In Hous­ton, oil work­ers may face ax but em­ploy­ment still grows

The Pak Banker - - MARKETS/SPORTS -

Plung­ing en­ergy prices robbed the Texas econ­omy of an es­ti­mated 60,000 jobs last year, as oil and gas com­pa­nies put the brakes on pro­duc­tion and slashed in­vest­ment, throw­ing en­gi­neers and ge­ol­o­gists out of work.

But the for­est of con­struc­tion cranes sprout­ing around this petro­chem­i­cal hub tell the flip side of the story, as some of the same forces that drove down those prices sparked tens of bil­lions of dol­lars in in­vest­ment in new pro­cess­ing plants to take ad­van­tage of cheap and plen­ti­ful sup­plies of oil and gas.

Exxon Mo­bil Corp and Chevron Corp are build­ing mam­moth chem­i­cal crack­ers to process poly­eth­yl­ene from nat­u­ral gas, and lo­gis­tics firms have cre­ated mil­lions of new square feet of ware­house space as they plan to ship the out­put to the global plas­tics in­dus­try.

Ris­ing chem­i­cals out­put has con­trib­uted to record traf­fic at the Hous­ton Port Au­thor­ity, and of­fi­cials say the trend is ex­pected to con­tinue. Through­out the Bay­town area, which is on the out­skirts of Hous­ton, an es­ti­mated $8 bil­lion worth of projects is ex­pected to be fin­ished this year and an­other $22 bil­lion com­pleted in 2017.

This has all propped up em­ploy­ment in Texas at an oth­er­wise dif­fi­cult time. The pos­i­tive im­pact on the over­all U.S. econ­omy from the chem­i­cals in­dus­try that this il­lus­trates is also one of the rea­sons the U.S. should avoid a down­turn de­spite trou­bles else­where in the world. That in turn should cre­ate the con­di­tions for the Fed­eral Re­serve to raise in­ter­est rates again this year. "They are shed­ding jobs up­stream. That's the na­ture of the busi­ness," said B.J. Si­mon, as­so­ciate ex­ec­u­tive di­rec­tor of the Bay­town-West Cham­bers County Eco­nomic De­vel­op­ment Foun­da­tion. But "the op­por­tu­nity to build th­ese crack­ers just could not be passed up...ac­cess to cheap feed­stocks changed the whole equa­tion down­stream."

Con­struc­tion work­ers have jobs, new schools are be­ing built to han­dle a grow­ing lo­cal pop­u­la­tion, a new Kroger Mar­ket­place store is be­ing com­pleted, and a par­tially va­cant shop­ping mall is be­ing over­hauled. The global econ­omy may be sput­ter­ing, with weak de­mand one of the rea­sons that oil prices have cratered. But the U.S. keeps adding jobs, and at a rate con­sis­tent with the out­look from Fed pol­i­cy­mak­ers who ex­pect grow­ing U.S. pay­rolls will mean enough do­mes­tic spend­ing to keep the econ­omy ex­pand­ing over­all.

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