Star-Telegram  Sunday, July 6, 2008

Schnurman: In Texas, economy could be a lot worse

By MITCHELL SCHNURMAN

From Main Street to Wall Street, the economic news gets more depressing every day, but things could be worse: You could be living outside of Texas.

Last week, the government reported that the U.S. economy lost 62,000 jobs in June, the sixth consecutive monthly decline. Separately, a Chicago consulting company said that layoff announcements rose 21 percent in the first half of 2008, with the list of shrinking employers including stellar names like Goldman Sachs.

Texas, meanwhile, keeps purring along. The economy is slowing, to be sure, and corporate layoffs are rising, but the state remains in positive territory by most measures. Even construction employment, down 5.2 percent nationwide in the past year, was up 3.6 percent here.

"We’re feeling an impact from the slowdown, but in economics, everything is relative," says Cheryl Abbot, regional economist with the Dallas office of the Bureau of Labor Statistics.

The state is holding up especially well compared with the country at large, and so far, North Texas is looking good, too. The Fort Worth-Arlington area added jobs in every category in the past 12 months, even an additional 200 in manufacturing — one sector that’s generally declined everywhere.

Credit three factors for Texas’ (relatively) good fortune:

The housing market has held up better than in much of the country, and as a result, consumer confidence hasn’t crashed to the same depths. That’s one explanation for why retail sales rose 5.6 percent in Texas in the past year, at least three times higher than nationwide.

The energy industry is booming, riding the wave of sky-high oil and gas prices. That’s producing scores of new jobs in Texas and abroad, and bonus checks for landowners in the Barnett Shale and elsewhere. The Texas rig count reached 931 in June, the highest level since 1984, reports the Federal Reserve Bank of Dallas.

Texas exports are on a tear, helped by the falling dollar and strong demand for chemicals. The currency drop has helped boost exports nationwide, but Texas exports grew 7.2 percent in April, compared with a 3.3 percent increase for the nation, the Dallas Fed reports.

These trends spill over to the broader economy, insulating Texas workers from some of the forces now squeezing employers. In professional and business services, for example, the nation barely added any jobs in the past year. But Texas companies added 64,500 employees in that category, a 5 percent increase.

Even the financial services business is doing OK here. Those firms have been in a tailspin, after the meltdown in subprime loans and a sharp drop in home sales. The sector accounted for more than 85,000 announced layoffs so far this year, the most in the monthly survey by Challenger, Gray & Christmas, a Chicago placement firm.

But Texas added 5,900 jobs in financial activities in the past 12 months, with 4,100 added in Dallas-Fort Worth alone.

"Texas is going to feel the effects of the downturn, just like other states," says John Challenger, CEO of Challenger, Gray & Christmas. "But when people lose jobs, they’ll be able to find something else a lot easier — and maybe without having to move and sell their house."

Job growth has slowed considerably in Texas and Dallas-Fort Worth, to an annual rate of about 2.2 percent through May. That’s more than respectable but less than last year and about half the growth rate of 2006.

And storm clouds are gathering. The parent company of American Airlines said last week that it will eliminate about 6,800 jobs, with many expected around American’s headquarters in Fort Worth.

Bank of America acquired Countrywide Financial this month and announced that it will cut 7,500 positions. The two companies are both among the largest private employers in the Dallas area.

Two weeks ago, a call center and a cellphone repair company said they will shut their Fort Worth units by the end of summer, eliminating 800 jobs. Last month, the Star-Telegram cut 130 workers in layoffs and buyouts, and this year Continental Airlines in Houston and AT&T in San Antonio announced major reductions.

Challenger reports that Texas companies announced 24,806 layoffs in the first half of 2008. That’s less than New York, California, Michigan, Ohio and New Jersey, which is saying something, because Texas has more Fortune 500 companies than any other state.

Still, the Texas total is 68 percent higher than at the midway point in 2007. That indicates that the downturn is spreading here. And even if companies are doing well in Texas, they may be forced to cut workers because of problems elsewhere.

For almost three-fourths of the layoffs announced in June, employers cited just two reasons: market conditions and cost-cutting.

Neither factor applies to energy companies. Natural resources and mining added 38,000 jobs nationally (up 5.3 percent), including 14,000 in Texas (up 6.8 percent). But even on that score, Texas benefits disproportionately.

The industry’s share of jobs is four times greater in this state than the rest of the country, amplifying the positive effects.

For consumers and many companies, that’s little consolation for the cost of oil and gas. But for the Texas economy, it’s a silver lining.