Headwinds Blowing in Texas Labor Market

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Hurricane Beryl and the prospect of lower crude oil prices prompted the Federal Reserve Bank of Dallas to revise its forecast for Texas employment lower for the year.

Beryl broke a 91-year-old record when it became the easternmost hurricane to form in June in the Atlantic. More than 2 million people were left without power in the greater Houston metropolitan area after the storm dumped 8-10 inches of rain on the region.

The Federal Reserve Bank of Dallas pointed to the storm as a reason for a slump in job prospects as well.

"Texas employment in July was impacted by Hurricane Beryl as the state lost around 14,000 jobs," said Luis Torres, a senior business economist for the Dallas Fed. "The Houston region bore the brunt of Beryl's winds and rain, which caused widespread power outages and contributed to the loss of 7,000 jobs."

The bank on Friday put its Texas jobs growth estimate for the year at 1.6%, down from 1.9% during the prior month. The forecast is based in part on the projected movement in national gross domestic product (GDP) and the direction of oil prices.

GDPNow, a closely watched metric from the Federal Reserve Bank of Atlanta, estimated national GDP at 2%, down from a previous forecast of 2.4%. Economists at the Organization of the Petroleum Exporting Countries (OPEC), meanwhile, were more optimistic, pegging U.S. growth at 2.4%, though growth slows to 1.9% by next year.

Elsewhere, the Energy Information Administration (EIA), the data keeper for the U.S. Department of Energy, believes the price for Brent crude oil, the global benchmark, will average $84 per barrel this year, up $2 per barrel from 2023, but far lower than the $101 average for 2022.

Brent was trading at about $79.15 per barrel early Monday. Markets may be anxious ahead of the Jackson Hole economic symposium this week and the possibility for future rate hikes from the U.S. Federal Reserve.

Despite initial fears of a busy hurricane season, Beryl has so far been the only storm to cause major damage to the U.S. mainland. Data from the Greater Houston Partnership, cited last week by NPR-affiliate Houston Public Media, found more than 90% of the firms surveyed had employees who couldn't get to work in the immediate aftermath of the storm; nearly 70% of those firms had to shut down operations.

On the energy sector specifically, Beryl left few casualties. The Freeport LNG export terminal lost power as the storm made landfall in Texas. Freeport uses electric motor-driven compression, therefore power outages completely shut down the process of cooling natural gas to its liquid form.

Industrial Info saw only a minor impact to the nation's refineries.Phillips 66 (NYSE:PSX) (Houston, Texas) was forced to cut capacity at its Sweeny refinery in Texas.

Offshore, the Bureau of Safety and Environmental Enforcement said that only 15 production platforms were evacuated. About 151,000 barrels of oil and 154 million cubic feet of natural gas per day were shut-in due to the storm.

"Although it is difficult to distinguish the net effects of Hurricane Beryl on employment, job losses in sectors not affected by the hurricane, such as professional and business services and health and education jobs, point to a cooling in the job market," said Torres from the Dallas Fed.

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