The Dallas-Fort Worth economy has been crushing it for almost a decade, often creating jobs at double the annual rate of the United States. But there was a time when North Texas’ labor market performed much worse than the nation’s — in the wake of 9/11.
For three consecutive years, the local workforce contracted more, often much more, than the workforce in the U.S.
That history is worth recalling as the coronavirus pandemic spreads and threatens more lives and livelihoods. It’s a reminder that even the most hardy economic regions cannot guarantee a safe harbor — and sometimes strengths can turn.
“This is a cross between 9/11 and the financial crisis,” said Harvey Rosenblum, director of research for the Federal Reserve Bank of Dallas for almost three decades before retiring in 2013. “This appears to be milder, but we’re gonna have some negatives that we can’t shrug off.
“We’ve been lucky to escape [some downturns] in the past, but this affects every part of the nation — and most industries,” said Rosenblum, who teaches at Southern Methodist University’s Cox School of Business.
Five years ago, oil prices plunged from over $100 a barrel to $30, and the Texas economy took a hit. In 2015 and 2016, job growth statewide fell by almost two-thirds, and Texas lagged the nation in job gains. In Houston, Midland and Odessa, total nonfarm employment actually declined.
But Dallas-Fort Worth rolled on, adding over 100,000 jobs in 2016. The region grew jobs at twice the U.S. rate, and many lauded a diversified economy that was luring workers and companies, and benefiting from the success of many corporate headquarters.
American Airlines and Southwest Airlines were booming, and so were their hometown hubs, DFW International Airport and Dallas Love Field. Together, they have long provided a powerful economic anchor and a big leg up in recruiting others to the region.
Any city would love to be the corporate home of these giant airlines, but there’s a risk. While the North Texas economy is considered to be highly diversified — that is, its breakdown of jobs closely resembles the nation’s as a whole — the workforce is heavily concentrated in some key sectors.
Not surprisingly, No. 1 is air transportation, the category that includes American and Southwest. Dallas-Fort Worth had almost 40,000 employees in the sector in September, and its concentration of workers in that field was 217% greater than the U.S. average, according to the U.S. Bureau of Labor Statistics.
Next on the high-concentration list: oil and gas extraction. Although D-FW isn’t considered an energy capital, it has almost 10,000 employees in the industry along with some major headquarters and private equity players. The concentration of workers in oil and gas in D-FW is almost two times greater than the U.S. average, the data shows.
Like air travel, the oil and gas business faces intense pressure, and from two directions. The coronavirus is reducing global oil demand, which depresses prices. And the Russians and Saudis are battling for market share, which depresses prices further.
Oil prices have already fallen by half this year, and energy experts see Russia’s aggressiveness as an attempt to drive out competitors in Texas, where shale fields have made the U.S. the top producer.
“This is different than 2014 because there’s both a supply-side shock and a demand-side shock,” said Bruce Bullock, director of SMU’s Maguire Energy Institute. “In 2014, there was also a lot of capital sitting on the sidelines, waiting to get back in the market. That’s not true this time. There’s gonna be a lot more carnage in energy before investors wade back in.”
D-FW has other concentrated job sectors vulnerable to ripple effects from recent developments. Computer manufacturing, merchant wholesalers, transportation support and truck transportation have a combined 227,000 employees. In D-FW, that translates into a 34% to 69% higher concentration of jobs than the U.S. average.
“We’re big on trade here,” said Cheryl Abbott, regional economist for the Bureau of Labor Statistics in Dallas.
If Chinese parts are delayed because of the virus, that’s likely to disrupt computer manufacturing. Truck transportation companies could feel the pain from broader declines in commerce.
“It depends on how long this goes on,” Abbott said. “Is it a two-month deal or a six-month problem?”
Almost 30,000 people work in securities and investments in North Texas, and Wall Street has entered a bear market. Major indexes have lost over a quarter of their value in just over three weeks, an undeniable indicator that investors have lost confidence.
“Most disconcerting, the virus is dimming the optimism of consumers,” Mark Zandi, chief economist of Moody’s Analytics, wrote this week.
Consumers account for about 70% of gross domestic product, so when they pull back — from air travel, theme parks, sporting events and more — the economy turns.
“The line between an expanding economy and recession is crossed,” Zandi wrote, “when investors, businesses and — most important — consumers lose faith. Faith that they will have a job, that they will receive a paycheck, and that their retirement nest egg is safe.”
On Wednesday, Wells Fargo economists said they expected consumers to cut spending. They projected “a mild contraction” in the second quarter with a return to growth in the following quarter.
On Thursday, Wells issued an update: “The events of the past 24 hours or so have made it painfully obvious that we need to rethink this forecast,” wrote Jay Bryson, acting chief economist.
“In short, it seems that recession is increasingly likely. The airline and hotel industries are in free fall, and there will be multiplier effects from cutbacks in those industries,” Bryson wrote. “Businesses may be loath to displace workers right now, but layoffs will eventually commence when order books begin to dry up.”
Some will suffer more than others, especially hourly workers who don’t have benefits and sufficient savings, said SMU’s Rosenblum. In D-FW, over 310,000 people work in food services and dining places, a higher concentration than the U.S. average.
“It’s gonna be a tough slog” for some, he said.
“My wife and I just had a conversation and decided, ‘Let’s not eat out in restaurants any more than we absolutely have to,’ ” said Rosenblum, who will soon turn 77.
