Manufacturing activity in Texas stalled in January according to a new survey released today by the Federal Reserve Bank of Dallas. The bleak economic assessment is fueled by lower crude oil prices and that is feeding concerns about what a Texas oil bust could do to the state economy.
The economic downturn being felt in the Texas oil patch is not being called a bust, but it is something state comptroller Glen Hegar admits he is keeping a close watch on.
"We project that Texas' economy will continue to grow but more modestly than what we have had the past several years."
Speaking at the Texas Association of Broadcasters, Hegar Monday morning explained how his budget estimate for state lawmakers is built on a volatile oil and gas market. Hegar's finance team calculated there will be $113 billion in sales tax revenue as long as the average price for crude oil stays around $64 a barrel. It's been below that mark since early December, despite that Hegar isn't worried.
" For the first 5 months of this year, August rolls in to September, so you have dollars from September, October, November and December in the Treasury so far, That average has been $80 oil, is what has been collected taxes on, the average of $80. price So looking forward to the next 7 months, if you have roughly an average of $50, we were at $47 this morning, last week we've gone up we've gone down, somewhere in the high $40's, if you take $52 oil, for the average of this year, to the end of august, that gets you to the $64 dollars that we put into the Revenue Estimate," said Comptroller Hegar.
While Hegar is predicting modest job growth in Texas for the next two years, he is counting on work outside of the Texas oil patch along with lower prices at the pump- to fuel the state economy.
"As of today, I see no wiggle room going up nor going down," said Hegar.
There is still going to be pain, especially in areas of the state that have benefited from the Texas oil boom. Late last year it was estimated that 300-thousand people work in the Texas oil and gas industry.
"To say we are at the bottom or near it, we hope that we are, most financial analysts seem to indicate by the 3rd or 4th quarter of 2015 we will start seeing the price pick up a little bit," said Todd Staples - with the Texas Oil and Gas Association.
The layoffs underway now, according to Staples, are not expected to trigger a recession similar to what happened during the oil bust in the 1980's.
"I think people are being wisely cautious in making these decisions to scale back, and its making some disruption, but right now, on a much more manageable pace than in other economic downturns."
If a barrel of crude stays below $55. The Federal Reserve Bank of Dallas estimates Texas could lose nearly 130-thousand oil industry jobs by the middle of this year. It's also estimated close to 300,000 new jobs statewide are expected to be created this year. The full report, here.