Without a doubt, the downturn in oil prices is affecting not only Texas economic performance, but also that of the state’s metropolitan areas.

Larger negative effects are being felt in areas with a greater oil and gas industry presence, whether due to proximity to an emerging field (such as in the case of San Antonio) or long-established ties through corporate headquarters and regional offices (such as in Houston). Other population centers are seeing more of a mixed result, with some gains (such as through greater consumer spending thanks to fuel savings and improved competitiveness of certain industries) offset by losses. Here is an overview of our most recent short-term forecast for the state’s largest metropolitan statistical areas (MSAs).

The Austin-Round Rock metropolitan area has long been an economic leader, with a large base of stable business activity stemming from state government and higher education as well as a growing presence in emerging sectors. This pattern is expected to continue through the short-term forecast horizon (2019) and beyond. The area was recently ranked the number five high-tech market in the nation by consulting firm Jones Lang LaSalle. With recent expansion and relocation activity in a number of industries, the Austin area remains a top location for jobs. Through 2019, the Austin-Round Rock MSA is forecast to see gains in real gross product at a 4.36 percent yearly rate, for an overall increase of $25.8 billion. Nearly 113,100 net new jobs are projected to be added (2.30 percent per annum growth).

The Dallas-Plano-Irving Metropolitan Division economy has been expanding at an impressive rate. The area was recently ranked among the top ten cities for technology in the United States based on numbers of jobs, growth, and wage growth. In addition, greater Dallas also continues to attract large corporate headquarters operations. Through 2019, The Perryman Group’s most recent forecast indicates output (real gross product) expansion at a 4.37 percent pace, for a gain of more than $78.7 billion. Wage and salary employment is expected to increase by nearly 283,900 over the period (a 2.31 percent yearly rate). All industrial sectors are projected to expand, with gains concentrated in the services industry group.

The Fort Worth-Arlington Metropolitan Division has been experiencing spotty growth, with some industry gains offset by losses in others. Recent locations and expansions have included firms within long-time area cornerstone industries including transportation and distribution, as well as other types of business operations.  The Perryman Group’s forecast calls for continued growth at a relatively healthy pace. Fort Worth-Arlington output (real gross product) is forecast to increase at a 4.37 percent annual rate through 2019, for a gain of almost $27.7 billion. Over the same period, wage and salary employment is likely to grow by 115,100, a 2.19 percent per annum rate.

Economic conditions in the El Paso MSA have been improving, with unemployment down significantly during the past year. There has been some recovery in the area’s large government sector, as well as significant hiring in the (1) trade, transportation, and utilities and (2) education and health services segments. The region’s relatively low cost of living is advantageous, and the large military presence provides a stable economic base. Even so, challenges in the areas of workforce preparedness and low income levels remain a drag on economic performance. Over the next five years, output (real gross product) is forecast to increase at a 3.49 percent annual rate through 2019, for a gain of more than $5.0 billion. During the same period, wage and salary employment is likely to grow by 31,760, a 1.84 percent yearly rate of expansion.

Houston-The Woodlands-Sugar Land has been among the strongest-performing large metropolitan areas in the nation, and Houston was recently named one of the cities benefiting the most from the economic recovery by Forbes magazine. Energy has been a key reason for this strength, with headquarters operations and other oil- and gas-related firms generating substantial economic activity. The region also benefits from the port and petrochemical companies, as well as locations/expansions in technology-oriented firms. While weakness in the energy sector will likely cause some notable slowing in the near future, a return to more robust growth is expected within the forecast horizon. Over the short term, output (real gross product) is projected to increase at a 4.47 percent annual rate through 2019, for a gain of almost $120.0 billion. During the same period, wage and salary employment is likely to grow by 342,310, a 2.18 percent annual pace.

The San Antonio area’s large base of stable industries (such as tourism, business and professional services, manufacturing, and education) continues to expand. In addition, the regional economy has been benefitting from drilling activity in the Eagle Ford Shale. The Perryman Group’s most recent forecast calls for significant economic gains over the next five years, with output (real gross product) expected to increase at a 3.97 percent annual rate through 2019, for a gain of almost $20.4 billion. During the same period, wage and salary employment is likely to grow by 107,930, a 2.08 percent yearly pace. The area’s services sector will dominate job growth, with notable gains in output across a number of industry groups.

We continue to monitor the situation with oil prices and the fallout for the Texas economy and will adjust our outlook as needed in response to changing conditions. Currently, we are anticipating that while there will likely be notable slowing in some areas over the next year or so, a return to higher growth will occur during our forecast horizon.