Oil Crash Dragging on Booming Texas Economy

NEW YORK - As the saying goes, everything is bigger in Texas.

For the past five years, the economy of the Lone Star State has outperformed the rest of the United States.

But the collapse in oil prices has left Texas facing its toughest test since the financial crisis.

A 50% tumble in oil prices since June has prompted companies such as Royal Dutch Shell and Chevron to slash billions of dollars in worldwide investment. Oil services companies like Schlumberger and Halliburton have announced thousands of job cuts.

So far, only a handful of petroleum companies have filed layoff notices in Texas this year, and the Texas Workforce Commission actually reported an increase in mining jobs in December. 

Yet few doubt what lies ahead for the second-biggest U.S. state, by economic output and population, after California.

The Federal Reserve of Dallas also expects positive economic growth in 2015 in Texas.

"The bottom line is it's going to cause growth to slow, but job growth will remain positive," said Keith Phillips, a senior economist with the central bank division in San Antonio.

Ingham, the Amarillo economist, agreed that Texas will likely lodge some growth in 2015 statewide. 

But Ingham predicted about a 10% contraction in the Midland-Odessa oil region, where some 8,000 oil workers will lose jobs and all businesses are affected by the sector.

Ingham said oil companies will be cautious in the short run before hiring back staff, even if oil prices recover. That could result in departures from oil towns like Midland.

"You're looking at at least 18 months out into the future before things start to look a little bit better out there," Ingham said. "Who's in a position to ride that out in terms of not having a job and not having income?"