While the Texas economy continues to show growth, oil field job job cuts have pushed the growth rate to lower than the national rate of growth for the first time in thirteen years.
Speaking to the annual Texas Economic Forecast meeting attendees in San Antonio, Federal Reserve Bank senior economist Keith Phillips said, “Even with over 50,000 jobs lost in the oil and gas sector, Texas managed to grow last year. In fact, it grew by 1.3% or 150,000 jobs.” He forecasts a job growth rate of 1.4 percent, or 161,000 jobs, WOAI reported.
The economist predicted that if oil continues to fall to the $20 – $30 per barrel range, the state’s job growth will turn negative. He said Houston may well bear the brunt of the economic slump. With a flash of optimism Phillips said, “But we are constantly surprised by oil prices. If they jump up past $60 and hold, Texas will likely return to growth above the national average.” He said Houston’s growth “flat lined” over the past year.
The oil giant BP, which has a heavy presence in Houston, announced it will cut 4,000 jobs over the next two years as it appears oil prices will continue to slump as Iran re-enters the international oil export arena, Click2Houston reported. The move followed the announcement that oil prices hit a 12-year-low near $31 per barrel.
In addition to the new Iranian oil coming into the market, China’s economic slump has lessened the demand for oil, this contributing to the current glut of oil on the international trade market.
“We have recently informed staff that we plan to further reduce numbers in our upstream segment by 2017 as we continue to simplify our business, improve efficiency and reduce costs without of course compromising safety which remains our number one priority.” BP reported in a statement. “However, we are not giving a running commentary on numbers.
BP said that at least 600 of the jobs to be cut will hit their North Sea operations. There was no word on how many of those jobs might come from Texas.
The statement from BP continued:
Overall, at a segment level we are planning an upstream organization with a workforce of below 20,000 people by the end of 2016. To reach this level we will need to reduce our current workforce of BP employees and agency contractors by at least 4,000 additional people.
For your background . . . BP’s upstream businesses in the U.S. include Gulf of Mexico, Alaska and Lower 48 onshore.
Phillips said that economic diversification is why Texas’ economy is continuing to show growth. “Leisure and hospitality, for example, benefitted a lot from the lower price of energy,” the economist stated. “We saw people going out more, and we saw people on vacation.”
He also said the Texas medical industry is showing growth because of the Affordable Care Act. The state’s housing market also remains strong. “The states that continue to prosper will be the states which have a low cost of living and a low cost of doing business, and that continues to be a strength in Texas,” Phillips told the attendees of the economic forecast meeting.
San Antonio, a city that relies heavily on tourism and military bases for its economic growth, showed a 3.6 percent job-growth rate for the second year in a row, the San Antonio Express-News reported. Phillips predicted that growth rate would drop to 2-3 percent in 2016, or 20,000 to 30,000 new jobs.
At this time, Phillips said there is just no way to predict what oil prices will do in the coming year. Joking with the crowd, he said, “There’s no effective mechanism to predict oil prices. If I had to make a forecast, I would say between $15 and $90. That would be a confident prediction.”
Bob Price serves as associate editor and senior political news contributor for Breitbart Texas and is a member of the original Breitbart Texas team. Follow him on Twitter @BobPriceBBTX.