Houston Chronicle

Job growth stays in sluggish mode around the area

- By Andrea Rumbaugh

Houston’s economy remained sluggish in July, but employment numbers released by the state on Friday had local analysts cautiously optimistic.

That’s despite a raft of dismal economic news — a domestic stock market plunge, worsening declines in China and another sixyear low for oil prices — that could prove at least a short-term drag on hiring.

A separate report from the Federal Reserve Bank of Dallas showed June and July drops in its statewide index of leading economic indicators, which tend to change direction before the overall economy, raising concerns of an approachin­g stagnation in job growth.

“The recent weakness in the Texas Leading Index suggests that the strength in job growth in July is not

likely to persist,” Keith Phillips, Dallas Fed assistant vice president and senior economist, said in a statement.

Still, observers of the regional economy saw signs that the area labor market could be starting to stabilize.

The metropolit­an area lost 4,900 nonfarm jobs in July, mostly due to seasonal fluctuatio­ns tied to the school year, the Texas Workforce Commission said in its monthly report. That’s fewer job losses than in a typical July. Over the past 10 years, the month lost an average of 13,600 jobs, said Patrick Jankowski, senior vice president of research for the Greater Houston Partnershi­p.

He said growth in the goods-producing sector — energy, constructi­on and manufactur­ing — helped buoy the month by adding 3,400 jobs.

This tells Jankowski that blue-collar layoffs, which occur during the first part of a downturn, may be nearing an end. He said white-collar layoffs, the second part of the cycle, have begun and should be reflected in data for August. The cycle’s third leg typically includes reductions in secondary services, such as restaurant­s and dry cleaners.

This down cycle is being played out quickly, Jankowski said, and the restructur­ing may persist for only a year or so. It took several years in the 1980s, and he said it won’t take as long this time around.

‘Not out of the woods’

“We’re not as bad off as everyone thinks we are, but we’re not out of the woods yet,” he said.

Jankowski acknowledg­ed that the stock market plunge could have a psychologi­cal impact on local business executives and may prompt them to delay some hiring. China’s slowing economy is the greater risk, he said, as it could decrease global demand for oil.

“Slow growth in China is a big concern over the long term,” he said. “The stock market is a big concern over the short term.”

During the first seven months of this year, the Houston area added 40,600 nonfarm jobs, in numbers that are not seasonally adjusted. That’s about half of last year’s growth, said Parker Harvey, senior regional economist for Workforce Solutions, which manages job services and training for a 13-county Houston region.

That’s “somewhat to be expected,” Harvey said, given that last year’s job growth was especially strong and that low crude prices are crimping employment this year.

Oil and gas employment was down 1,100 jobs compared with July 2014. But the industry ticked up when compared with June, adding 1,500 jobs.

“It’s a pleasant surprise,” Harvey said, adding that it’s possible the data do not reflect recent layoff announceme­nts. “Keep in mind it could be revised next month.”

Bill Gilmer, director for the Institute for Regional Forecastin­g at the C.T. Bauer College of Business at the University of Houston, said the energy sector appears to have stabilized during the past few months.

But this correspond­s with oil prices around $60 a barrel in May and June. On Friday, the domestic benchmark crude closed at $40.45. If prices hover in this range, Gilmer said, Houston’s job growth could lose more momentum.

“If $40 a barrel continues through the end of this year, then it’s going to mean a very difficult time for Houston’s oil producers and oil services companies,” he said.

More cuts?

R.T. Dukes, an analyst at Houston energy research firm Wood Mackenzie, said oil executives piecing together their 2016 spending plans are expected to cut even deeper than they had expected as they hunker down for a longer slump.

“There’s a big group of operators talking about the second round of cuts,” he said. “You’re seeing some of those now, and you’ll likely get more with oil where it’s at now.”

Profession­al and business services added 2,600 jobs in July, up 3.2 percent year over year. Educationa­l and health services added 3,000 jobs, up 4.4 percent year over year. Leisure and hospitalit­y had a 7 percent annual growth, but it lost 2,300 jobs in July.

The Texas Workforce Commission also reported the Houston metropolit­an area had a 4.7 percent unemployme­nt rate in July, up slightly from 4.5 percent in June but down from 5.4 percent in July 2014.

In seasonally adjusted overall numbers, Texas employers added 31,400 nonfarm jobs in July. The state has increased employment in 57 of the last 58 months.

Texas’ seasonally adjusted unemployme­nt rate remained at 4.2 percent in July, the lowest monthly unemployme­nt rate since July 2007. Statewide numbers are seasonally adjusted, but local data are not.

 ?? Cabot Oil & Gas ?? Employees work on a Cabot Oil & Gas well pad in the Marcellus Shale. The energy sector’s job picture showed some stabilizat­ion recently, but that was with oil prices at $60 a barrel in May and June.
Cabot Oil & Gas Employees work on a Cabot Oil & Gas well pad in the Marcellus Shale. The energy sector’s job picture showed some stabilizat­ion recently, but that was with oil prices at $60 a barrel in May and June.

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