The Big Conversation
Is Texas in danger of recession next year because of the current swoon in oil prices? An economist with J.P. Morgan Chase is raising an early warning flag about that possibility.
The bank's chief U.S. economist, Michael Feroli, wrote in a note to clients, "As we weigh the evidence, we think Texas will, at the least, have a rough 2015 ahead, and is at risk of slipping into a regional recession," as reported by the Wall Street Journal.
The cause for Feroli's pessimism lies in the fact that the price of oil per barrel has been cut almost in half in the past six months. The commodity experienced a similar decline in 1986, and it was enough to trigger a recession in Texas even as the rest of the country benefited from lower energy prices.
Some things have changed between now and then. For instance, the cost of extracting oil has declined. "But," according to the Journal's blog post, Feroli "concluded that those arguments 'are not so strong as to signal smooth sailing for the Texas economy.'”
Meanwhile, the Houston Chronicle's FuelFix blog has the numbers on job losses in Texas should oil prices not rebound from where they are now. The numbers are significant but don't point to an economy stopping dead in its tracks.
"If U.S. benchmark crude remains cheap at around $55 a barrel, the state could lose 128,000 jobs by the middle of 2015, according to a Federal Reserve Bank of Dallas model of how oil prices impact U.S. jobs," according to the Chronicle. "That’s a big number, but it wouldn’t be enough to slow the state’s job growth to zero: Texas is on track to add 390,000 jobs this year, and it added 295,000 jobs last year, said Michael Plante, a senior research economist at the Dallas Fed. The losses would amount to around 1.1 percent of the state’s non-farm employment of more than 11.6 million jobs."
The Day Ahead
• Lt. Gov.-elect Dan Patrick will speak at the graduation ceremony in Austin for 109 new Texas Highway Patrol troopers.
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Quote to Note
"When you resign, they confiscate your computer and you get your keys and you leave."
— State Sen. John Whitmire, D-Houston, on the nearly weeklong departure of Jack Stick from the Health and Human Services Commission. His last day was Thursday after having offered a verbal resignation the previous Friday.
Today in TribTalk
Why they fight: The Texas GOP and the looming session, by Jim Henson and Joshua Blank