"Economic Outlook for Houston Region"
SEPTEMBER 28, 2016
Mr. Jesse Thompson
Economist, Federal Reserve Bank of Dallas, Houston Branch
Seminar Hosted by the Economic Council of the Greater Houston Partnership
Mr. Jesse Thompson, an economist with the Houston branch of the Federal Reserve Bank of Dallas, delivered a seminar on the economic outlook for the Houston region. Some key points of his presentation include:
• Houston's job growth from 2012 - 2014 was a strong annualized 3.5 to 4.0% per year.
• Revisions for Houston employment show that 2015 was flat, actually entering into a local economic recession in November 2015 (with a little 'r' not big 'r').
• Houston employment tanked in Q1 2016, and is down 14,000 jobs year to date as of August 2016.
• 61,000 core oil and gas jobs lost since December 2014.
• Good things are coming forward, as the forecast for the second half of 2016 is zero rather than negative growth.
• Q3 2016 estimates of job growth are currently positive, but less than 5,000 and likely to be revised down, but not negative.
• Overall, Houston job growth is forecasted to be 0% in 2016.
• Leisure and hospitality, along with education and health services, continue to remain strong points in Houston's economy, helping to offset job losses in energy.
• During oil crash and cycle, it takes about 4.2 to 4.5 quarters after oil prices bottom for employment to hit its resulting bottom, which Houston has likely passed now.
• Fabricated metals are the first jobs to go, but also the first jobs to return; the rate of job loss has declined, and metals may be starting to show signs of return.
• Survey conducted of various companies producing oil regionally asked what oil price they need to see profitability: responses ranged from $50 to $62 per barrel for Texas/Oklahoma region.
• Refining and petrochemicals have boomed on the east side of Houston, but with potentially lower margins due to lower global demand, which may lead refiners to turn less crude into gas and other products, further exacerbating the imbalance of oil supply and demand.
• In 2017, Houston may see a flip whereby economic growth from upstream oil projects pick up while downstream projects slow down.
• With changes in the value of the dollar, international trade has dropped a bit, but volume of trade has remained steady.
• In Houston, median home price remained flat from 2002 to 2012, but after 2012 home prices have increased with demand outpacing supply.
• House supply remains low, particularly low for those buyers seeking homes valued >$500,000.
• Inherent with Houston's high rate of growth, faster than the U.S. as a whole, is greater volatility.
• Houston Job growth:
-0.5% to -1.5% in 2016.
-0.5% to 0.5% in 2017.
• Texas job growth: 0.5% to 1.5% in 2016.
• Employment and economic growth in Houston could remain anemic into 2018.