Posted on April 26, 2018
Economic index could surpass highs set in era of $100 oil by summer
Midland and Odessa are on course to repeat or even surpass the white-hot economic growth of 2010-2014 that was fueled by triple-digit crude oil prices.
Most components of the January Midland-Odessa Regional Economic Index are at record levels, and a sharply higher revision in the area’s employment data has shortened the time for the index to reach and surpass its previous peak, said economist Karr Ingham.
The January index jumped 18.3 percent compared to January 2017 and, reaching its low point in October 2016, has risen 18.8 percent over the ensuing 15 months. Ingham – who prepares the index for the Midland Development Corp. — said the index is down 3.8 percent from its record high reached in January 2015 as crude prices were headed to 13-year lows. He said it is likely the index will reach and surpass that record high sometime in the first half of this year.
“The takeaway from the January index, at least for me, is the spectacular upward revisions in Midland-Odessa employment data, Midland in particular,” he said by email as he traveled to Houston on business.
Ingham called the revisions released earlier this month by the Texas Workforce Commission “nothing short of stunning. The expectation was for sharp upward revisions in both Midland and Odessa monthly employment estimates in 2017, and the results were even more dramatic than may have been anticipated, especially in Midland.”
Original estimates put the number at 90,200 employed Midlanders at the end of 2017, a gain of 3.1 percent from December, with employment averaging 88,500 for 2017, up 1.3 percent from a year earlier. The revised estimates put Midland employment at 97,800 – a gain of 7,600 – at the end of 2017, a surge of 10.5 percent over December 2016 estimates. The new monthly average for 2017 was 93,400, a gain of 4,900 jobs and an increase of 7 percent compared to the previous year.
The Bureau of Labor Statistics ranks Midland with the fifth lowest unemployment rate in the nation, tied with Elkhart-Goshen, Indiana.
In Odessa, the original employment estimate at the end of 2017 was 71,200, up 1.6 percent from 2016 levels, with a monthly average of 70,100 — a gain of 0.7 percent compared to the 2016 monthly average. Under the revised data, Odessa’s employment at the end of 2017 was 75,600, a gain of 4,400 jobs — or 7.6 percent — while the monthly average was revised up to 73,200, a gain of 3,100 jobs — or 4.6 percent.
For the combined Midland-Odessa area, year-end 2017 employment of 161,400 was revised to 173,400, a gain of 12,000 jobs or 9 percent – up from the original 2.4 percent. The average monthly employment level rose from the original 158,600 to 166,600, a gain of 8,000, or 5.9 percent, up from the original 1 percent.
“Midland’s population is burgeoning, and the MDC is excited to engage with the new opportunities and challenges of the glowing economic outlook,” Sara Harris, interim administrator with the MDC told the Reporter-Telegram by email. “The MDC recognizes the urgent necessity for expanded capacity in housing, child care, and roads, and is working to address those issues. We look forward to more participation in infrastructure, health care, and education as we establish partnerships to meet Midland’s needs. Sustainable economic and population growth can be achieved.”
Ingham said the components of the index continue to exhibit “rapid growth” and in some cases reach record highs. Growth was led by consumer spending.
Retail sales tax receipts set a January record, surpassing the previous high set in January 2015 and coming in 33.8 percent above January 2017 receipts.
In Midland, sales tax receipts were 27.4 percent higher than January 2017.
Automotive spending also set a January record, beating the previous high set in January 2014. January 2018 automotive spending was 48.3 percent higher than January 2017 levels.
In Midland, spending was 49.4 percent above January 2017.
Yet another January record was set by building permit valuations, which at $80.4 million was 149.4 percent above the $32.2 million of the previous January.
In Midland, building permit valuation growth was even sharper, with January’s $50.8 million was up 219.9 percent from January 2017’s $15.87 million.
Midland and Odessa issued a combined 150 permits for new homes, only the fifth time in the life of the index that new housing permits have reached that number. The figure was 54.6 higher than the 97 issued the previous January.
In Midland, the 74 permits issued in January was a gain of 34.5 percent from the 55 issued in January 2017.
Sales of existing homes rose seven homes, or 2.9 percent, to 249 homes from 242 in January 2017. The average sales price of $259,066 was 5.1 percent higher than the January 2017 average of $246,560, which was 8.8 percent higher than January 2016.
In Midland, the number of homes sold actually fell by 11, or 6.3 percent, to 164 homes from 175 sold in January 2017. The average price, however, rose 4.7 percent to $286,115 from $273,287 in January 2017.
Midland-Odessa’s thriving economy continues to attract outside dollars, as represented by the 16.1 percent rise in airline boardings over January 2017 and the hefty 82.7 percent leap in hotel-motel tax collections. In Midland, hotel-motel tax collections were up 74.3 percent compared to the previous year. Ingham said hotel-motel activity in the fourth quarter of 2017 did not match its previous record set in 2015 “but is rapidly closing that gap.”
“The Midland-Odessa economy is on pace to complete the recovery from the downturn of 2015-16 and begin a new chapter in real economic growth sometime in the first half of 2018, perhaps even as early as the second quarter of the year,” Ingham said. “The elements for continued strong economic expansion in 2018 are in place with improved crude oil prices, upside support for crude pricing from global demand growth and the extension of the OPEC-non-OPEC production limitation agreement through the end of the year, and continued expansion in the Permian Basin regional oil and gas economy.”
While the outlook for continued economic growth in 2018 is solid, Ingham said the only potential landmine for the economy is record oil production from the Permian Basin, Texas and the U.S.