Data indicates Houston economy nosedive

Because of oil bust and pandemic, city’s job loss is ‘significant’

No matter what where you look, local economic activity took an unprecedented nosedive last month.

Indicators for the Houston economy are blaring red as the region got hit in April by stay-athome orders, business shutdowns and one of the worst oil busts in history, Patrick Jankowski, a local economist said during an online presentation for the Greater Houston Partnership, a business-financed economic development group.

The most recent came out Tuesday, when the Houston Purchasing Manager’s Index, a well-regarded gauge of economic activity in the region, showed the local economy contracting at its fastest rate since the local index was introduced in 1995. Goods and service-producing activity in Houston rapidly plummeted in April as local shutdown orders implemented to slow the spread of the coronavirus upended business activity, according to the index, which is based on a survey of Houston-area supply chain executives.

Other data has flashed dire warnings for the region’s economy, said Jankowski, senior vice president at the Greater Houston Partnership. The national unemployment rate last month jumped to 14.7 percent, about the same level of unemployment Houston faced during the 1980s oil bust.

Most economists believe the true rate of unemployment is even higher, and the Department of La

bor in its report stated that the rate would have been at least 5 percent higher if those who reported that they are absent from work but still employed — in other words, furloughed — were counted in the unemployment rate.

Texas and Houston’s unemployment rates will be reported next Friday, May 22.

Based on initial claims for unemployment insurance and the national unemployment rate, Jankowski estimates Houston has lost around 350,000 jobs since closures to slow the spread of the coronavirus began in March.

“Any way you look at it, Houston has lost a significant amount of jobs,” Jankowski said.

The downturn is hitting some sectors harder than others, with retail, food and travel businesses

seeing among the steepest declines in activity, according to economic indicators by sector.

In Houston, mixed beverage sales fell from $107 million in February to $51 million in March, when local orders shut down bars. As the closures continued, mixed drink sales plummeted to just $12,000 in April — less than 1 percent of the mixed drink sales in Houston just two months prior.

Airport system traffic in Houston fell by nearly 60 percent to 2.2 million travelers in March 2020 from 5.2 million travelers during the same month of 2019, according to the Houston Airport System.

No sector has been spared. Oil and gas, construction, mid-stream operations, professional services and health care all reported “significant weakness” according to the Houston Purchasing Manager Index survey.

When and how the economy will recover will depend on the coronavirus

and whether cases and deaths keep rising and a second wave of infections breaks out, as well as what form social distancing takes, Jankowski said.

Some economists project the shape of the economic recovery curve from the COVID-19 collapse as a check mark — a very steep decline in activity followed by a relatively steady recovery. But it could take other forms too, Jankowski said, perhaps like a hockey stick — a steep decline followed by a long and gradual recovery.

The worst-case scenario is what the economy saw during the last recession, what Jankowski described as a “bathtub,” or a steep plunge followed by a long downturn, and recovery not beginning for several quarters or years.

“I hope this doesn’t become a second bathtub,” he said.