Presented by: Steve Nivin, Ph.D. Please contact Steve Nivin with any questions or comments at snivin@saberinstitute.org or 210-517-3609.

SAN ANTONIO ECONOMIC OUTLOOK: 2014

Presented on: March 28, 2014

2

Business cycle index indicates growth in San Antonio

3

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0 Ja

n-79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Bus

ines

s Cyc

le In

dex:

San

Ant

onio

Se

ason

ally

Adj

uste

d

Source: Federal Reserve Bank of Dallas

Unemployment rate in San Antonio second lowest among major metropolitan economies in Texas

Region Unemployment Rate (January 2014)

San Antonio 5.3% Austin 4.6% Dallas 5.6% Ft. Worth 5.5% Houston 5.5% Texas 5.7% U.S. 6.7%

Source: Bureau of Labor Statistics; Federal Reserve Bank of Dallas

4

Unemployment rate in San Antonio declined in January for the 4th consecutive month

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Unemployment Rate (Seasonally Adjusted)

San Antonio Austin Dallas Ft. Worth Houston Texas U.S.

Source: Bureau of Labor Statistics; seasonal adjustment by Federal Reserve Bank of Dallas

5

Unemployment rate decreased to 5.3% in January…right at average since 1990

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2008 2009 2010 2011 2012 2013 2013

Unemployment Rate in San Antonio (Seasonally Adjusted)

Avg. since Jan. 1990 = 5.3%

Source: Bureau of Labor Statistics; seasonal adjustment by Federal Reserve Bank of Dallas

6

Broad-based employment growth (Jan. 2013 – Jan. 2014)

Region Employment Growth

Employment Increase Employment Decrease

San Antonio 2.27% MLC, Wholesale, Retail, TWU, Information, Financial, Prof. Services, Educ./Health, Hospitality, Other Services, Govt.

Mfg.

Austin 3.57% MLC, Mfg., Wholesale, Retail, TWU, Information, Financial, Prof. Services, Educ/Health, Hospitality, Other Services,

Government

Dallas 1.95% MLC, , Mfg., Wholesale, Retail, TWU, Information, Financial, Prof. Services, Educ./Health, Hospitality, Other Services,

Government

Financial

Ft. Worth 1.92% MLC, Mfg., Wholesale, Retail, TWU, Prof. Services, Educ/Health, Hospitality, Other Services, Government

Information, Financial

Houston 2.03% MLC, Mfg., Wholesale, Retail, TWU, Information, Prof. Services, Educ/Health, Hospitality, Other Services, Govt.

Financial

Texas 2.68% MLC, Mfg., Wholesale, Retail, TWU, Information, Financial, Prof. Services, Educ/Health, Hospitality, Other Services, Govt.

U.S. 1.67%

Source: TWC; BLS; Federal Reserve Bank of Dallas; Change calculations by Steve Nivin, Ph.D. MLC=Mining, Logging, and Construction; TWU=Transportation, Warehousing, Utilities

7

Growth trend since end of recession similar to growth pre-recession

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

8

San Antonio employment grew 2.27% in January

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

1991

19

92

1993

19

94

1995

19

96

1997

19

98

1999

20

00

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

2013

20

14

Cha

nge

from

Sam

e M

onth

Pre

viou

s Ye

ar

San Antonio Austin Dallas Ft. Worth Houston Texas U.S.

San Antonio average annual employment growth rate = 2.27%

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

9

Employment growth has come back to its long-term (since 1991) trend

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

1991

19

92

1993

19

94

1995

19

96

1997

19

98

1999

20

00

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

2013

20

14

Employment Growth in San Antonio (Change from Same Month Previous Year)

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

10

San Antonio average annual employment growth rate = 2.27%

11

Most sectors either continued to see growth during recession or have returned to their pre-recession employment levels plus

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

12

Construction & mining and manufacturing should continue to grow this year and at least get closer to their pre-recession levels of employment…information sector still facing structural headwinds

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

13

Should continue to see growth in these sectors…with higher levels of uncertainty around health and government

Source: BLS; Federal Reserve Bank of Dallas; Calculations by Steve Nivin, Ph.D.

Single family housing market is very strong in San Antonio and across Texas.

14

0 1 2 3 4 5 6 7 8 9

10 20

06-J

an

2007

-Jan

2008

-Jan

2009

-Jan

2010

-Jan

2011

-Jan

2012

-Jan

2013

-Jan

2014

-Jan

Mon

ths-

in-I

nven

tory

: Sin

gle

Fam

ily H

omes

San Antonio Austin Dallas Ft. Worth Houston Texas

Source: Texas A&M Real Estate Center Months in inventory measures how many months will take to sell the current inventory, based on the average number of sales per month in the previous year.

Robust increases in home prices are indicative of a tight market.

15

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

2001

-Jan

2002

-Jan

2003

-Jan

2004

-Jan

2005

-Jan

2006

-Jan

2007

-Jan

2008

-Jan

2009

-Jan

2010

-Jan

2011

-Jan

2012

-Jan

2013

-Jan

2014

-Jan

Rea

l Med

ian

SF H

ome

Pric

e (4

MM

A, Y

/Y %

Cha

nge)

San Antonio Austin Dallas Ft. Worth Houston Texas

Source: Texas A&M Real Estate Center; Calculations by Steve Nivin, Ph.D.

2013 San Antonio Economic Forecast

¨  2013 Forecast = Employment growth of 2.25-2.75%

¤ Risks: Sequestration, E.U., China ¨  Midyear Update: At best will end up at lower end of

forecast. Most likely will see growth between 1.0-2.0%. ¤ Biggest risk is sequestration. International risks (e.g.,

E.U. and China) worth watching closely. ¨  Employment growth in 2013 was 2.3% (20,400 jobs)

16

2014 San Antonio Economic Forecast

¨  Accelerating growth in global, U.S., and Texas economies

¨  Growth in San Antonio should also accelerate in 2014 ¤  Many sectors should see accelerated growth (e.g.,

construction, manufacturing, professional services, hospitality)

¤  Healthcare and financial services continue with adjustment to Obamacare and financial reform

¨  2014 Forecast ¤  Employment growth of 2.5-3.0% (22,800-27,500 jobs)

¤  Unemployment rate will decline to 4.8-5.0%

17

Thank you!!!

Questions?

18