Houston economy falters, shedding jobs in July
Rebound reverses after region becomes COVID-19 hot spot
The Houston economy sustained a setback last month, shedding jobs for the first time since April as the region struggled to contain COVID-19 and businesses were forced to walk back efforts to re-open.
Houston employers cut 2,700 jobs in July, and the region’s unemployment rate, 9.4 percent, remains painfully high — more than double the 4.1 percent a year ago.
In July, COVID-19 cases spiked around the state and Houston became a hot spot of the outbreak. Texas set record after record for reported coronavirus deaths, and Gov. Greg Abbott closed bars again and reduced restaurant capacity. Abbott also allowed local officials to limit large group gatherings and implemented a state mandate for face coverings — after resisting such measures at the beginning of the outbreak.
Business owners and customers also responded to the virus. Houston’s largest and most influential business association, the
Greater Houston Partnership, encouraged its members to send workers back home to work remotely if possible at the end of June. And local business owners said revenues, which had been recovering, fell in early July as customers opted to stay home when COVID-19 hospitalizations began to surge.
Andy Sommer, who owns a women’s clothing, jewelry and home decor store in the Heights with his wife, Morgan, said their business noticed a drop in sales in late June and early July. They thought their business would climb out of the red in June — maybe even beat the sales from the previous years — but then, customers dwindled.
“In the beginning of June, we were on a trajectory of good news,” Sommer said, “Then near the end of the month, things started to go downhill.”
Economists said the halt in job gains confirm what experts have said since March: The only way to save the economy is to stop the spread of COVID-19.
“We don’t want to throw away earlier advances in (containing) the virus for modest economic gains,” said Jesse Thompson, a Houston economist for the Federal Reserve Bank of Dallas. “Con
trolling the virus is the key to a robust economic recovery. Period.”
State recovery stalls
Across the state, too, the job recovery showed signs of stalling. The Texas economy lost 12,300 private-sector jobs over the month. Gains in government employment easily offset private-sector declines, adding 43,700 jobs. Overall, Texas employers added 31,400 jobs last month.
The state, however, has lost a net of almost 540,000 jobs in 2020.
The state unemployment rate fell to 8 percent in July from 8.4 percent and remains below the national rate of 10.2 percent.
The next challenge for the state’s economic and health recovery, experts said, is re-opening schools. If going back to the classroom causes COVID-19 cases and hospitalizations to jump again, further restrictions might be necessary.
Customers may stop shopping, traveling and going out to eat, and businesses may limit their re-opening efforts further, as many did in July when cases spiked. It also may affect productivity, said Patrick Jankowski, an economist at the Greater Houston Partnership, a business-financed economic development group.
“You can see a scenario where a child can get the parent sick, or the parent has to spend time taking care of the child,” Jankowski said. “And then, the parent isn’t able to focus on work.”
Job losses accelerate
Year-over-year job losses accelerated in some of Houston sectors hardest hit by the pandemic — accommodations and food services, manufacturing and retail.
Accommodation and food services — hotels, bars and restaurants — lost 47,500 jobs last month compared to the same month last year. In June, the year-over-year losses were 43,500.
Houston retailers cut 10,300 jobs in July compared to last year.
For Sommer’s small retail business, called Forth and Nomad, transitioning to e-commerce during the crisis was a saving grace.
“It was a necessity at the time, so we just went for it,” Sommer said of launching the online store in March. Sommer estimates about 25 percent of his sales come from the online store.
Still, changing the business model has not been able to stave off the inevitable financial hardship of COVID-19, and he’s worried about what a sustained crisis will mean for Houston’s small business scene. Sales in June were strong — up 20 percent compared to last year — but in July as COVID cases started to rise, sales fell, down 25 percent from 2019.
“A lot of us small-business owners would appreciate another round of government help depending on how long this is going to go,” Sommer said. “The last thing you want to see is another business shutdown, even if it’s competition. It’s going to affect the fabric of Houston.”
Double whammy
The COVID-19 crisis — combined with an oil price bust — has destroyed nearly 226,000 jobs in Houston since the beginning of 2020. That’s almost four times the number of jobs the economy gained in 2019.
Losses in oil and gas extraction jobs have slowed in recent months as oil prices have recovered from a crash below zero in April, but the industry still had almost 5,000 fewer jobs in July than a year earlier. It typically takes the Houston energy sector a year after oil prices reach bottom for job losses to bottom out, said Thompson, the Dallas Fed economist.
That means Houston’s oil and gas industry will likely see a “slow bleed” in employment until next year, Thompson said, but most of the pain is done.
Other sectors that rely on Houston’s oil and gas industry, such as manufacturing, one of Houston’s largest sectors by employment, will continue to be affected by the oil downturn and the uncertainty surrounding the election, which could cause businesses to hold back capital spending until it is resolved, experts said.
But it will come down to the virus, experts said, and whether the slowdown in new cases since the July spike continues.
“We have a long way to go (in containing the virus),” Thompson said. But, he added, “So long as COVID-19 continues a trajectory of improvement, there’s a light at the end of the tunnel.”