2020 Economy Forecast: Sunny with a Slight Chance of Decline

The San Antonio economy is going strong into 2020, having gained more jobs last year than the year before, and the state’s economy is strong overall with steady job growth expected and no recession in sight, a Federal Reserve economist said Tuesday.

But declines in oil and gas prices, combined with a tight labor market, trade wars, and uncertainty around the upcoming elections, could pose threats in the coming year, said Senior Economist Keith Phillips, assistant vice president of the Federal Reserve Bank of Dallas. Already, energy-focused Houston is experiencing a slowdown in job growth that began last year.

Phillips presented his forecast Tuesday at an annual Texas Economic Outlook event at the San Antonio branch of the Federal Reserve Bank of Dallas.

Attended by several dozen professionals from the area’s banking, financial services, and real estate industries, the event also featured talks by Bryan Grundhoefer, president of Wellmed Medical Management and OptumCare Central Region, and Phil Green, chairman and CEO of Cullen/Frost Bankers and Frost Bank.

Phillips said Texas came out of the Great Recession of 2008-2009 as one of the top three states in terms of job growth.

In San Antonio, job growth was at 2.2 percent in 2019, slightly higher than the state overall, and up from 1.8 percent the year before. Jobs in construction, health care, and, in particular, the leisure and hospitality sector, experienced the greatest gains while finance and insurance job growth remained flat.

Texas employment is forecast to grow about 2.1 percent in 2020, with a projected 274,000 additional jobs. Phillips said. State employment grew at 2 percent in 2019, adding approximately 245,100 jobs, and 2.4 percent in the year before.

But last year’s job growth in Texas was suppressed by both declines in the energy sector and the tight labor market.

“When we talk to businesses across the state, one of the key things they mentioned is labor force,” Phillips said. “Overall, the immigration issue is affecting labor force growth … even though we still see a lot of net immigration from other states.”

While the oil and gas industry weakened in the state, so did manufacturing slightly, Phillips said. But in the second half of last year, the service sector actually improved.

When it comes to service in general, San Antonio has always had a strong customer service culture, said Green. He called it the city’s core competency, similar to energy in Houston and technology in San Francisco. “And if you don’t believe it, look at the leading institutions in San Antonio,” he said, naming Frost Bank, USAA, and Rackspace as examples.

Even the military presence in San Antonio counts among those, he added. “There’s no higher form of service I can think of.”

Green believes that characteristic will do more to ensure business success and attract investment to San Antonio in 2020 than anything else. “If I’m going to expand a business, I want to be in a place that has a talent pool that’s demonstrated success and competence in providing service to my customers,” he said.

That idea resonated with attendees, most of them alumni of the University of Texas and the UT McCombs School of Business, which sponsored the event.

“We’re very lucky to be in Texas now. I think this is a really great moment for the region, for the state.”

Joe Shields, director of business development at McCombs Enterprises

“We’re such an energy-focused city and state, it’s interesting to see some data that shows we’re not totally dependent on [energy] and we don’t see our results totally correlative with energy results,” said Joe Shields, director of business development at McCombs Enterprises. “It’s nice to know our diversified city will stand tall because of our service [culture]. That’s one thing that can’t be disrupted – customer service.”

Jay Hartzell, dean of the McCombs School since 2016, said that when it comes to Texas versus the rest of the United States, this state is very well positioned economically.

“We’re very lucky to be in Texas now,” he said. “I think this is a really great moment for the region, for the state. All of that resonates with what we see in terms of student interest, population flows, people trying to hire students. I haven’t had any meetings as dean worrying about students not getting jobs.”

There is one thing each of the speakers agreed San Antonio leaders should focus on for the next 10 years, and that is educational attainment levels.

“The basis for the problems we have with income inequality is basically education,” Phillips said. “If San Antonio was known as the top education place and had the best schools in the country, we wouldn’t have to worry about growth.

“We’re doing [well] as it is, but if we really wanted to improve the outcomes … for all people, the education part, and particularly reducing the inequality of education, would be the top vote.”

The Dallas Fed releases its Texas Employment Forecast on a monthly basis in conjunction with the release of monthly Texas employment data. The next release is scheduled for March 13.