State of Texas
Previous assessments of the Texas economy showed Texas being resistant to, but not immune from the recession. The current assessment, however, is that Texas is feeling the effects of the worldwide recession. That said, the Texas economy continues to fare better than those of many other states.
In January, Texas’ seasonally adjusted unemployment rate rose to 6.4 percent, a full percentage point below the U.S. unemployment rate of 7.6 percent. Industry
job losses hit Manufacturing and Trade,Transportation, and Utilities sectors the hardest.
Recent decreases in oil prices have begun to adversely affect job creation in the Texas oil and natural gas industry. The Dallas branch of the Federal Reserve recently projected that Texas could lose as many as 300,000 jobs in 2009. State Comptroller Susan Combs, not nearly as pessimistic as the Feds, revised her estimate of job losses for the year up by 60% -- from 111,000 to 180,000.
Thus far, Texas has weathered the national real estate crunch without significant damage to property values, but sales and construction activity are slowing. Despite its continuing resiliency, Texas is unlikely to remain immune from the national real estate crunch. As of February 2009, the Texas foreclosure rate was one in every 896 mortgages. The rate was a 14.14 percent drop from February 2008, but a 7.92 percent increase from January. Comparable rates in other states include Nevada’s one in 70, California’s one in 165 and Arizona’s one in 147.
Beaumont / Port Arthur / Orange Area
The Beaumont / Port Arthur / Orange area seems somewhat recession resistant for two reasons. First, the area’s cup over-floweth with $15 billion in industrial development and expansion and the spin off effects from that.
The largest project of the area, Motiva’s $7+ billion refinery expansion slowed down as of mid-January for cost review of the project. Numerous construction contract employees were released then. The project is still continuing forward – in a slower mode this year (still with significant dollars being spent) and a ramp up of the project expected in 2010 and completion scheduled for Q1 of 2012 rather than late 2010.
Valero postponed their coker expansion project until further notice because of expenses and economic uncertainty. They will proceed, however, with their 50,000 barrels-per-day hydrocracker unit expansion project. The $1.6 billion project will hire 2400 workers at the peak and will be completed December 2011.
The $1.6 billion Eastman gasification project is seeking a federal loan guarantee from DOE as an advanced energy project under the Energy Policy Act of 2005. A decision on the loan is expected in the second half of 2009. Construction on the plant was initially scheduled to begin this year, but economic problems and rising product costs pushed the engineering back, in turn pushing the construction start back. Even though the company is cutting costs by $100 million in other areas, the
project is moving forward.
On January 29, Total announced that their $2.2 billion coker unit project was full speed ahead despite the economic downturn.
Construction on the Golden Pass LNG terminal and pipeline is progressing with continued assessments of the impact of Hurricane Ike on the terminal and the extent of the impact on schedule. The extent of the damage to the pipeline is minimal and is on course to be completed in 2Q09.
The second reason for the area’s resilience during troubled times is the economic bubble following Hurricane Ike with home and business repairs. The Ike bubble is particularly strong in the Orange County area – the hardest hit by Ike. Following Hurricane Rita, the bubble lasted for quite some time.
Texas was allocated $1.3 billion in CDBG funds for Ike recovery . The Office of Rural Community Affairs (Gov’s designated agency) in turn allocated $139 million to our region for the first phase of recovery. 50% is allocated for housing and 49% for infrastructure, and 1% for economic development. The regional economic development group is recommending that $1.4 million of the fund for economic development be used for revolving loan fund for existing small business in the Hardin, Jefferson, Orange counties. The other $.5 million is recommended for revolving loan fund for new start up businesses in Bridge City and City of Orange areas (hardest hit by Ike). A second round of hurricane funds from the feds is expected.
The ports of Beaumont and Orange each received $4 million in federal grants to expand and improve cargo operations. These are economic recovery grants from the U.S. Economic Development Administration. The grants will help create jobs, as well as increase size and business at both ports.
An $8 million project of the Corp of Engineers will be reinforcing the entire length of the Port Arthur seawall starting in April 2009 and ending before storm season.
The unemployment rate for the area rose from 7.9 percent in December to 8.7 in January. This rate is the third highest in the state; however, this area
consistently ranks in the top three. The rate is higher than the state's 6.3 percent unemployment rate, and the nation’s 7.6 rate. The area’s unemployment rate has
historically been above the national rate and state rate, so January's numbers do not necessarily reflect recessionary problems seeping in the area. Also, January unemployment rates are typically higher than the December before because seasonal workers are laid off and construction activity slows down that month.
Manpower Inc.’s Employment Outlook Survey predicted an upswing in hiring for the area by 13 percent for second quarter of 2009. This is the seventh highest in the nation.
Near the end of December 2008, ISP (rubber manufacturer) released workers for a short period over the holidays. Gerdau Ameristeel cut back worker hours to 32 per week in December. Lyondell (which is still making the decision of whether to invest the dollars required for recovery from plant flooding by Hurricane Ike) laid off
75 workers in mid February. On the positive side, Signal International recently announced that they would be hiring 200-300 new workers.
The Beaumont-Port Arthur area saw the biggest fourth quarter home price increases in the country (according to the National Association of Realtors.) The median price of $132,600 is 16.7% higher than in the same period one year ago.
By Karen Bourdier - Entergy Texas, Inc. – economic development group
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