Area economy may lose 80,000-plus jobs.
Houston is in for a year of staggering job losses from business shutdowns related to the coronavirus, depressed productivity from worker deaths and illnesses, and the worst oil bust in history that will hit major employers and trickle through the rest of the economy.
The Houston region could lose 83,200 net jobs by the end of 2020, according to the most recent estimate by Bill Gilmer, economist and director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business. Before the virus upended life here and across the country, Gilmer had forecast in January that the region would add a net 47,000 jobs this year.
Gilmer notes that his estimate is riddled with the same uncertainties that public health officials are struggling with: How bad will the virus get, how many waves will there be, what is the true infection rate, and when will there
be a vaccine?
Using the Spanish flu of 1918 and Asian flu of 1957, unemployment insurance claims and prior oil busts, Gilmer estimated that the combination of the national recession and oil bust will result in a loss of 58,200 jobs this year. Another 25,000 jobs will be lost from local business shutdowns and social distancing measures.
Based on unemployment claims data, Houston’s jobless rate will likely surpass 10 percent this month, he said. In Harris County alone, nearly 200,000 workers have filed for unemployment benefits between the end of March and the end of April, according to data from the Texas Workforce Commission.
“This is a nightmare that has really started to become reality,” Gilmer said. “We’ve seen unemployment claims surge.”
The lasting economic impact of the coronavirus, however, is unlikely to come from these temporary closures, Gilmer said, thanks to a rapid fiscal and monetary response from the federal government that expanded and increased unemployment aid to jobless workers and injected cash into the national economy.
Longer-term economic damage will be due to reductions in productivity as lives are lost, sick employees cannot go to work, supply chains are disrupted, and consumer confidence is shaken, which will likely keep many home and spending down even after social distancing measures are lifted.
Gilmer said the mandated business closures could result in less long-term economic damage to the private sector, since it transfers some of the costs to the government in the form of unemployment checks and health care costs.
The issues are not just economic, Gilmer said, but also political and ethical.
“How much illness and how much death should be allowed?” he said. “The current tug-of-war between stay at home orders and the economy is a political question, and it’s a difficult question.”
Houston’s oil problem
An economic recovery for the U.S. could come next year, Gilmer said, but oil prices will lag behind, perhaps not returning to near $60 per barrel until 2022.
In the meantime, Gilmer, who described his oil price projections as more optimistic than most, said he expects oil prices to stay below $40 per barrel for the next two years. That’s a price level that is difficult for many U.S. shale companies to turn a profit.
The global market for crude oil is facing an enormous supply glut as stay-at-home orders dramatically cut demand for fuel products — personal travel has ground to a near halt. Global oil demand has fallen by roughly 30 million barrels per day.
But even if the glut is worked out by the fall, Gilmer said, a national and global recession will keep demand for fuel products depressed for several more quarters, so oil prices are likely to remain low.
That means that Houston will have a “longer and harder” downturn than many initially thought, he said.
In the first year of economic recovery, low oil prices will keep Houston’s job growth muted, with the region adding about 40,500 jobs in 2021, well below pre-coronavirus forecasts, according to Gilmer.
But if the virus is contained and oil prices return to near $60 per barrel by 2022, Houston could join the national recovery with gusto, potentially adding more than 100,000 jobs in 2022.
Houston’s reliance on the oil and gas industry often leads the region to rapid growth, surpassing the national rate, only to find itself in more dramatic downturns than the rest of the U.S. when oil crashes. But without oil, Gilmer estimates the local economy would have grown at a slower pace in recent decades and have 400,000 fewer jobs than it does today.
“There’s a trade-off,” Gilmer said of oil’s influence on the local economy. “Oil brings us volatility, but it also brings us much faster growth. Maybe we need to learn how to fasten our seat belts here in Houston.”