UH economist’s take: ‘We’re back’
Job growth from Harvey recovery, oil and gas industry shepherd upturn
The Houston economy has largely recovered from the twoyear oil downturn that began in 2014 and economic indicators suggest solid growth ahead for the region, according to analysis by a University of Houston economist.
The local economy, after struggling in recent years, is again adding jobs at a strong pace, supported by oil prices above $60 a barrel and a robust national expansion, said Bill Gilmer, an economist with the university’s Bauer College of Business.
“We’re back, Houston is fine, oil should stay around $65 per barrel, we’re in good shape,” Gilmer told business leaders at a luncheon in downtown Houston. “It’s a great turnaround after several years of suffering from no growth.”
The metropolitan economy has picked up speed since the end of last year, when tens of billions of dollars in federal aid and insurance payments flooded into the region to rebuild after Hurricane Harvey hit in August 2017. The Texas Workforce Commission has estimated that Houston has exceeded 120,000 new jobs over the past year, although many of the jobs were temporary jobs related to Harvey recovery.
Gilmer said the biggest plus for Houston’s recovery was a strong U.S. economy, which has created jobs for 97 consecutive months and pushed the unemployment rate to 3.7 percent, the lowest in almost 50 years. The local economy is now much more closely linked to the U.S. economy, Gilmer said, and as long as the U.S. economy performs well, so will the economy in Houston.
The U.S. economy, Gilmer said, remains strong by “virtually every economic measure and has strengthened significantly in recent months. The probability of recession remains near zero.”
The Houston economy was also helped by the sustained recovery of the oil and gas industry, and $50 billion in petrochemical construction projects along the Houston
Ship Channel linked to cheap natural gas. Natural gas provides the feedstock of plastics and many chemicals.
Houston’s unemployment rate is about 4.1 percent, contributing to a tighter job market and shortages of qualified workers that’s resulting in a rise in pay and benefits, Gilmer said.
“We’ve successfully turned the corner,” Gilmer said.
Gilmer forecast that oil prices will remain stable for at least the near future. Oil settled in New York at $62.21 a barrel Tuesday, down 89 cents.
Oil and gas jobs are still key to local growth, Gilmer said. Houston lost some 74,000 oil-related jobs during the downturn and only 20 percent of those have returned. Efficiency gains through automation and other technological improvements mean that oil and gas employment is unlikely to regain its 2014 peak of about 300,000 jobs, Gilmer said.
The region has about 245,000 oil-related jobs, Gilmer said. Even with oil at $100 a barrel, employment would still top out at about 272,000, he estimated.
The United States in August became the world leader in oil production at 11.3 million barrels produced per day. Gilmer said that at $60 per barrel, hydraulic fracturing, or fracking, the process the helps extract oil and gas from shale rock, could easily increase oil production to 12.5 million barrels per day by 2019.
The local housing market, like the national market, appears to be cooling, Gilmer said, largely due to rising mortgage rates. Inventories are rising and price increases are slowing, he said, forecasting that home sales in the region will remain flat