The Texas Workforce Commission released revised monthly employment estimates for Texas and Texas metro areas in March which primarily cover 2016 and 2017. This annual event reconciles the original monthly estimates with more accurate quarterly and annual payroll employment records and sets the benchmarks for the monthly estimates moving forward in the year ahead.
All expectations were for sharp upward revisions in Odessa employment in 2017 and those expectations were met and then some as thousands of jobs were added to the original estimates over the course of last year. This means those jobs were actually added and in existence in 2017 but were not captured by the estimating benchmarks in place at the time, a common occurrence during times of rapid transition where jobs are being added or lost in big chunks in a relatively short period of time.
The original monthly estimates indicated about 71,200 jobs in Odessa at year-end 2017 which was up by 1.6% over the December 2016 estimate, and a monthly average employment level over the course of the year of about 70,115, an increase of a slight 0.7% compared to the 2016 annual average. The recent data release raised those numbers significantly. The revised estimates put year-end (December) 2017 total employment at 75,600, an upward revision of 4,400 jobs, and an increase of 7.1% over the revised December 2016 employment level. On average for the year, monthly employment estimates were raised by nearly 3,100 jobs, and the 2017 average was up by 4.6% (again compared to 0.7% under the original estimates).
The revisions once again vaulted Midland and Odessa into the top two spots in the rankings among Texas metro areas in terms of year-over-year job growth. That remains the case in January 2018 at 10.3% and 7.2%, respectively.
The Odessa Economic Index was updated to reflect the employment data revisions and the result of course was to raise the index values in 2017 (and 2016 to a lesser degree). The original year-end (December) 2017 Odessa Economic Index of 214.9, a 12.7% year-over-year increase, was revised upward by six full points to 220.9 which is up by 16.6% compared to the revised December 2016 OEI.
The Odessa general economy continues its rapid expansion moving into 2018 as well with the Odessa Economic Index posting another large month-to-month increase in January at 224.5 up from 220.9 in December, and up a whopping 18.4% compared to the January 2017 revised OEI of 189.7. The upward revisions moved the Odessa Economic Index considerably closer to reaching its pre-downturn peak; the January 2018 OEI is now down by only 3.2% compared to the index all-time high of 231.9 in January 2015. The index is on pace to reach and surpass that level in the second quarter 2018.
Due to the methodology of estimating monthly oil & gas employment data in Midland and Odessa, those monthly estimates are to some degree revised on an ongoing basis; however, the data was still revised upward by about 1,660 jobs at year-end 2017, raising the original growth rate of 20.3% to 25.0% under the revised numbers.
The Texas Permian Basin Petroleum Index increased sharply in January fueled by a sizable monthly increase in crude oil prices, rising to 290.2 for the month up from the revised 283.2 in December, and up nearly 30% from the January 2017 TPBPI of 223.8. The regional oil & gas index remains some 24% (about 92 points) below its all-time peak of 382.2 in November 2014.
Posted crude oil prices (the field producer price benchmark, typically some $3-4 lower than futures prices) averaged over $60/bbl in January for the first time since November 2016, up from $54.57 in December and up 22% compared to January 2017. After languishing a bit in September and October the rig count increased for the third straight month in January to 329 (the monthly average for RRC districts 7C, 8, and 8A). The 656 drilling permits issued in that same region is the highest January monthly total since 2014 and is up by about 35% compared to January of a year ago.
Crude oil production continues to climb rapidly with 7C/8/8A production approaching 63 million barrels for the month of January, a record total and a nearly 18% increase compared to January of a year ago.
The January table of general economic indicators in Odessa is simply beyond impressive with 7.2% year-over-year employment growth, sharp decline in the unemployment rate compared to its year-ago level, and double-digit percentage improvement in every other component of the Odessa Economic Index.
General real (inflation-adjusted) spending per January sales tax receipts in Odessa posted a new record for the month of January and was up by over 40% compared to January of a year ago. Real auto spending also set a January monthly record with a 47% year-over-year increase. Hotel/motel activity per taxes collected in January (for fourth quarter 2017 lodging) was up by a whopping 95% compared to last year, though it remains slightly below the record from 2015.
Construction activity per January building permit valuations was up by over 80% compared to a generally low total in January of a year ago, while home building set a new January monthly record with 76 permits issued for the month.
The 85 closed home sales in Odessa also represents a January monthly record, posting a 27% increase over January of a year ago and the average price of those sales was up by a sharp 17% compared to January of a year ago. The real total dollar volume of residential real estate sales surged high into record territory for the month of January, logging a 45% increase compared to January 2017.
The Odessa metro area economy is on pace to complete the recovery from the downturn of 2015-16 in short order and begin a new chapter in real economic growth as early as April or May of this year. 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 & gas economy. The only potential landmine – record Permian, Texas, and US crude oil production. However, when prices began to decline in 2014 the production limitation agreement was of course not yet in place, and demand growth was generally tepid or non-existent. Therefore, based on current knowledge there is every reason to believe the regional general economy will continue to grow throughout the year, and establish new records for the Odessa Economic Index and every individual economic indicator along the way.