u.s. economic outlook, summary€¦ · recent u.s. economic data has generally been positive. ......

Stronger Q2, Less Drag from Energy, Labor Stutter Freezes Fed

Recent U.S. economic data has generally been positive. The very weak first quarter real GDP growth has been revised up from the initial estimate of 0.5 percent annualized, to 0.8 percent. We expect to see another minor upward revision to GDP on June 28. Consumer spending in April was strong, gaining 0.6 percent after accounting for higher pric-es, a significant support to Q2 GDP growth. We expect the current quarter to show a moderate rebound in real GDP growth, up to about 2.3 percent, supported by stronger consumer spending and less drag from the energy sector. In early June, the U.S. rig count increased for the first time since last August. However, the May employment report from the Bureau of Labor Statistics landed with a thud. According to the BLS, only 38,000 net new payroll jobs were added to the U.S. economy in May, well below expectations. This could turn out to be an anomalous report, and it is reasonable to expect some bounce back in the June labor data, due out July 8. However, there is enough corroboration outside the June employment report to take the miss seriously. First, job growth in the ADP employment report has been trending down. We have been expecting a similar downtrend in the official BLS data. We could be seeing the start of a downtrend with the last two months of payroll data, when April saw a gain of just 123,000 jobs, followed by May’s very weak 38,000. Second, productivity growth has been very weak. Re-cent weak productivity growth has been an important debate topic amongst economists. University of Chicago econo-mist Robert Gordon recently published a book focusing on productivity. U.S. productivity growth was just 0.6 percent in 2016Q1 versus 2015Q1. A pickup in GDP growth in Q2, plus weak hiring over the quarter, could mark the reset in productivity growth that some economists have been waiting for. Third, both the May ISM Manufacturing Index and the May ISM Non-Manufacturing Index showed employment sub-indexes below 50, indicating a contraction in employment for the month. As is often the case, the May employment report went in two directions at once, showing weak job growth combined with a noticeable step down in the unemployment rate, from 5.0 percent in April, down to 4.7 per-cent in May. Strong increases in the labor force have kept the unemployment rate stable near 5.0 percent since last September. In May, the labor force gains reversed, bringing the unemployment rate down despite weak hiring. Timing is everything. The weak May employment report, released just 10 days before the upcoming Federal Open Market Committee meeting, over June 14 and 15, will likely keep an interest rate increase on hold. We still think that a fed funds rate increase for July 27 is on the table. But the economic data will need to be solid in front of that meeting. The upcoming BREXIT vote in the United Kingdom is also an issue for the Fed. The STAY camp is still ahead in the polls, but their lead is narrowing. A LEAVE vote is viewed as economically destabilizing in the near term for both the UK and the EU. Janet Yellen’s speech in Philadelphia on June 6 gave her an opportunity to set market expectations for the upcoming FOMC meeting. Her speech was generally positive, but highlighted several areas of uncertainty including the weak May employment data. Yellen’s optimistic but cautious speech was consistent with no rate hike in June, but also consistent with the possibility of a rate hike at the end of July if the data is supportive.

Economic Outlook: C Balance of Risk:

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herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction

based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the

authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or

factual information.

4Q'15a 1Q'16a 2Q'16f 3Q'16f 4Q'16f 1Q'17f 2Q'17f 3Q'17f 2015a 2016f 2017f

Real GDP (Percent Change Annualized ) 1.4 0.8 2.3 2.2 2.2 2.6 2.6 2.4 2.4 1.8 2.4

CPI (Percent Change Year-over-Year) 0.4 1.1 1.5 1.7 2.1 2.7 2.3 2.1 0.1 1.6 2.3

Payroll Jobs (Average Monthly Diff., Ths.) 282.0 203.0 138.3 174.9 164.1 156.3 152.0 150.4 228.7 201.8 151.6

Unemployment Rate (Percent) 5.0 4.9 4.8 4.7 4.6 4.5 4.5 4.5 5.3 4.8 4.5

Federal Funds Rate (Effective) 0.16 0.36 0.37 0.62 0.67 0.92 1.17 1.38 0.13 0.51 1.22

10-Yr. Treasury Rate 2.19 1.92 1.78 1.96 1.98 2.14 2.33 2.50 2.14 1.91 2.37

a = actual f = forecast

U.S. Economic Outlook, Summary

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The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained





125

135

145

155

165

175

185

195

4,400

4,600

4,800

5,000

5,200

5,400

5,600

J'14 J'15 J'16

Existing Home Sales Improved This Spring

Existing Home Sales, Ths. SAAR (L) Case Shiller Comp - 20 HPI (R)

Source: NAR

-2 -1 0 1 2 3

Trade, Inventories and Investment Drag Q1 GDP

2015Q2

2015Q3

2015Q4

2016Q1

Contribution to GDP

Non-Res. Fixed

Investment

Res. Fixed Investment

Inventories

Net Exports

Government

Consumer

SpendingSource: BEA

13

14

15

16

17

18

19

J'14 J'15 J'16

May Auto Sales Little Changed at 17.4 mln

Auto and light truck sales, SAAR, mil.

Source: MotorIntelligence

12

13

14

15

16

17

18

19

0.65

0.75

0.85

0.95

1.05

1.15

1.25

1.35

1.45

1.55

J'14 J'15 J'16

U.S. Dollar Strengthened on Fed Outlook in May

Mexican Peso per USD (R)

Canadian Dollar per USD (L)

Euro per USD (L)

Source: Federal Reserve

-5

-4

-3

-2

-1

0

1

2

3

4

J'14 J'15 J'16

Rebound in Energy Prices Boosts Inflation

CPI

PPI

Core CPI

Percent Change Year Ago

Source: BLS

700

800

900

1000

1100

1200

1300

1400

J'14 J'15 J'16

Housing Completions Housing Permits Housing Starts

SAAR, Thousands

Starts and Permits Rebound in April

Source: U.S. Census Bureau

June 2016

4.25

4.50

4.75

5.00

5.25

5.50

5.75

6.00

6.25

6.50

6.75

7.00

7.25

-400

-300

-200

-100

0

100

200

300

400

500

600

700

800

J'14 J'15 J'16

May Payrolls Disappoint, Up Just 38k Jobs

Total Nonfarm Employment (L)

Total Employed (Household Survey) (L)

Unemployment Rate, Percent (R)

Source: BLS

-2

-1

0

1

2

3

4

5

2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1

Q1 GDP Growth Revised Up to 0.8%

Real GDP, Percent Change Annualized

Source: BEA

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June 2016

4Q'15a 1Q'16a 2Q'16f 3Q'16f 4Q'16f 1Q'17f 2Q'17f 3Q'17f 2015a 2016f 2017f

Output

Nominal GDP (Billions $) 18165 18230 18389 18559 18761 18982 19197 19409 17947 18485 19303

Percent Change Annualized 2.3 1.4 3.5 3.7 4.4 4.8 4.6 4.5 3.5 3.0 4.4

Real GDP (Chained 2009 Billions $) 16471 16505 16598 16687 16780 16889 17000 17102 16349 16643 17050


Pers. Consumption Expenditures 11331 11384 11465 11529 11589 11654 11720 11784 11213 11492 11753


Nonresidential Fixed Investment 2213 2178 2162 2176 2200 2226 2251 2274 2209 2179 2262

Percent Change Annualized -2.1 -6.2 -2.9 2.6 4.6 4.7 4.5 4.2 2.8 -1.4 3.8

Residential Investment 547 570 589 600 607 613 618 622 530 591 620


Change in Private Inventories 78 70 60 55 50 55 60 60 98 59 59

Net Exports -552 -561 -562 -569 -580 -586 -591 -596 -543 -568 -593

Government Expenditures 2871 2879 2898 2912 2927 2942 2957 2972 2859 2904 2964


Industrial Prod. Index (2007=100) 104.6 104.1 104.2 104.8 105.6 106.4 107.1 107.6 105.2 104.7 107.3

Percent Change Annualized -3.3 -1.6 0.2 2.3 3.3 2.8 2.5 2.1 0.3 -0.5 2.5

Capacity Utilization (Percent) 75.8 75.4 75.4 76.4 77.0 77.4 77.7 77.9 76.7 76.1 77.8

Prices

CPI (1982-84=100) 238.1 237.9 240.3 241.8 243.1 244.3 245.8 246.8 237.0 240.8 246.2

Percent Change Annualized 0.8 -0.3 4.0 2.6 2.1 2.1 2.5 1.6 0.1 1.6 2.3

PCE Price Index (2009=100) 109.8 109.9 111.0 111.7 112.2 112.8 113.5 114.0 109.4 111.2 113.7


GDP Price Index (2009=100) 110.3 110.5 110.8 111.2 111.9 112.5 113.0 113.6 109.8 111.1 113.3


Producer Price Index, Finished Goods 192.3 189.9 192.0 192.7 193.7 194.7 195.8 196.6 193.8 192.1 196.2

Percent Change Annualized -4.9 -4.8 4.4 1.5 2.0 2.1 2.4 1.6 -3.3 -0.9 2.1

Crude Oil, WTI ($/barrel) 42.3 33.4 45.0 50.0 55.0 55.0 60.0 60.0 48.9 45.8 58.8

Labor Markets

Payroll Jobs (Average Monthly Diff., Ths.) 282.0 203.0 138.3 174.9 164.1 156.3 152.0 150.4 228.7 201.8 151.6


Average Weekly Hours, Prod. Works. 33.7 33.7 33.6 33.6 33.6 33.6 33.6 33.6 33.7 33.6 33.6

Population (Millions) 322.7 323.4 324.0 324.7 325.4 326.0 326.7 327.3 321.7 324.4 327.0


Personal Income

Average Hourly Earnings ($) 21.23 21.36 21.52 21.70 21.88 22.06 22.23 22.39 21.04 21.61 22.31


Real Disp. Income (2009 Billions $) 12390 12512 12545 12615 12719 12824 12920 13028 12247 12598 12975


Personal Saving Rate (Percent) 5.3 5.7 5.5 5.5 5.5 5.5 5.5 5.5 5.1 5.6 5.5

Housing

Housing Starts (Ths., Ann. Rate) 1135 1147 1194 1208 1227 1243 1256 1270 1108 1194 1263

Ext. SF Home Sales (Ths., Ann Rate) 4583 4717 4784 4842 4893 4937 4981 5027 4627 4809 5005

New SF Home Sales (Ths., Ann Rate) 508 532 573 579 587 592 598 603 502 568 601

Case/Shiller HPI (Jan. 2000=100) 176.3 178.8 181.1 183.2 185.2 187.1 189.1 191.1 172.4 182.1 190.1

Year/Year Percent Change 5.1 5.3 6.0 6.2 5.1 4.6 4.4 4.3 4.6 5.6 4.4

Consumer

Household Economic Stress Index 0.3 0.7 0.3 0.2 1.6 2.6 2.4 2.2 0.8 0.7 2.3

Auto Sales (Millions) 17.9 17.2 17.4 17.5 17.2 16.8 16.5 16.2 17.4 17.3 16.4

Interest Rates (percent per year)

Federal Funds Rate (Effective) 0.16 0.36 0.37 0.62 0.67 0.92 1.17 1.38 0.13 0.51 1.22

Prime Rate 3.29 3.50 3.50 3.62 3.67 3.92 4.17 4.38 3.26 3.57 4.22

1-Month LIBOR 0.25 0.43 0.45 0.72 0.81 1.07 1.32 1.53 0.20 0.60 1.37

3-Month LIBOR 0.41 0.62 0.65 0.92 0.97 1.21 1.46 1.67 0.32 0.79 1.51

1-Yr. Treasury Rate 0.46 0.58 0.58 0.81 0.85 1.08 1.33 1.53 0.32 0.70 1.37

5-Yr. Treasury Rate 1.59 1.37 1.27 1.47 1.51 1.69 1.90 2.10 1.53 1.41 1.96

10-Yr. Treasury Rate 2.19 1.92 1.78 1.96 1.98 2.14 2.33 2.50 2.14 1.91 2.37

30-Year Fixed Rate Mortgage 3.90 3.74 3.62 3.81 3.76 3.91 4.10 4.26 3.85 3.73 4.13

a = actual f = forecast June 6, 2016

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Resilient Houston Faces Ongoing Stress The Houston economy has been remarkably resilient in the face of extreme pressure on its large oil and gas

sector. Unfortunately, we expect to see more pressure from low oil prices at least through the first half of this year. Labor metrics shifted in the Houston metro area in 2015. Following strong and steady monthly job growth in 2014, Houston saw increasingly choppy data through 2015. While still overall positive for the year, four months in 2015 showed net job losses and one month was close to zero. Still, year-over-year job growth in the Houston metro area was 0.8 percent in December, positive, but well below the peak 4.6 percent year-over-year growth from November 2012, and below the U.S. average of 2.0 percent for the month. The Hou-ston area unemployment rate reached a low of 4.2 percent in February 2015, and then increased to 5.0 per-cent by December. Going forward, we except to see more consistent net job losses for Houston through the first half of 2016, bringing the unemployment rate up to 5.8 percent in the third quarter of this year.

Our Houston metro area forecast is largely contingent on our oil price outlook. We currently expect the price for WTI crude oil to increase to about $45 per barrel by year end. If this turns out to be an optimistic forecast, we would expect the Houston economy to show even bigger net job losses through this year. While we are hopeful that oil prices are currently in a bottoming-out process, we believe that it is still too early to say that we have reached a bottom in oil prices. Global demand remains softer than expected while production re-mains stronger than expected. The recent lifting of the U.S. crude oil export ban is good news for Texas, but it does not alter the fundamental reality of an oversupplied global oil market. What it does is allow U.S. produc-ers access to markets that are currently being supplied by higher priced oil. One impact of U.S. crude oil ex-ports will be to put even more pressure on high cost production globally, including Canadian tar sands pro-duction and North Sea production.

February 18, 2016

4Q'15a 1Q'16f 2Q'16f 3Q'16f 4Q'16f 1Q'17f 2Q'17f 3Q'17f 2015a 2016f 2017f

Labor and Demographics

Payroll Jobs (Thousands) 2996 2999 2995 2977 2969 2974 2986 3004 2983 2985 2996

Percent Change Annualized 1.6 0.4 -0.6 -2.3 -1.1 0.7 1.6 2.5 2.0 0.1 0.4


Population (Thousands) 6689 6714 6736 6758 6779 6799 6819 6839 6646 6747 6829


Net Migration (Thousands) 12.3 10.3 8.0 7.4 6.3 5.5 5.4 5.6 62.7 32.0 22.5

Personal Income

Total Personal Income (Nom., Millions $) 373127 376198 379035 381519 385371 390246 395532 401007 370321 380531 398322


Housing

Housing Starts (Total, Ann. Rate) 50718 48625 47730 45494 44160 43607 43438 43760 54712 46502 43725

Percent Change Annualized -33.9 -15.5 -7.2 -17.5 -11.2 -4.9 -1.5 3.0 -5.5 -15.0 -6.0

SF Housing Starts (# of Units, Ann Rate) 36189 35224 34909 34049 33651 33511 33511 33707 36392 34458 33666

MF Housing Starts (# of Units, Ann Rate) 14528 13401 12821 11445 10509 10096 9927 10053 18319 12044 10059

House Prices, FHFA (1995 Q1=100, NSA) 288 290 291 292 292 293 294 296 282 291 295


Bankruptcies

Total Business (12 Months Ending) 478 535 624 736 787 826 853 862 446 670 853

Total Personal (12 Months Ending) 6681 6939 7284 7968 8421 8602 8844 8968 6503 7653 8907

Houston MSA Economic Outlook


Houston MSA is a Comerica Economics designation of the Houston-The Woodlands-SugarLand metropolitan statistical area (MSA), as defined by the Office of Management

and Budget (OMB). The 2010 OMB definition of the Houston-The Woodlands-SugarLand MSA consists of Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liber-

ty, Montgomery and Waller counties.








-6

-4

-2

0

2

4

6

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1

Houston Job Growth Cooling

Houston

U.S.

Nonfarm Payrolls,

Year/Year Percent Change

Source: BLS, Comerica Bank

-10

-5

0

5

10

15

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1

House Price Gains to Moderate

Houston

U.S.

Source: FHFA, Comerica Bank

FHFA Home Price Index,


-15

-10

-5

0

5

10

15

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1

Houston Income To Lag U.S.

Houston

U.S.

Source: BEA, Comerica Bank

Personal Income,


6,000

7,000

8,000

9,000

10,000

11,000

12,000

400

500

600

700

800

900

1000

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1

Houston Bankruptcies to IncreaseBusiness Bankruptcies,

Total 12-Mos. Ending

Source: U.S. District Courts,

Comerica Bank

Personal (R)

Business (L)

500

600

700

800

900

1000

1100

1200

1300

1400

20000

25000

30000

35000

40000

45000

50000

55000

60000

65000

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1

Houston Housing Markets Cool

Houston(L)

U.S., ths (R)

Source: U.S. Census Bureau, Comerica Bank

Total Housing Starts,

Annual Rate

3

4

5

6

7

8

9

10

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1

Houston Labor Slack to Increase

U.S.

Houston


Unemployment Rate,

Percent








Houston Faces Ongoing Energy Sector Consolidation There is much more to the Houston economy than the price of oil, but the low price of oil continues to weigh

heavily on the center of the North American oil market. Perversely, the Paris terrorist attacks may have pro-vided some support for global oil prices, but downside momentum may continue as inventories of both crude and refined products increase. The price of West Texas intermediate crude oil is approaching $40/barrel and may retest the late-August low. Natural gas prices also remain exceptionally weak at $2.50 per mmbtu.

Job growth in the Houston metro area has clearly stepped down from the vigorous 8,100 net new payroll jobs per month average of 2014. Through September, the 2015 monthly average is a weak 656 net new jobs per month. And this disguises the four months of net job losses seen so far this year. We expect the Houston metro area economy to shed jobs on a net basis more consistently from the fourth quarter of 2015 through the second quarter of 2016, and the unemployment rate to increase through the third quarter of 2016.

Five smaller Houston-based energy companies appear on the Security and Exchange Commission’s list of dis-tressed companies. The proposed Halliburton-Baker Hughes merger will likely not be approved by the Depart-ment of Justice until late-November. According to the Houston Business Journal, Halliburton could cut as many as 20,000 jobs worldwide after the deal is finalized. Houston office construction has already slowed down considerably, with new projects down 33 percent this fall from one year ago. We expect residential construction to also cool through next year.

Good news for Houston came from the University of Texas, which announced plans to build a 332 acre re-search facility in southwest Houston. Also, a high speed rail terminal site appears to be one step closer for Houston after the Federal Railroad Administration eliminated a downtown site, apparently favoring a site at the intersection of Highway 290 and Loop 610. Construction on the rail system could begin in 2017.

November 20, 2015


Labor and Demographics

Payroll Jobs (Thousands) 2985 2970 2955 2940 2942 2955 2972 2990 2926 2977 2948

Percent Change Annualized 1.4 -2.0 -2.1 -2.0 0.3 1.8 2.3 2.5 3.5 1.8 -1.0





Personal Income

Total Personal Income (Nom., Millions $) 368785 369329 370761 372944 376940 381906 387201 392720 350072 367110 375638


Housing

Housing Starts (Total, Ann. Rate) 56115 51034 48645 46549 45401 44896 45285 45913 57872 54854 46373

Percent Change Annualized 19.1 -31.6 -17.4 -16.2 -9.5 -4.4 3.5 5.7 21.6 -5.2 -15.5





Bankruptcies

Total Business (12 Months Ending) 440 469 521 562 586 607 624 645 466 440 569














-6

-4

-2

0

2

4

6

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1


Houston

U.S.

Nonfarm Payrolls,



-10

-5

0

5

10

15

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1


Houston

U.S.


FHFA Home Price Index,


-15

-10

-5

0

5

10

15

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1


Houston

U.S.


Personal Income,


6,000

7,000

8,000

9,000

10,000

11,000

12,000

400

500

600

700

800

900

1000

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1

Houston Bankruptcies to IncreaseBusiness Bankruptcies,

Total 12-Mos. Ending

Source: U.S. District Courts,

Comerica Bank

Personal (R)

Business (L)

500

600

700

800

900

1000

1100

1200

1300

1400

1500

20000

25000

30000

35000

40000

45000

50000

55000

60000

65000

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1


Houston(L)

U.S., ths (R)


Total Housing Starts,

Annual Rate

3

4

5

6

7

8

9

10

2009

:Q1

2010

:Q1

2011

:Q1

2012

:Q1

2013

:Q1

2014

:Q1

2015

:Q1

2016

:Q1

2017

:Q1

2018

:Q1


U.S.

Houston


Unemployment Rate,

Percent








Energy Sector Consolidation Weighs on Houston Lower for longer is a painful refrain for the Houston metro area, as the regional economy adjusts to ongoing

low oil prices. After bouncing off the high 30s, West Texas intermediate crude oil has settled near $45 per barrel for most of September. However, the global forces of supply and demand for crude oil may not yet be in a sustainable equilibrium. On the supply side we see consistent evidence of declining U.S. production over the summer, but we also see ongoing strong production from OPEC members as well as the expectation for more output from Iran. On the demand side, developed economies around the world, including the U.S., simply do not need any more oil to continue expanding, due to the deep penetration of energy efficient tech-nology. Suppliers look to developing economies for increased crude oil demand, and many developing econo-mies, including China and Brazil, are cooling down.

Some relief may come to Texas in the form of the end of U.S. crude oil export restrictions. The U.S. House of Representatives’ Energy and Commerce Committee approved a bill to end the ban on crude oil exports that dates back to the Nixon administration. The U.S. Energy Information Agency has recently released a study in support of the ending the ban. Even at current low oil prices, U.S. crude oil exports would help to bolster the liquidity of many stressed energy-related companies.

Nonetheless, we will see still more signs of pain in the energy-sector this fall and winter. Stressed companies will be facing tightening credit availability even as protection from hedges rolls off. Ongoing consolidation in the energy sector will result in more cuts to operations and employment, and those will have further spillover effects on the rest of the state and regional economy. We expect the Houston metro area economy to show small net jobs losses through the middle of next year. We expect to see softer conditions for Houston area real estate markets in the months ahead.

September 25, 2015


Labor and DemographicsPayroll Jobs (Thousands) 2975 2981 2973 2966 2960 2967 2978 2993 2926 2977 2968

Percent Change Annualized -0.4 0.9 -1.1 -0.9 -0.8 0.9 1.6 2.0 3.5 1.7 -0.3





Personal IncomeTotal Personal Income (Nom., Millions $) 361105 364419 367992 372216 376278 381396 386562 391909 347950 363205 379113


Housing Housing Starts (Total, Ann. Rate) 53293 52542 50047 46708 43714 42092 41344 41401 57872 53585 43464

Percent Change Annualized -30.9 -5.5 -17.7 -24.1 -23.3 -14.0 -6.9 0.6 21.6 -7.4 -18.9





BankruptciesTotal Business (12 Months Ending) 440 464 502 547 586 612 636 657 466 459 595














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Houston

U.S.

Nonfarm Payrolls, Year/Year Percent Change


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U.S.


FHFA Home Price Index,Year/Year Percent Change

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Houston

U.S.


Personal Income,Year/Year Percent Change

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1100

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Houston Bankruptcies to IncreaseBusiness Bankruptcies, Total 12-Mos. Ending

Source: U.S. District Courts, Comerica Bank

Personal (R)

Business (L)

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Houston(L)

U.S., ths (R)


Total Housing Starts, Annual Rate

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U.S.

Houston


Unemployment Rate,Percent








Houston Energy Sector in Consolidation Houston’s energy sector is consolidating in response to the reset in the global oil market. Drilling, engineering and

service companies are reducing operating budgets and reducing staff by the thousands. Not only are drilling crews idled, but everything from automobile sales to shipping activity is being affected.

U.S. crude oil production appears to be levelling out after ramping up sharply since 2009. Inventories of crude oil in storage are also levelling out. Both are positive signs for stabilizing crude oil prices. Interestingly, some Texas drillers are preparing to bring more rigs into play is response to recently higher crude oil prices, potentially chang-ing the production/storage relationship. This feels like an oil market that is still searching for equilibrium in terms of both prices and drilling activity.

The impact of the radical changes to the energy sector on the Houston economy are still unfolding. So far, we have seen a one-way drag since rig counts started falling at mid-year 2014. Recently we have seen oil prices firming to near $60, but that does not reverse the shock to the oil and gas industry and will not be enough to turn the tide of energy sector consolidation. If oil prices stabilize at $60 per barrel, or increase, we expect to see global drilling ac-tivity firm up in 2016, as existing production from shale reservoirs follows a rapid decline curve.

The Houston metro area added an average of 9,000 net new payroll jobs per month through 2014. In January, 3,700 jobs were shed. February saw a gain of 7,000 and then 4,400 were lost in March. We expect to see greater jobs losses in the Houston metro area economy in the months ahead as energy industry consolidation continues. We are forecasting a regional recession beginning in the second quarter of 2015 and extending through the first quarter of 2016. The length and depth of a regional recession in Houston will be, in large part, determined by the price of oil. Our assumption is that oil prices firm up gradually over the second half of 2015, to hit about $65 by the end of the year. We assume that the firming oil prices would stabilize drilling activity by 2016, and give Houston-area companies more confidence in their hiring by mid-year 2016.

May 21, 2015


Labor and DemographicsPayroll Jobs (Thousands) 2977 2979 2966 2951 2944 2952 2960 2970 2926 2968 2956

Percent Change Annualized 1.1 0.3 -1.8 -1.9 -1.0 1.1 1.0 1.4 3.5 1.5 -0.4





Personal IncomeTotal Personal Income (Nom., Millions $) 361382 363751 361652 361463 363932 368223 372866 377565 348057 362062 370646

Percent Change Annualized 5.0 2.6 -2.3 -0.2 2.8 4.8 5.1 5.1 6.2 4.0 2.4

Housing Housing Starts (Total, Ann. Rate) 56177 54501 52803 51347 50039 48940 48196 48141 56607 53707 48829

Percent Change Annualized -20.7 -11.4 -11.9 -10.6 -9.8 -8.5 -5.9 -0.5 18.2 -5.1 -9.1



FHFA HPI, (1995 Q1=100, NSA) 229 229 232 233 234 236 238 241 221 231 237


BankruptciesTotal Business (12 Months Ending) 446 469 494 526 562 598 615 632 466 484 602



Houston Metro Economic Outlook











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2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1

More Layoffs in Houston Expected in 2015

Houston

U.S.

Nonfarm Payrolls,Year/Year Percent Change


-15

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-5

0

5

10

15

2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1

Personal Income Growth Will Ease

Personal Income,Year/Year Percent ChangeHouston

U.S.


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1,000

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0

10,000

20,000

30,000

40,000

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2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1

Housing Starts Will Decline in a Cooling Regional Economy

U.S., Ths (R)

Houston (L)

Housing Starts, Total, Annual Rate

Source: Census Bureau, Comerica Bank

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0

5

10

15

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Real Estate Markets Will Cool

Houston

U.S.

FHFA Home Price Index,Year/Year Percent Change


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2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1

Credit Conditions Reflect Weaker Economy

Personal (L)

Business (R) Bankruptcies, Total 12-Mos. Ending

Source: U.S. District Courts, Comerica Bank

3

4

5

6

7

8

9

10

2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1

Houston Unemployment to Elevate

Houston

U.S.Unemployment Rate, Percent


u.s. economic outlook, summary€¦ · recent u.s. economic data has generally been positive. ......

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