as well as established solar-specific
minimum generation targets to reduce
carbon emissions.
A high target increases demand
among electricity companies for
renewable energy that they may be unable to generate on their own. In those
cases, companies can often turn to a
market mechanism called renewable
energy credits (RECs), electronic credits that can be bought and sold among
producers and homeowners to meet
renewable energy requirements.
Texas set its first renewable energy
target to reduce emissions in 1999 and
has since increased its goal three times,

most recently in 2006. However, even
Texas’ highest renewable energy target,
at 10,000 megawatts by 2025, amounted
to only 9.1 percent of total generation
(relative to 2006 capacity). It also did
not include a solar-specific requirement.
Additionally, when Texas created
its REC market in 1999, homeowners
with solar systems couldn’t participate,
precluding a revenue stream that could
encourage home solar panel investment.
Meanwhile, homeowners in states
with more residential solar installations often can benefit from an array
of government incentives, including
direct subsidies, income tax credits
and cash rebates. Texas only excludes
solar installations from property tax
assessments.

Notes
“Citywide Impacts of Cool Roof and Rooftop
Solar Photovoltaic Deployment on Near-Surface Air
Temperature and Cooling Energy Demand,” by Francisco
Salamanca, Matei Georgescu, Alex Mahalov, BoundaryLayer Meteorology, vol. 161, no. 1, 2016, pp. 203–221.
2
“Solar Industry Research Data,” Solar Energy Industries
Association, accessed Feb. 15, 2019, www.seia.org/
solar-industry-research-data.
1

Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2019

GO FIGURE

Shale Revolution Boosts
Texas Refiners’ Competitiveness
Design: Emily Rogers; Content: Jesse Thompson

Millions of barrels per day

6

Shale Oil Production
Helps Texas Refine
Record Amounts
of Crude Oil

Where do U.S. refiners
get their oil?

Crude
refined
Crude
produced

5
4
3
2
1
0

’00

’06

’12

’18

53% U.S.

16% OPEC

3%

Rest of the World

22% Canada

4%

2%

Colombia

Mexico

Increased shale production cuts prices of domestic oil and natural gas,
materials used in refining processes that produce gasoline and other products.

2000–07

0
-$8

-$8

+$8

2010–18

0

Domestic oil
costs $2 more*
than international

-$8

+$8

Domestic oil
costs $7 less*
than international

*Prices are per barrel. International refers to the Brent benchmark; domestic refers to the West Texas Intermediate benchmark.

Natural gas prices
more than halved

2000–07

2010–18

$6.85

$3.32

If Texas were a country, it would rank second in the world in refining capacity.
World Crude Oil
Refining Capacity

2

1

3

2

1

3

LEADERBOARD

Russia

China

Texas

Texas

China

Russia

2015

2018

NOTES: Natural gas prices refers to the Henry Hub spot price for natural gas. Leaderboard rankings are based on country refining capacity for Jan. 1, 2015, and Jan. 1, 2018.
SOURCES: Energy Information Administration; Oil and Gas Journal, Worldwide Refining Survey.

Federal Reserve Bank of Dallas
P.O. Box 655906
Dallas, TX 75265-5906

SNAPSHOT

PRSRT STD
U.S. POSTAGE

PAID

DALLAS, TEXAS
PERMIT #1851

Economy Booms in Midland–Odessa

T

he Permian Basin economy, at the heart of U.S. oil
production, has boomed as oil output expanded. Even
as oil prices softened beginning in fourth quarter
2018, oil production reached a record of 3.94 million barrels
per day in January, up from 3.87 million the previous month.
Despite widespread reports of labor shortages, Midland–
Odessa employment increased 7.5 percent in 2018, well
above Texas’ job growth of 2.3 percent.
The local housing market has been tight with the influx
of workers. Single-family home inventories in Midland and
Odessa were under two months in January, well below the
six months that is considered balanced, and the apartment
occupancy rate approached 96 percent for 2018.
Fourth-quarter existing-home prices rose 16.2 percent in
Odessa and 11.6 percent in Midland from the year before.
State home price growth averaged 6.3 percent in 2018, according to the Federal Housing Finance Agency repeat sales index.
—Adapted from Permian Basin Economic Indicators,
March 1, 2019

CHART

1

Permian Cities’ House Prices Soaring

Percent, year/year*
20

Odessa

Midland

Texas

15
10
5
0
–5
–10
'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

*Quarterly, seasonally adjusted.
SOURCE: Federal Housing Finance Agency.

Federal Reserve
Bank of Dallas

Southwest Economy
is published by the Federal Reserve Bank of Dallas. The views expressed are those of
the authors and should not be attributed to the Federal Reserve Bank of Dallas or the
Federal Reserve System.
Articles may be reprinted on the condition that the source is credited to the Federal
Reserve Bank of Dallas.
Southwest Economy is available on the Dallas Fed website, www.dallasfed.org.

Marc P. Giannoni, Senior Vice President and Director of Research
Pia Orrenius, Keith R. Phillips, Executive Editors
Michael Weiss, Editor
Kathy Thacker, Associate Editor
Dianne Tunnell, Associate Editor
Justin Chavira, Graphic Designer
Emily Rogers, Graphic Designer
Darcy Taj, Graphic Designer

Federal Reserve Bank of Dallas
2200 N. Pearl St., Dallas, TX 75201