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About Sheryl Jean

I make sense out of the economy. I also write about Texas Instruments Inc. and airlines. Before joining The Dallas Morning News in 2008, I worked as a business reporter in California, Minnesota, New York, Rhode Island and South Carolina. I'm a long-distance runner, cyclist and yoga enthusiast. Follow me on Twitter at @SJeanDallas.

Economist predicts Dallas-Fort Worth economies will grow faster than U.S. through 2019

Texas economist Ray Perryman is forecasting stronger economic growth for the Dallas-Fort Worth area and the state — faster than U.S. growth — over the next five years thanks largely to the energy boom and big corporate relocations.

He told a group today at the Dallas Regional Chamber’s annual Economic Outlook Summit in Dallas that the Texas economy will grow at a 4.3 percent compounded annual rate through 2019. He expects the Dallas and Fort Worth areas to grow even faster in that time frame — 4.4 percent each.

Much of Texas’ growth — and national growth — has been related to energy. The state has tripled its oil product since 2010 to more than 3 million barrels of oil, said Perryman, head of The Perryman Group in Waco. Low crude oil prices may dampen oil exploration, but pumping will continue and longer term, demand will only increase for oil as emerging countries increase their consumption, he said.

The Dallas-Fort Worth economy is doing well across many segments, such as technology, health care and corporate relocations.

Newcomers to the area are driving the demand for housing.

Texas has led the nation’s housing recovery, especially in Houston and D-FW, David Brown, a regional director of Metrostudy in Dallas, said at the summit.

A short supply of houses in the area — less than three months — is driving up prices. The Dallas area has 10 percent fewer homes listed for sale today than a year ago, Brown said. D-FW prices rose about 12 percent last year and are on pace to be up 7 percent to 8 percent this year, which is still double historical appreciation rates, he said.

“We’re going to continue to see a very competitive housing market” as big companies such as Toyota move operations and people here, Brown said. “The challenges we face now are all on the supply side, and despite rising prices our housing remains extremely attractive for people moving here from somewhere else.”

About half of all housing demand is for apartments, Brown said. And even though D-FW apartment construction is booming, he doesn’t think the market is becoming overbuilt. Last year, 15,222 apartment units were absorbed into the market.

The national economy

After a “very, very difficult recovery,” the nation is now seeing consistent job and economic growth, Perryman said. He forecast U.S. gross domestic product growth of about 3.4 percent a year through 2019.

“We feel pretty good about the U.S. economy,” but there are some risks, such as the nation’s monetary policy, Perryman said. The Federal Reserve is walking “a tight rope” on when to start raising interest rates, which have been near zero since 2008, he said.

“If they raise rates too fast, it could hurt us and if they raise rates too slow, it could hurt us,” Perryman said. “If they do it right, we could have a pretty good recovery here; if not, we could have some issues.”

Scott Nyquist, a director at McKinsey & Co., said many of the consulting firm’s clients are frustrated about the global economy in the short term as slower growth is expected in Europe and China, but are optimistic about the longer term potential.

“It’s hard to be anything but excited about Dallas,” which has a youthful population and the nation’s third biggest high-tech hub, Nyquist said at the summit.

A study by the McKinsey Global Institute found that the Dallas area is well positioned in four drivers of the national economy over the next decade: energy, big data, infrastructure improvements and trade.

As the national economy improves and job opportunities improve in other places, the Dallas area must focus on quality of life and environmental issues, Nyquist said. Also, the area’s share of residents with a bachelor’s degree and STEM (science, technology, engineering and math) degrees is lower than the national average, he said.

Still, McKinsey expects the D-FW area’s economy to grow 50 percent faster than the U.S. economy over the next 20 years.

Texas Instruments expands in Chengdu, China, with ‘wafer bumping’ operation

The opening ceremony for Texas Instrument's wafer factory in Chengdu, China, in 2010. (Courtesy of Texas Instruments Inc.)

Texas Instruments Inc. is expanding its wafer manufacturing capability in Chengdu, China, again.

TI late last night said it will add a 300 millimeter so-called “wafer bumping” facility to its operations in Chengdu in the Sichuan province of central China.

Wafer bumping is an advanced process technology where “bumps” or balls made of a lead-free alloy are formed on the wafers before they’re cut into chips. The technology, which is used in many consumer electronics and mobile applications, can improve the performance, reduce the size and weight and lower the cost of the semiconductor package.

TI said that nearly 40 percent of its wafer production uses this bump technique. It operates other bump operations in the Philippines and Dallas.

The announcement comes as the Dallas-based chipmaker celebrates the grand opening of its assembly and test center in Chengdu. TI paid $16.5 million for the building and land rights from UTAC Chengdu Ltd. to integrate assembly and testing with its wafer factory there.

The additional production in Chengdu also increases TI’s 300 millimeter analog capacity and its ability to meet customer demand. TI’s only other 300 analog facility is in Richardson.

TI said this investment in Chengdu does not change its annual capital spending forecast of around 4 percent of total revenue. The company said in summer 2013 that it would invest up to $1.69 billion over the next 15 years to expand production in Chengdu.

TI began manufacturing in China in 2010 with a wafer plant in Chengdu. In addition to its Chengdu operations, TI has 18 sales and support offices, four research and development centers and a product distribution center in Shanghai.

Dallas-Fort Worth tops metro small business job growth in October on Paychex/IHS index

Strong job growth at small businesses in the Dallas-Fort Worth area helped the area reclaim the top spot nationally in October’s Paychex/IHS Small Business Jobs Index — even as the overall index remained flat.

Texas ranked No. 2 among small business growth by state. Washington was No. 1. (See chart at right)

Among the nation’s to 20 metro areas tracked by Paychex/IHS, the D-FW area surged 0.88 percent in October, to pass the Seattle and Houston to the top spot. (See chart at top right)

Texas ranked No. 2 among small business growth by state. Washington was No. 1. (See chart at bottom right)

Nationally, the downturn in small business job growth in four of the last five months leveled off with no change from September to October. The index rose 0.23 percent over the last 12 months to 100.84 — a low for 2014, but a reading above 100 is still considered to be strong.

“The year-over-year trend of employment growth continues to be strong for small businesses, despite the index not showing a lot of movement in recent months,” Paychex CEO Martin Mucci said in a statement. “Even with the pace of employment varying since the index hit its record high in the spring, small business hiring continues to be stronger than the previous year.”

Payroll and benefits provider Paychex and data analytics firm IHS launched the index in April.

 

Report: State unemployment rates vary greatly by race and ethnicity, Texas’ rate was highest for blacks in third quarter

The U.S. economy continues to improve and the unemployment rate continues to fall, but the numbers vary greatly by state, race and ethnicity, according to new research by the Economic Policy Institute.

In September, the U.S. unemployment rate fell to 5.9 percent — the lowest level since July 2008 and down from 7.2 percent in September 2013.

By state, September’s jobless rates ranged from a high of 7.9 percent in Georgia to a low of 2.8 percent in North Dakota. Texas’ rate was 5.2 percent.

Nationally, blacks had the highest unemployment rate (11 percent), followed by Latinos (6.9 percent), whites (5.1 percent) and Asians (4.3 percent). None of those numbers have been adjusted for seasonal variations.

Texas showed similar trends — albeit with lower rates — for the three months ended Sept. 30. The state’s unemployment rate was highest for blacks (9.2 percent), Latinos (5.6 percent), whites (3.9 percent) and Asians (3.8 percent).

Texas was one of seven states where the black jobless rate was below 10 percent in the June-to-September period. The black unemployment rate was lowest in Virginia (8.2 percent) and highest in Nevada (16.8 percent).

Virginia had the smallest gaps in jobless rates by race in the third quarter, according to institute. However, no state leads in the recovery for all race groups, it found.

The Economic Policy Institute is a nonprofit, nonpartisan think tank based in Washington D.C.

Dallas-Fort Worth wages rise 3.5 percent for the 12 months through September

The wages and salaries of private employees in the Dallas-Fort Worth area rose 3.5 percent for the 12 months through September, according to data released today by the U.S. Bureau of Labor Statistics.

Total compensation costs for D-FW workers rose 3.4 percent. Wages and salaries represent about 70 percent of compensation costs.

Nationwide, both total compensation costs and wages and salaries rose 2.3 percent for the 12 months through Sept. 30.

The D-FW area ranked No. 2 for the biggest increase in total compensation and wages and salaries among the nation’s 15 largest metropolitan areas. The San Francisco-San Jose, Calif., area was No. 1. (See Chart 2 below)

The increases come after Americans’ wages have been flat to declining since 2007 – and even farther back – as wages have not kept up with increased productivity, according to research by the Economic Policy Institute in Washington, D.C.

For D-FW, annualized wages and salaries have been increasing each quarter since late 2012, according to BLS data since 2006.

The latest D-FW’s compensation gains far outpaced the Houston area, which saw both its compensation costs and wages and salaries increase 1.5 percent for the 12 months ended Sept. 30, according to BLS data.

Last month, Richard Fisher, president of the Federal Reserve Bank of Dallas, noted that Texas’ annaulized wage inflation was about 3.5 percent. He said higher wages were being seen in jobs from auditors to truck drivers.

Wages tend to increase as hiring picks up and the unemployment rate declines. The jobless rate was 5.9 percent nationwide and 5.2 percent in Texas in September, down from 7.2 percent and 6.3 percent, respectively, a year earlier.

Fisher last month said he was worried a bit that wage inflation is growing faster than price inflation (+2.5 percent) in Texas. Right now, it’s not a concern nationally, with price inflation below 2 percent on an annual basis, he said.

Dallas Fed’s Richard Fisher sees improving economy, but risks

Richard Fisher, president of the Federal Reserve Bank of Dallas (David Woo/The Dallas Morning News)

Richard Fisher, president of the Federal Reserve Bank of Dallas, said he voted last week for the central bank’s monetary policy statement because he was encouraged by dropping of the word “significant” in describing the remaining labor-market slack and indications that it might raise interest rates sooner than mid-2015 as the economy continues to improve.

The Federal Reserve’s policy setting committee, of which Fisher is a voting member, last week decided to stop buying Treasury bonds and mortgage-backed securities to stimulate the economy. The central bank began its bond buying in 2008 and began tapering its purchases in January.

Under its stimulus program, the Fed bought $1.7 trillion in Treasuries and mortgage-backed securities — on top of the $2 trillion invested in the first two rounds.

In prepared comments for a speech today at the Harvard Club of New York, Fisher noted that the Fed’s monetary policy succeeded in pushing interest rates lower, energizing the bond market and steering the economy away from depression and deflation. However, well before last week’s vote, effectiveness of the stimulus program “had waned while its current and potential future costs were mounting,” he said.

Fisher, a policy hawk who was against the last round of quantitative easing — called QE3 — and had called for ending the program earlier.

“I was thus an enthusiastic supporter of killing the program,” Fisher said. “I would rather we had never had QE3 in the first place. To this day, I feel that the costs of accumulating another $1.7 trillion of Treasuries and [mortgage-backed securities] will be shown to exceed the benefits.”

Fisher thinks the economy is getting stronger and inflation approaches the Fed’s 2 percent target rate.

He remains worried about the risks related to some financial trends: The nominal yield levels and spreads of subpar credits vs.  investment-grade issues; and tripling in U.S. stock prices since the trough in March 2009.

“I believe that the Fed should, in most circumstances, not directly concern itself with fluctuations in financial-asset prices,” Fisher said. For that reason, last week he “strongly advised” his fellow bankers not to react to the stock market volatility in mid-October.

Fisher also is concerned about what will happen to all the liquidity that remains in the system in the aftermath of the Fed’s stimulus.

Only time will reveal the effect of the Fed’s monetary policy since 2008, Fisher said. Quoting Yogi Berra, he said: “it ain’t over till it’s over.”

Comerica Bank: Texas economic activity rebounded in August, oil prices provide future downside risk

Comerica Bank’s Texas Economic Activity Index rebounded in August, after cooling off in July.

The index rose 0.7 percentage points to 106, the bank reported today. August’s reading was 33 points, or 46 percent, higher than the low of 72.6. The index averaged 100.3 points for all of 2013 and 98.2 in 2012.

“The Texas economy continued to advance strongly in August,” said Robert Dye, chief economist for Dallas-based Comerica. “Seven out of eight components of the index improved or held steadyl. Only housing starts eased. The drilling rig count remained strong through August, even as oil prices began to fall.”

Current crude oil prices near $81 a barrel can sustain a “healthy Texas energy sector, Dye said. He does not expect oil prices to plunge lower, however, “that is a downside risk to the Texas economy” that he’s monitoring carefully, he added.

Comerica rolled out new methodology for  the August index, so historical index values may be different than earlier editions. The index used to consist of seven components, but now there are eight seasonally adjusted components: nonfarm payroll employment, exports, hotel occupancy rates, continuing claims for unemployment insurance, housing starts, sales tax revenue, home prices and the Baker Hughes rotary rig count.

Hiring of C-suite and mid-level managers is up

Greg Konstans, Dallas partner in charge for Heidrick & Struggles (Courtesy of Heidrick & Struggles)

I wrote about the uptick in hiring — and hiring more permanent full-time workers – being done by Dallas-area companies in in yesterday’s newspaper and online.

The trend is also occurring at the highest levels of local companies.

The Dallas office of Heidrick & Struggles has seen its executive search activity jump more than 60 percent for the first nine months of the year compared with last year, said Dallas partner in charge Greg Konstans. He has seen increased demand from clients for chief executive officers and chief financial officers — called the C-suite — but also for senior managers, such as executive vice presidents and general managers.

Konstans sees the most demand in the technology, financial services and industrial areas.

Increased confidence in the economy and company’s outlook is driving the trend. And as the stock market has risen, many executives have cashed out and are retiring, opening up positions for others, said Konstans, a 20-year executive search industry veteran.

“During the recession and the downturn, people’s appetite for change and risk went down significantly people were more willing to wait things out until their personal situation or the economy go better,” he said. “Now you’re seeing people willing to take a risk by moving companies.”

For example, Plano-based J.C. Penney Co. earlier this month named Atlanta-based Home Depot executive vice president Marvin Ellison as its CEO-designee. He starts this week, but isn’t scheduled to move into the CEO role until next summer.

The state of the economy can affect CEO turnover. A Booz & Co. study found that the number of changes at the top remains low during a down economy as companies strive to provide steady and familiar leadership through tough times. As the economy improves, companies may look to new leadership to provide new ideas and strategies, and executives may seek new challenges elsewhere.

Nationally, CEO turnover rose in September as 124 planned CEO departures were reported, up 4 percent from August and up 16 percent from a year earlier, according to a report by outplacement consulting firm Challenger, Gray & Christmas Inc.

In September, some CEOs left due to mergers and acquisitions, others due to pressure from activist investors. Resignation was the main reason (43 CEOs) for September departures, followed by 26 CEOs who retired, 25 who stepped down into another C-suite or board position, 16 who found new positions at other companies and two who were ousted.

Last year, CEO turnovers rose 12 percent among Fortune 1000 companies — with the most occurring at industrial and consumer companies, according to Heidrick & Struggles.

Will the label SoLo stick to the area south of Dallas Love Field? (Updated Nov. 3 with reader comments, graphics)

Walt Bialas has come up with a catchy name for the area around Dallas Love Field that’s ripe for redevelopment: South of Love or SoLo.

“I am very proud of it,” said Bialas, research director for the Jones Lang LaSalle real estate firm, who doesn’t even really like neighborhood acronyms. “It seemed to work really well and work as a double entendre. You know when you first get your pilot’s license, you go solo.”

Other cities have coined their trendy neighborhoods like New York’s SoHo and San Francisco’s SoMa.

My colleague Steve Brown today wrote about the burgeoning interest in real estate redevelopment around Love Field now that the airport, which is home to Southwest Airlines, has been renovated and flying is expanding.

Developers are planning apartments and new hotel and retail around Love Field in anticipation of more business in that area. The city-owned airport expects to see an estimated 50 percent increase in passengers.

Redevelopment of the area could accommodate more than 60 million square feet of new commercial and residential uses in the next 20 years or so, Bialas estimates. The opening of the Stemmons Freeway in 1959 originally spurred development of this older, industrial part of Dallas.

“There’s a lot of fragmented ownership of property in that area,” Bialas said. “I think there’s great potential. We’re seeing the beginning of it now with some parcels changing hands and [apartment developers] moving in.”

It’s only natural that as the Dallas area continues to grow, more redevelopment will take place at the edges of the urban core and spread as other areas become built out or too expensive. Look at what’s happened in the Design District and, to some degree, Victory Park.

SOHIP logo (Courtesy of Edwin Blair)

Dallas Love Field and the medical district south of it will “create a new opportunity for a South of Love (SoLo) submarket to emerge as growth pushes out of the downtown area,” Bialas said. UT Southwestern Medical Center just built $800 million hospital on Harry Hines Boulevard in the medical district that will open in early December.

UPDATED 10:30 a.m., Nov. 3: Two readers contacted me after this blog post ran with information I thought I’d share.

UPDATED 10:30 a.m., Nov. 3: Terry Kearns, who owns a couple of residential lots in the neighborhood east of Love Field and Lemmon Avenue, came up with the name “LoveTown.”

UPDATED 10:30 a.m., Nov. 3: A dozen years ago, a group of Dallas residents formed a new neighborhood association called South of Highland Park and began using the SOHIP acronym a few years ago, said the association’s leader Edwin Blair. The neighborhood of nearly 50 blocks, including Oak Lawn, the Knox-Henderson area and West Village, now has more than 1,140 members.

SOHIP neighborhood members are in red. (Courtesy of Edwin Blair)

Texas returns to list of top 10 states with the best business tax climates

Texas returns to the list of the nation’s top 10 states with the best business tax climates this year, edging in at No. 10, according to a new report by the Tax Foundation.

Last year, Texas for the first time dropped out of the top 10 — to No. 11 — losing its place to Indiana.

This year, Wyoming has the best business tax climates, while New Jersey, New York and California struggle with the worst tax codes in the country.

Most of the players in the top 10 list didn’t change much from last year. Texas moved up one rank because Washington declined from No. 6 last year to No. 11 this year.

Tax Foundation economist Scott Drenkard explained last year that “Texan tax policy has remained stagnant over the past few years, while Indiana has made notable improvements.” He has noted that Texas’ needs to address its margin tax.

Property taxes and unemployment insurance taxes are levied in every state, but other tax vary by state.

The absence of a major tax is a common factor among many of the top ten states. For example, Texas and Florida have no individual state income tax. Wyoming, Nevada and South Dakota don’t levy a corporate or individual income tax. New Hampshire and Montana have no sales tax.

North Carolina saw the biggest rank improvement in the report’s 11-year history, moving from No. 44 to No. 16 due to changes to its individual income  tax rates, corporate income tax rates and sales tax system.

Maine was the only state to see a significant drop in rank — from No. 28 to No. 33 — due to a sales tax rate increase.

“The federal government is gridlocked, but state policymakers on both sides of the aisle are enacting truly fundamental reforms,” Drenkard said.  “States are doing their part and it’s time that Washington steps up.”

The Tax Foundation, a Washington, D.C.-based group that promotes lower tax rates,  measures each state by analyzing more than 100 tax variables in five categories: corporate, individual income, sales, property and unemployment insurance taxes.