Forecast: San Antonio Economy to Remain Sunny

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Hispanic Chamber of Commerce's 2015 Economic Outlook Breakfast held at the Pearl's Full Goods building. Photo courtesy of SAHCC.

Unless you’re looking for work in the oil patch, it’s a good time to be a job seeker in San Antonio, where demand for skilled workers is coming very close to outstripping supply. Job creation remains strong, unemployment is at an historic low, and the city continues to grow. Gas prices at the pump are down, consumer confidence is strong, and there aren’t enough new houses to equal a six month supply.

Employers in two of the local economy’s fastest growing and highest paying sectors – health care and tech – can’t find enough smart recruits to fill available jobs.  That means San Antonio needs to compete with other attractive cities to import more talented professionals and retain its homegrown, highly educated Millennials to remain a city with adequate Brain Gain.

Keith Phillips

Keith Phillips

Steve Nivin

Steve Nivin

That’s the upbeat picture painted by two economists Thursday morning at the Hispanic Chamber of Commerce’s 2015 Economic Outlook Breakfast held at the Pearl’s Full Goods building. It’s a story told mostly in graphs and charts crowded with different color lines all heading in the right direction: up, up, up. 

Continued growth is the sunny forecast, but not growth equal to 2014 growth.

“I think this will be the first time in 13 years that Texas does not grow as fast as the national economy,” said Dr. Keith Phillips, PhD. and senior economist and research officer at the Federal Reserve Bank of Dallas. Still, Phillips said Texas enjoyed the sixth best job growth among all states in 2014, and will continue to create jobs at a rate that will keep it among the top 10 states.

Keith Phillips' job growth estimates.

Keith Phillips’ employment growth estimates.

Both Phillips and Dr. Steve Nivin, PhD. and chief economist with the SABÉR Research Institute,  a partnership between the Hispanic Chamber and St. Mary’s University, said their respective forecasts this time last year proved conservative, and that job growth in San Antonio and falling unemployment exceeded expectations.

“I was low,” Nivin said, noting that he forecast 2014 employment growth in San Antonio at 2.5-3%, the equivalent of 22,800-27,500 new jobs, and the year ended with a 3.26% job growth rate and 30,300 new jobs. Nivin expects job growth to slow this year, but still reach 2.25-3%, or about 24-28,800 new jobs.

Steve Nivin's employment growth estimates.

Steve Nivin’s employment growth estimates.

Local unemployment, meanwhile, stood at 4% at the end of January, lowest of all Texas cities except Austin with 3.7% unemployment. The state average is 4.4%, and nationally the number is 5.7%. The Fed generally considers full employment to be around 5%, given the number of jobless adults not seeking work or unable to work. Nivin expects San Antonio’s rate to fall a few more decimal points in the coming months.

The Challenges

San Antonio’s weakness, Nivin said, remains the education level of its working population.

“What we need to focus on here is education, which will drive the higher wage jobs,” he said. “We need to get UTSA to the level of UT-Austin, to the Tier One level. We need to support entrepreneurship, we need to support entrepreneurial growth and that sector of the economy.”

Al Aguilar, the chairman of the Hispanic Chamber who owns the Creative Civilization advertising, marketing and public relations agency with his wife, Gisela Girard, noted that small businesses in San Antonio continue to create the majority of new jobs in the city.

“We need to support small businesses and we need to support one another,” Aguilar said.

A strong dollar also will depress exports out of Texas as the cost of U.S. goods continues to rise for foreign buyers, and it will dampen Mexican consumer spending among visitors who earn in pesos, particularly during the Easter Week.

Declining oil prices, which fell from $106 a barrel in mid-2014 down to less than $44 a barrel Thursday, have hurt and will continue hurt Texas, although the state’s economy is far more diversified than it was during the last big bust. Cities like Houston and Midland with significant energy sectors will hurt the most, while falling oil prices are of little consequence in San Antonio, Phillips said, because energy jobs account for only about 3% of the workforce.

From Keith Phillips' presentation.

From Keith Phillips’ presentation.

Phillips appeared on a San Antonio panel earlier in the year that I moderated, and said then, as he said again Thursday, that the Eagle Ford Shale Play had far less of a positive impact on San Antonio’s economy that most people believe. I challenged that claim, arguing that while jobs are counted in the South Texas counties where they are held, many of the Eagle Ford oil field workers and their families actually live and shop in the San Antonio metro area.

Both economists said many of the Eagle Ford workers left jobs in the local construction industry and will now come back to San Antonio to fill jobs in that sector, which is short of workers.

Keith Phillips' estimates of job growth in relation to Eagle Ford Shale play.

Keith Phillips’ estimates of job growth in relation to Eagle Ford Shale play.

Neither economist addressed trends in the city’s low wage economy where unskilled workers struggle with incomes that keep them below the poverty line.

A Seller’s Market

Whatever the truth is about the Eagle Ford’s economic impact, San Antonio’s overall economy is growing at a pace that is outpacing new home starts.

“The housing market is rather strong. The six-month supply is the equilibrium level in the market, and San Antonio only has a 3.6 month supply,” Nivin said. “The $200-250,000 home and below, many of those homes are selling even before they’re completed and hitting the market. We’re even seeing that in houses that are closer to $1 million.”

Tightened federal regulations on lenders, the economists said, have reduced the number of homes in the $100,000 category being built locally because would-be buyers can no longer qualify for mortgages.

The housing shortage is even worse in the other major Texas cities, which is driving up prices. Prices are up 5.6% year over year in San Antonio, and up close to 10% in Austin, Dallas and Fort Worth. Texas still seems like a bargain to new residents coming here from both coasts.

“It’s a seller’s market is most MSAs,” Phillips said, noting that the housing supply in Dallas has fallen below the two-month supply mark.

Steve Nivin home price estimates.

Steve Nivin’s home price estimates.

Both economists expect the pace of new home construction to pick up in San Antonio.

The only suspect forecast unsupported by any hard data came from Nivin, who opened his presentation with a prediction that the University of Wisconsin men’s basketball team would win the NCAA Championship this month.

To review Phillips’ full presentation, click here. To review Nivin’s full presentation, click here.

*Featured/top image: Hispanic Chamber of Commerce’s 2015 Economic Outlook Breakfast held at the Pearl’s Full Goods building.  Photo courtesy of SAHCC.

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