May 2019 Texas Economic Outlook

May 13, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Texas Positioned for Growth in 2019

The Texas economy is poised to have another good year in 2019, supported by higher oil prices and a solid Houston metro area economy. Houston represents about one-fourth of all employment in Texas, and Houston will be a complex story in 2019. The area economy has recovered from the devastating flooding associated with Hurricane Harvey in 2017. Higher oil prices this year will support growth in Houston’s important energy sector. Organic growth for Houston, driven by strong population expansion, is also a significant economic driver for the state. However, even with higher energy prices, Houston faces the unwind of a period of robust expansion in its petrochemical industry. We expect year-over-year job growth in the Houston metro area to remain well above the U.S. average, but it will ease from near 2.5 percent as of March. The Austin metro area will also be an important part of the Texas story in 2019. For much of the past 30 years, Austin has been the fastest growing of the big four Texas metro areas. But through the first quarter of 2019, both Houston and Dallas-Ft. Worth are showing stronger year-over-year job growth than Austin. San Antonio currently trails the group posting 2.0 percent year-over year job growth in March, which is still above the U.S. average of 1.7 percent. The state economy will continue to benefit from the development of Permian Basin oil reserves in West Texas. Development has been hampered by a pipeline bottleneck that will ease this year. The consolidation of Permian Basin production by major oil companies will be a stabilizing force for the state economy.

For a PDF version of this report, click here: May 2019 Texas Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.
 

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May 2019 Michigan Economic Outlook

May 13, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Michigan’s Schumpeter Moment

Joseph Schumpeter was the Austrian economist who popularized the term “creative destruction.” Schumpeter used the term to describe how an economy evolves through the business cycle. Some parts of the economy are lost at the end of the old business cycle as new parts are created that propel the economy forward in the new expansion. Michigan’s automobile industry is in the midst of Schumpeterian creative destruction. As the auto industry evolves at an increasing pace, there will be significant churn in the Michigan economy. It is obvious that vehicle assemblers will need to change systems as automobile technology evolves away from its reliance on the internal combustion engine. The rise of China as a global economic power may also require the Detroit Big Three to evolve from industry leaders to industry followers in at least some aspects of automobile production and sales. As new vehicle platforms are developed, there will be a push to significantly reduce the labor-hours needed to assemble a vehicle and this will have implications for Michigan’s labor market. Workers will need to be nimble and trainable. Fortunately, new production, mechanical and software systems will also create new jobs for Michigan’s workforce. Parts suppliers will need to be nimble. If all electric vehicles end up dominating the market, entire systems, such as engine transmissions, will go the way of the horse and buggy. Michigan’s Schumpeter Moment will not hit all at once. But it is in fact already happening and it will continue to have a profound impact on the state for many years to come. It may be more accurate to say that many parts of the Michigan economy are at the start of a Schumpeter decade. The UAW contract negotiations this year may be particularly contentious as both sides try to navigate the churning environment.

For a PDF version of this report, click here: May 2019 Michigan Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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May 2019 Florida Economic Outlook

May 13, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Central Florida Pushes the State Economy

Florida economic data continues to show a shift in momentum from Southern Florida to Central Florida in early 2019. Driving this shift is the change in locational preference for both new Floridians and new businesses. The Miami-Fort Lauderdale-West Palm Beach metropolitan area remained a top 10 most populous region in the U.S. in 2018. However, the strongest population growth in the state from 2017 to 2018 was in the Central Florida region. The Orlando-Kissimmee-Sanford metropolitan area added 60,045 people in 2018, making it the fifth fastest growing metropolitan area in the U.S. last year. Tampa-St. Petersburg-Clearwater added 51,438 people, enough to be in ninth place for major metropolitan areas in 2018. The relative affordability of Central Florida is helping to boost the area’s commercial and residential real estate markets. According to Cushman and Wakefield, the office space vacancy rate in Miami ticked up from 12.1 percent in 2018Q1 to 13.3 percent in 2019Q1. However, Tampa saw only a minor increase in office vacancy rates from 11.3 percent to 11.5 percent and Orlando declined from 9.5 percent to 9.1 percent in the same time frame. The difference in home price appreciation could also be seen across the three areas. Tampa led the way in home price appreciation last year, up 9.4 percent in 2018. Orlando saw home prices tick up 9 percent, while Miami grew a decent 6.7 percent in 2018. We expect Central Florida to continue to see positive momentum in 2019. Yet, rising home prices and rent costs will begin to eat into affordability this year. The Florida economy as a whole is looking good so far this year anchored by solid job growth and rising incomes. The state is also well positioned to benefit from an overall moderately growing U.S. economy in 2019.

For a PDF version of this report, click here: May 2019 Florida Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.
 

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May 2019 CA Economic Outlook

May 13, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

California Cooling

Economic data released for the first quarter is consistent with a moderate expansion for the California economy at the start of the year. California GDP has grown at or above 3 percent since 2013. However, there are signs that some of the major economic drivers are cooling. The state added 51,300 jobs in Q1. This is about half the job gains seen in 2018Q1, and the slowest start to the year since 2016. While we expect job growth to pickup in Q2, the overall trend in the pace of hiring will be slightly weaker in 2019 than in 2018. California has also seen a slowdown in the residential housing sector. Both single-family and multifamily housing starts have been on a downward trend since early 2018. In the near-term lower mortgage rates may be able to help stabilize new home construction this year. However, the longer run trends of low affordability and net outflow of people from the state are more difficult to overcome. Home prices across the state’s major metropolitan areas are increasing at the slowest rates since turning positive in 2012. The year-over-year change in the Case Shiller Home Price Index for Los Angeles was up 1.8 percent, San Francisco was up 1.3 percent and San Diego was up 1.0 percent in February. Ongoing trade tension between the U.S and China is a major risk factor for the California’s trade sector. Combined imports for the Ports of Long Beach and Los Angeles were up just 0.8 percent while exports were down by 8.9 percent from a year ago in April. The Trump Administration implemented additional tariffs on $200 billion worth of Chinese goods on May 10 and the Chinese government has threatened retaliatory tariffs in response.

For a PDF version of this report, click here: May 2019 CA Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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May 2019 AZ Economic Outlook

May 13, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Sunny Outlook for Arizona’s Economy

The Arizona economy ended 2018 on a strong note with GDP growth up 3.4 percent in Q4. For the full year 2018, Arizona GDP was up 4.0 percent, making Arizona the fourth fastest growing state economy in the U.S. last year. Job growth slowed somewhat in the first quarter of 2019 as employment in accommodations and food services declined by 2,300 jobs in Q1. The state’s important tourism industry was hurt in Q1 by bad weather and by the longest ever federal government shutdown. The closure of national parks and recreation facilities may have spilled over to state parks as well, which posted year-over-year declines in visitations in January and February. However, Arizona continues to be well positioned to benefit from an ongoing expansion of the overall U.S. economy this year. Arizona tends to benefit from its low cost of living and business friendly environment as the overall U.S. economic expansion matures. Strong inflows of people and businesses are driving up real estate demand in the Phoenix area. RealPage noted that Phoenix area apartment rental prices were up 7.4 percent in 2018 which was about two times the national average. Apartment occupancy for the Phoenix area was at 95.4 percent last year. Office space is also seeing a boost from the inflow of businesses. According to Colliers International, the Phoenix market saw net absorption of office space climb to 850,000 square feet in Q1. This was enough to push the Phoenix office market vacancy rate down to 13.6 percent. Industrial space, which includes warehousing and manufacturing, saw the vacancy rate tighten to a low 7.2 percent in Q1.

For a PDF version of this report, click here: May 2019 AZ Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.


 

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