In recent years, Texas has led the nation in job creation, with Midland and Odessa frequently outpacing major metropolitan areas like Dallas and Houston.
The plunge in crude prices to below $50 a barrel is expected to affect the state’s job creation in 2015, according to the Federal Reserve Bank of Dallas’ annual Texas Economic Outlook.
The outlook forecasts that the state’s job growth will likely slow from about 3.6 percent in 2014 to between 2 and 2.5 percent his year, said Keith Phillips, senior economist and research officer with the bank. That will result in between 235,000 and 295,000 new jobs this year, down from the estimated 408,000 jobs that were created last year.
A sustained oil price below $50 a barrel will hurt the state economy because that figure is below the breakeven point for a majority of shale drilling projects, Phillips said.
He said areas of Texas more dependent on energy production, like West Texas and the Eagle Ford Shale in South Texas, will be more negatively impacted by the sharply curtailed drilling and extraction activity resulting from low oil prices.
He said, however, that, “I do not think this situation is long-term in nature.” His reasoning: Although supply and (temporarily) demand and a stronger dollar — which means the same international purchasing power is obtained with fewer dollars — are playing significant roles, the driving force is OPEC decision making.
The bank’s outlook said the state’s gross domestic product will be more affected than job growth because output per worker in the mining sector is about 4.6 times more than the state average.
Beyond the headwind created by low oil prices, slowing exports may be another headwind for the Texas economy in 2015, according to Phillips. Texas exports have declined in recent months, and a strong U.S. dollar may further dampen exports this year.
The outlook’s bottom line: Texas is likely to continue to grow but not nearly as strong as last year.