San Antonio 2018 Economic Forecast

I had the pleasure and honor of being on a panel at an event this past Friday hosted by Texas CEO Magazine in partnership with the Bill Greehey School of Business at St. Mary’s University in which I presented my economic forecast for the San Antonio economy in 2018.

The presentation can be found here.

Employment growth in San Antonio remains healthy but has been slowing a bit over the past twelve months, which follows a similar pattern to the other major metropolitan economies across the state through August. Given the length of the economic expansion, growth rates have regressed toward the long-term average. The unemployment rate in San Antonio is still quite low at 4.1% in August, but it has started to tick up over the past year.

Again, a similar pattern is occurring across the other major metropolitan areas, too. We are at the point in this phase of expansion where the economy is at or very near full employment, so growth is going to be driven by population growth and/or growth in productivity, so it is difficult to see that growth will be much greater than average, if it is at all in 2018. For next year, I believe we continue to see growth in San Antonio with employment increasing in the range 2.25-2.50%, which is around the historical average growth rate of 2.43%. I project that the unemployment rate in 2018 will probably be in the range of 4.00-4.25% in San Antonio in 2018.

You will also see in the slides that I think we need to consider the possibility of the U.S. economy going into recession in the next two to three years. This is simply due to the fact that the current expansion is already 100 months old, which makes it the third longest in history. If growth continues over the next two to three years, it will become the longest expansion in history.

If we learned anything in the last recession, it is that growth does not go on forever. The expansion is long in the tooth. As already mentioned, growth in the foreseeable future is going to come from population growth and/or higher levels of productivity. Given the trends in demographics with the aging baby boomer generation and limitations being put on immigration, it is difficult to see where the population growth is going to come from in the next few years. Boosts in productivity are, in part, going to be driven by technological change, and while that is exceedingly difficult to forecast, it is hard to envision from where the boost in productivity will come in the near future. With this in mind, it seems that the odds are pretty high that the economy will run out of steam within the next two to three years.

Of course, all of this is contingent on various risks, and the biggest risk I see at this point is political risk. The national and global political situation has injected a massive amount of uncertainty into the business and economic environment. This, in and of itself, can be a deterrent to economic growth, but it certainly makes economic forecasts more difficult.

Steve

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Growth Slowing in Texas and Its Major Metropolitan Economies

I recently gave a speech to the Rotary Club of Seguin titled, “Past, Present, and Future of the Central Texas Economy,” in which I discussed the current economic situation in Texas and across the major metropolitan economies in the state. Growth across the state and in these metropolitan economies has been slowing this year, as expected, but over the past few months, the rates of growth have dipped below long-term trends for San Antonio and below growth rates for the U.S. and even below 1% growth year-over-year in some of the other areas (See chart below). With employment growth of 2.55% in August, Dallas leads the way.

august-2016-employment-growth

There are several factors that play into this. Houston has seen its economy fall into recession since the decline in oil prices, and as the state’s largest metropolitan economy, this downturn ripples through other local economies. Another big factor is that labor markets in these economies are very tight, and there just might not be enough labor to fuel the continued growth we have seen over the past few years. I believe this is especially acute in Austin but could also be playing an important role in San Antonio and other areas.

Additionally, slowing growth around the globe and the continued strength of the dollar have certainly negatively impacted exports, and I can’t help but wonder if uncertainty around the U.S. presidential election has caused at least a bit of the slowdown. I still need to assess the prospects for 2017, but I want to see the results of the presidential election. Regardless of that result, though, it seems likely that some of these headwinds will continue into next year.

If you’d like to see the presentation, it can be downloaded here.

Steve

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San Antonio Economic Forecast Update

I recently presented an update to my 2016 forecast for the San Antonio economy.

Please find the full presentation slides here.

In short, the growth in the San Antonio economy has slowed this year as anticipated. As shown in the following two graphs, through July, employment had grown 2.15% compared to July of 2015 and unemployment was at 2.8% (seasonally adjusted). My forecast for San Antonio this year was for employment growth between 2.25-2.75% and an unemployment rate in the range of 3.5-3.7%. While the July figures are slightly outside these ranges, I am leaving my forecast as is with the recognition that employment growth may end the year a bit lower than 2.25% and unemployment may come in at a rate slightly above 3.7%.

Unemployment rate as of July 2016Employment growth through July 2016

Please feel free to contact me with any questions regarding the report.

Steve

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The Emergence of a San Antonio/Austin Metroplex

I gave a speech today to the San Antonio chapter of the Commercial Real Estate Women.

The topic was the potential for the San Antonio and Austin metropolitan areas to merge into a metroplex or mega-region.

The presentation can be found here: The Emergence of a San Antonio/Austin Metroplex.

Thank you to CREW for the invitation to speak.

Steve

 

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