Oil state Texas still facing some economic pressures

Job growth was close to zero, but some momentum expected in 2017.

By Daniel J. Graeber

The Texas oil and gas industry stabilized during the latter half of last year, though there are secondary pressures remaining, an economist said.

Energy executives responding to a survey from the Federal Reserve Bank of Dallas said the outlook for 2017 had improved over last year. During the fourth quarter, state oil and gas production held relatively stable and measured indices showed gains in oil in particular.


"Gains in the energy sector would help many manufacturing industries in the state, although the strength of the dollar is still a sharp headwind for the many exporters in Texas," Keith R. Phillips, the assistant vice president for the Dallas Fed, said in a statement.

A strong dollar means domestic consumers would pay less for imports, but foreign consumers pay more for exported U.S. goods and manufacturing is one of the pillars of the Texas economy outside of the energy sector.

Minutes from the December meeting of the U.S. Federal Reserve revealed a sense of optimism based in large part on strong labor figures across the country and modest gains in inflation, which is still below the 2 percent objective. Phillips made no mention of the protectionist policies expected from President Donald Trump, which could influence relationships with key U.S. trading partners like Mexico. Many of Trump's Cabinet choices, however, have strong ties to the oil and gas industry.


Texas is the top oil producer in the United States and regulators issued 1,009 original drilling permits in December 2016, up from the 727 recorded in December of the previous year. A rebound in oil prices that followed a decision from the Organization of Petroleum Exporting Countries to trim production improved the economics for shale oil producers and the latest federal estimate predicts most of the new growth will come from the Permian shale basin, centered in Texas and parts of New Mexico.

On employment prospects, one of the overall bright spots in the U.S. economy, the Dallas Fed reported Texas lost 700 jobs in December, but improvements over the full fourth quarter.

"Job growth was close to zero in December but was revised up sharply in November resulting in 1.8 percent growth for the fourth quarter," Phillips said. "Recent moderate job growth and a strong December increase in the Texas Leading Index suggest some upward momentum heading into 2017."

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