Texas Economic Performance and Outlook Amidst COVID -19 ...... · 18-06-2020 · Texas Economic...
Transcript of Texas Economic Performance and Outlook Amidst COVID -19 ...... · 18-06-2020 · Texas Economic...
Texas Economic Performance and Outlook Amidst COVID-19 Pandemic
Federal Reserve Bank of Dallas6/18/2020
Laila Assanie
DISCLAIMER: The views expressed are the authors’ and do not necessarily reflect the views of the Federal Reserve Bank of Dallas or Federal Reserve System.
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Connecting Regional Economies
Federal Reserve Districts
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Serving theEleventh District
Texas in the COVID-19 Pandemic
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Sharp, sudden contraction in economic activity and employment due to COIVD-19 induced shelter-in-place regulations
Record declines in activity in March and April, less-severe contraction in May
Activity appears to be gradually improving as economy reopens, but the path of the virus is unpredictable, creating heightened uncertainty for businesses and individuals
So far Texas matching or beating US performance, but this may change due to the state’s industrial mix
Higher share of employment in vulnerable industries
The economic crisis appears to have broadly peaked but may take time to unwind
Overview
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All states shed jobs from Feb to Apr; Northeast/Midwest suffer largest losses
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-25
-20
-15
-10
-5
0
MI
VT NY NJ RI
HI
NV
MA PA DE
NH CT
ME KY OH
WA WI
AK CA
U.S
.LA IN OR
MD IL NC SC MN
WV
MT FL TN CO
NM IA MO GA ID MS TX AL AZ VA ND KS NE UT
SD AR DC
WY
OK
Texas
U.S.
Percent change, Apr 2020/Feb 2020, SA
SOURCES: Bureau of Labor Statistics.
Texas job losses less severe than U.S.(April/Feb.)
7
-59.7-50.9
-23.8
-48.3 -49.5
-98.1
-49.0
-16.7
-57.2
-68.9
-45.1-45.5
-32.1
-9.5
-37.8 -41.8
-93.9
-26.5
-8.0
-39.6
-57.8-52.6
-120
-100
-80
-60
-40
-20
0
Total Trade,Transp.& Util.
(20.3%)
Gov't(16.6%)
Prof. &Bus. Serv.
(14.5%)
Educ. &HealthServ.
(13.8%)
Leisure& Hosp.(7.6%)
Mfg.(7.4%)
Fin.Activ.(6.8%)
Constr.(6.3%)
Info. &Other Svcs
(4.9%)
Oil & Gas,Mining Sup.
(1.7%)
U.S. Texas
Annualized job growth (percent)
NOTE: Data show April 2020/Feb. 2020 annualized growth. Numbers in parenthesis indicate share of total state employment for April.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; FRB Dallas.
Texas unemployment rate spikes; still below nation’s
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13.312.8
0
2
4
6
8
10
12
14
16
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Percent, SA
NOTES: Data through April for Texas and May for the U.S. Grey bars show U.S. recessions.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; adjustments by the Dallas Fed.
U.S.Texas
Unemployment claims remain elevated
9
0
200
400
600
800
1000
1200
1400
1600
Jan. Feb. Mar. Apr. May Jun
Weekly total unemployment insurance claims, index, Jan. 2020 = 100
U.S.
Texas
NOTE: Data through the week ending June 6.SOURCE: Department of Labor.
Layoffs hitting all sectors in Texas
10
29
26 2523
21 2018
14 13 13 13 12 11 119
74 2
00
5
10
15
20
25
30
35
NOTES: Claims data for week ending March 7 through week ending June 6. Employment for Feb. 2020.SOURCES: BLS LAUS program; Texas Workforce Commission
UI claims as a share of industry employment, percent
190 185 178 174 171 169 163 163 160 154 152 151 145 144 141 139 135 135 127 125 120 118108 108
0
20
40
60
80
100
120
140
160
180
200
NOTES: Claims data for week ending March 7 through week ending June 6. Employment for Apr. 2020.SOURCES: BLS LAUS program; Texas Workforce Commission
Claims per 1,000 workers
Layoffs span all Texas metros; border cities and energy centers harder hit
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12
Texas Business Outlook indexes show services, manufacturing activity contracting more slowly in May
-28.1-28.0
12.49.2
-80
-60
-40
-20
0
20
40
60
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenue (Services)
NOTES: Data through May 2020. Dashed lines are post-recession averages.SOURCE: Federal Reserve Bank of Dallas Texas Business Outlook Surveys (TBOS).
Diffusion index, SA
Production (Manufacturing)
Most Texas firms see a sizeable dip in revenues
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Revenues are down (59.9%)81.20
Revenues are normal8.62
Revenues are up (161%)10.18
How do your firm’s current revenues compare with a typical May?
NOTES: Pie chart shows the share of responses belonging to each answer. Numbers in parentheses show average response to how revenues compare with typical May revenues within each answer.SOURCE: Dallas Fed Texas Business Outlook Surveys, May 2020 Special Questions.
1.0%8.0%
14.2%
7.2%
10.3%
59.2%
If current revenue levels were to continue, how long could your firm survive?
Less than a month 1-3 months 4-6 months 7-9 months 10-12 months More than a year
SOURCE: Federal Reserve Bank of Dallas Texas Business Outlook Surveys, May 2020 Special Questions.
May survey suggests nearly one-fourth of firms unable to survive beyond six months at current revenue levels
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Majority of firms applied for and have received PPP funding
SOURCE: Dallas Fed Texas Business Outlook Surveys, May 2020 Special Questions.
“Have you applied for a PPP (Paycheck Protection Program) loan?”“If you applied for a PPP loan, have you received it?”
60% 93%of surveyed firms have applied for a PPP loan
of those that have applied have received their loan
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PPP borrowers largely able to stave off layoffs, wage reductions
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78
66
52
2115
0
10
20
30
40
50
60
70
80
90
Prevented layoffs and/orfurloughs
Prevented wage reductions Helped us pay bills and/or rent Allowed for rehiring of workers Other
How did receiving the PPP loan benefit your firm?
NOTES: Data collected from 216 business executives from May 12-20, 2020. Respondents asked to select all options that apply.SOURCE: Dallas Fed Texas Business Outlook Surveys, May 2020 Special Questions.
Share of responses, percent
Texas firms shift to working from home
17
69
4333
23 20 19 1711 11
0
10
20
30
40
50
60
70
80
Increasedworking from
home
Reduced workhours (includingcutting overtime)
Reduced orsuspendedbonuses
Paid time off Furloughs Layoffs Reduced wages Other None
Have you taken any of the following steps regarding employment in response to COVID-19?
NOTES: Data collected from 389 business executives from May 12-20, 2020. Respondents asked to select all options that apply. SOURCE: Dallas Fed Texas Business Outlook Surveys Special Questions.
Share of responses, percent
Among firms facing difficulty recalling workers, infection fears, lack of child care cited as significant challenges
18
60.0
46.7 43.3
6.7
30.0
0
10
20
30
40
50
60
70
Fear of infection Lack of child care Generousunemployment
benefits
Other None
Were there any impediments to recalling workers or increasing hours?
NOTE: Data collected from 60 business executives from May 12-20, 2020.Question posed to respondents who indicated that they were attempting to recall workers or increase hours. Respondents were asked to select any and all choices that applied.SOURCE: Dallas Fed Texas Business Outlook Surveys Special Questions.
Share of responses, percent
Yes33.3
No66.7
Have you attempted to recall any laid off/furloughed workers or increase hours among current workers?
NOTE: Data collected from 186 executives who indicated that they have attempted to recall any laid off/furloughed workers or increase hours among current workers.
Mobility increasing and workers starting to come back,daily new Texas COVID cases rising again
19
-50
-110-100-90-80-70-60-50-40-30-20-100102030405060708090100110
-2500
-2000
-1500
-1000
-500
0
500
1000
1500
2000
2500
3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3 5/10 5/17 5/24 5/31 6/7 6/14
COVID19 daily new casesCOVID19 daily deathsMobility and engagementNum. of hourly employees working
NOTE: Mobility and engagement index data up to June 13, 2020, Homebase data up to June 15, 2020, all other data up to June 16. Mobility and engagement index values are scaled such that the national index average over January-February are subtracted out and divided by the national value in the week ending in April 11, the lowest national weekly value. Mobility and engagement index value can be interpreted as mobility and engagement relative to the national trough in mobility and engagement.SOURCES: Homebase, Johns Hopkins University, SafeGraph, Federal Reserve Bank of Dallas.
Count, 7 day avg. Index, 7 day avg.
2205
26
-22
Texas Mobility and Engagement and COVID-19 Spread
- 52 (4/10)
5/1: Phase 1 of re-
opening
5/22: Phase 2 of re-opening
-107 (4/10)
6/3: Phase 3 of re-opening
6/12:Restaurants expand to
75% capacity
Restaurant reservations in Texas lose some momentum in June
-100
-80
-60
-40
-20
0
20
Feb Mar Apr May June
Texas
Houston
San Antonio
Dallas
Austin
U.S.
NOTE: Data through June 16, 2020. Data refers to year/year percent change in seated diners at restaurants on the OpenTable network across all channels: online reservations, phone reservations, and walk-ins.SOURCE: OpenTable.
Percent change, y/y, 7 day moving average
-100-90-80-70-60-50
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Negative factors Low oil prices Texas job growth is less than nation’s when oil prices fall to very low levels
Less remote work capability Texas has a lower share of workers that can work from home
More vulnerable industries Texas has a greater share of employment in industries harmed by social distancing Texas more exposed to international trade, Mexico
Positive factors Typically grows faster than nation Flexible labor markets, good business climate Fewer COVID risk factors? Low density metros, lack of mass transit
So far Texas matching or beating US performance, but this may change
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Fewer can work remotely in Texas
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0.280.37
0.480.42
0.40
0.230.50
0.330.47
0.570.27
0.570.27
0.420.34
0.370.39
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7Other areas in Texas
San AntonioAustin
Dallas/Fort WorthHouston
HispanicAsianBlackWhite
Income>=$60,000Income<$60,000
With college degreeNo college degree
FemaleMale
TexasU.S.
Percent of Workers Compatible with Remote Working
NOTE: All samples, except for the top bar are restricted to workers in Texas.SOURCE: IPUMS; Dallas Fed; author's calculations.
Texas has more employment at risk in pandemic
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1.2 1.61.7 0.3
4.23.7
6.15.8
9.69.2
0
5
10
15
20
25
Texas U.S.
Accommodations & food servicesAdministration & support servicesTransportation & warehousingEnergyArts, entertainment & recreation
NOTE: Data is from March 2020.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by the Dallas Fed.
Share of total employment
DFW Economy Amid the COVID-19 Pandemic
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Business-Cycle Indexes indicate sharp contraction in DFW
-6.04
-12.33
-15
-10
-5
0
5
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
DallasFort Worth
Percent, year/year
NOTES: Business-cycle indexes through April 2020. Dashed lines are long-run (20-year) averages.SOURCE: Federal Reserve Bank of Dallas.
25
604
-59
-23
-120
-80
-40
0
40
80
120
-700-600-500-400-300-200-100
0100200300400500600700
3/1 3/7 3/13 3/19 3/25 3/31 4/6 4/12 4/18 4/24 4/30 5/6 5/12 5/18 5/24 5/30 6/5 6/11 6/17
COVID19 daily new casesMobility and engagement (Index)Num. of Hourly Employees Working (Index)
NOTE: Mobility and engagement index data up to June 12, 2020, Homebase index up to June 16. Case data through June 17, 2020.SOURCES: Homebase; Johns Hopkins University; SafeGraph.
Count, 7 day avg.Index, 7 day avg.
Dallas-Fort Worth Social Distancing and COVID-19 SpreadMay 1: Most retailers, dine-in restaurants allowed to open at 25% capacity May 22: Phase 2
of re-opening
June 3: Phase 3 of re-opening
Mobility increasing and workers starting to come back,daily new COVID-19 cases rising again in DFW
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June 12:Restaurants expand
to 75% capacity
DFW leads major Texas metros in net migration gains since 2010
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-1000
100200300400500600700800
DFW Houston Austin San Antonio El Paso
Net migration, thousands
NOTE: Data are for July 2010 to July 2019. SOURCE: U.S. Census Bureau, Population Division.
Reason for migrating to Texas versus elsewhere
NOTE: Data refer to 2010-2019.SOURCES: CPS-ASEC; author’s calculations.
Reason Texas Non-Texas
Relocated for job 50.9 41.3
Family Reasons 26.6 26.6
Amenities 17.8 23.8
Other 4.7 8.3
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Texas and DFW Real Estate Markets
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Residential construction weakens
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020NOTE: Last data point is April 2020. Table refers to percent growth in annual totals. Table 2020 YTD data for January-April 2020.SOURCES: U.S. Census Bureau; seasonal adjustments by FRB of Dallas.
Index, Jan.‘10=100, 5 MMA, SA
Single-family permits DFW
Multifamily permits DFW
Single-family permits Texas
Multifamily permits Texas
2019 2020 YTD 2019 2020 YTDDFW -3.7 17.7 4.4 -0.8Texas -0.3 17.9 22.8 5.8
Single-family(percent growth)
Multifamily(percent growth)
30
Apartment rent payments slightly below 2019
31
93.292.7
93.2 93.2
91.9
89.0
93.9
93.293.5 93.5
92.2
88.9
86
87
88
89
90
91
92
93
94
95
Austin Dallas San Antonio Fort Worth Houston U.S.*
June 1-13, 2020 June 1-13, 2019
NOTE: US data are from National Multifamily Housing Council. Texas metro data provided by RealPage Inc.SOURCES: RealPage Inc.; National Multifamily Housing Council.
Percent
Home sales fall sharply in the wake of COVID-19
90
100
110
120
130
140
150
160
170
2012 2013 2014 2015 2016 2017 2018 2019 2020
Fort Worth
Texas
Dallas
U.S.
Index, 3MMA, Jan. 2011 = 100, SA
NOTE: Data through April 2020.SOURCES: Multiple Listing Service; seasonal and other adjustments by Dallas Fed.
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Home sales dip across price points
0
100
200
300
400
500
600
700
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Dallas-Fort Worth-Arlington
$400-499k
$300-399k
$200-299k
More than $499k
$150-199k
Less than $150k
Index, Mar. 2011=100, 3MMA, SA
NOTES: Data are through April 2020. Pie chart data for 2020 YTD. Underlying data in nominal dollars.SOURCES: Multiple Listing Service, seasonal and other adjustments by FRB Dallas.
6%
12%
38%22%
10%
12%
33
Inventories tight
4.53.52.9
2.01.8
2.1
0
2
4
6
8
10
12
14
2011 2012 2013 2014 2015 2016 2017 2018 2019
Dallas-Fort Worth-Arlington
More than $499k
$400-499k
$300-399k
$200-299k
$150-199k
Less than $150k
Months of Inventory, SA
NOTES: Dashed line at six months of inventory indicates balanced level of supply. Data are through April 2020.SOURCES: Multiple Listing Service, seasonal and other adjustments by FRB Dallas.
34
House price appreciation holding steady
35
-6-4-202468
1012
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Percent, year/year, SA
DFW
U.S.
NOTES: Data through March 2020. Case-Shiller HPI for DFW is used to approximate Texas.SOURCE: Standard & Poor’s CoreLogic Case-Shiller Home Price Index.
What business contacts are saying about new-home sales in DFW
“Sales remain solid to this point.”
“DFW, San Antonio, and Austin were pretty strong. Houston was a little slow. Dallas is shaping up to have a better month than we expected. We expect monthly sales for April to be about 2/3 of what they were last year.”
“… over the past few weeks we have done a really good job of moving our prospects to contract and this week was a rebuilding prospect week. We have a better start to the week already with multiple contracts in the works.”
“We had a good week here in Dallas. We were almost double last week’s gross number. We ended up netting about 90% of plan. I have heard quite a few deals already in the process that should finish in the next couple of days. Keeping fingers crossed.”
36
DFW office absorption softens ahead of the pandemic
-4-202468
10121416
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020
DFWHoustonAustinSan Antonio
Net absorption, millions
NOTE: Data through Q1 2020. San Antonio data missing in Q1 2014, Q2-Q4 2016.SOURCE: CBRE Research.
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Outlook for 2020
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Texas employment expected to rebound in second half but end the year below 2019 levels
39
-69.0
116.8
-100.0
-50.0
0.0
50.0
100.0
150.0
Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
NOTE: Forecast scenario estimates Texas payroll employment for May based on initial claims data and the remainder of the year based on US GDP growth of -42.3% Q2, +16.3% Q3, and +22.8% Q4, as well as direct COVID-19 impacts from March to May and WTI prices following the futures contract curve as of 6/1.
Percent, SAAR
-3.8-15.0-10.0-5.00.05.0
Percent, Y/Y
Texas unemployment rate expected to slowly decline
40
3.5
12.8
14.9
8.9
2
4
6
8
10
12
14
16
Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20NOTE: Forecast scenario estimates Texas payroll employment for May based on initial claims data and the remainder of the year based on US GDP growth of -42.3% Q2, +16.3% Q3, and +22.8% Q4, as well as direct COVID-19 impacts from March to May and WTI prices following the futures contract curve as of 6/1.Unemployment rate forecast assumes a labor force participation rate of 63.8 and a payroll/household employment ratio of 0.97 at year-end.
Percent, SA
Pandemic is unprecedented and has many aspects of a natural disaster instead of a typical recession
Economic activity is slowly recovering; path of the virus and consumer demand and business responses highly uncertain
Most economists expect a sharp decline in Q2 and recovery in the second half – but still expect to end the year down more than in the Great Recession
Weakness in the energy industry will likely be drag on Texas, dampening the state’s recovery in the second half of 2020
Factors such as a central location, low cost of living, flexible labor markets, good business climate will be favorable for DFW in the long run
Summary
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