The pattern of contraction in the Odessa general economy extended to 15 months in April, which also brought the 12th straight monthly decline in the Odessa Economic Index. The index fell to 202.4 for the month down from 203.9 in March, and down 12.5% from the April 2015 OEI of 231.2. Spending and employment continue to register deep year-over-year declines, along with auto spending and hotel/motel activity in the city. The unemployment rate is up by over 50% compared to its year-ago level, and construction activity is now in a state of sharp decline as well.
Crude oil prices continued to improve in April with the monthly average posted price for West Texas Intermediate increasing to $37.51 for the month up from a low of $27.08 in February. Daily prices at this point are about double the low point of $22.75 on February 11, and that will very likely begin to stabilize the regional rig count along with other measures of regional oil & gas activity. Through April, however, the rig count continued to fall, dropping to an average 123 for the month (for Texas Railroad Commission districts 7C, 8, and 8A), down from 139 in April and down about 75% compared to November 2014 (just in advance of the decline in the rig count). At this point, about 4,000 oil & gas jobs have been lost in Odessa compared to the peak industry employment level in late 2014.
About 8,000 total jobs have been lost in Odessa over the course of the contraction thus far (April of 2016 compared to peak employment in December 2014) according to Texas Workforce Commission monthly employment estimates. April employment is down by about 5% compared to April of a year ago.
General real (inflation-adjusted) spending per April sales tax receipts is down by about 25% compared to April of a year ago, and is down by close to 23% for the year-to-date. Real auto spending posted a 14% year-over-year decline for the month, and the total through April is off by 27% compared to the first four months of a year ago.
Hotel/motel activity continues to decline sharply in Odessa; in addition to lower levels of business-related travel to the city, the practice of housing oil drilling and service crews in local hotels has largely evaporated over the course of the contraction.
New single-family residential housing construction slowed in April with five fewer permits issued in the month compared to April of a year ago; for the year-to-date, however, new housing construction is essentially flat compared to year-ago levels. Existing home sales are also flat thus far in 2014 – slightly higher for April, and slightly lower for the year-to-date. Prices have moved very little in response to softer economic conditions in Odessa; the monthly average is unchanged from April 2015, and the year-to-date average is actually slightly higher. The median average price in April 2016 ($165,000) is down about $5,000 from April of a year ago.
The process of economic recovery in Odessa will be just that – a process. The contraction has occurred (and continues to occur) in stages, much like a line of falling dominoes. Economic recovery is very much akin to standing those dominoes back up again; as was the case at the onset of contraction, the first domino in the current economy is the price of crude oil.
Most encouraging is that we are far enough into this economic cyclical event that we can begin to use terms like “recovery” and envision a point in the not-so-distant future at which the economy as reflected by the Odessa Economic Index reverses course and begins to expand once again.
"If everyone is moving forward together, then success takes care of itself."