The close of 2018 and the first few weeks of 2019 saw the news cycle dominated by upheavals in the stock market, a government shutdown, and erratic oil prices. However, despite the doom and gloom of national headlines, the healthy labor market should continue to propel the economy forward in 2019. The Texas economy also continues to grow at a solid albeit slower pace across industries and regions. The recently released Dallas Fed’s Texas Employment Forecast suggests jobs will increase 2.4 percent in 2019 (December through December) adding 293,000 jobs in the state. Here is a look at some of the key sectors that drive the Texas economy:

Oil & Gas – Sliding prices spur uncertainty

The Texas economy is intrinsically linked to the oil and gas sector, and a rise or fall in prices sends ripple effects throughout the entire state’s economy. A barrel of West Texas Intermediate began 2018 at about $60, sporadically rose above $70 during the year, then closed around $45 before rebounding slightly at the start of 2019. The slide in prices has resulted in a pullback of enthusiasm among industry executives. According to the Dallas Fed Energy Survey, the business activity index plunged from 43.3 in the third quarter to 2.3 in the fourth, breaking a 10-quarter run of rising activity. Positive readings in the survey typically indicate expansion, while negative readings suggest contraction. The Fed survey also shows that oil companies have lowered their capital spending plans for 2019. The company outlook index declined among oilfield services firms, and nearly 60 percent of firms reported greater uncertainty in the coming months. Although the pace of job growth in the Permian has slowed from 2018, the Texas employment market continues to be tight.

Manufacturing – Tariffs, trade wars and tapering off

Texas manufacturing saw a banner year in 2018, outpacing most of the nation. However, threats of tariffs and escalating trade tensions have injected uncertainty into the sector. The latest numbers from the Dallas Fed’s Manufacturing Outlook Survey are a stark contrast to the positivity of 2018 and could portend slower economic growth. The Dallas Fed’s December 2018 Manufacturing Outlook Survey showed the general business activity index at -5.1, which is the lowest level since 2016. December’s company outlook index also fell to a 30-month low with more than 20 percent of manufacturers anticipating a worse outlook. Expectations regarding future business conditions declined but remained in positive territory. The fall in several manufacturing outlook indices may simply a leveling-off after a white-hot year of expansion.

Construction – Looking for Labor

According to the AGC’s 2019 survey of more than 1,300 contractors across the nation, construction executives remain confident about their business prospects for 2019, despite a continuing concern about finding qualified workers. Seventy-eight percent of respondents indicated they were having a hard time filling positions which, in turn, impacts project costs and completion times. In Texas employment, tight labor availability is projected to intensify in 2019. Younger people entering the industry is not adequately replacing the retiring workforce. Meanwhile, restrictive immigration policies are reducing the availability of foreign workers who have historically been a significant source of employees for the Texas construction sector. To attract new talent, nearly sixty percent of companies raised base pay rates, while many also increased or introduced incentives, bonuses and benefit contributions.

What does this mean for employers?

Despite a slightly slower rate of growth predicted for 2019, the Texas economy is still expected to expand, and most employers will again be faced with a tight labor market. Attracting and retaining qualified workers will remain a top concern for many companies as the number of available workers continues to shrink. Market volatility and uncertainty can cause immediate ripple effects so companies must be nimble in their ability to ramp up or scale down talent. Consider utilizing the services of an experienced staffing firm to decrease costs, increase flexibility and improve productivity.

All of us at The Daniel Group wish you a happy and prosperous 2019.  Our experienced professionals can help you navigate staffing challenges in any economic climate. We qualify the best and brightest candidates that will fit into your organization’s culture, and we stand behind our work with a One-Year Replacement Guarantee.

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