Houston’s Economic Engine – Driving Forward
May 9, 2012
“Happiness is the Great Recession in the Rearview Mirror”— at least that’s the view Patrick Jankowski presented at the Economic Forecast Luncheon organized by O’Connor & Associates on April 25, 2012. Jankowski, Vice President of Research for the Greater Houston Partnership, stated that if you had to live through the Great Recession anywhere in the United States, then Houston was THE place to be.
Measuring the beginning and the end of the Great Recession by job loss and job creation, respectively, Jankowski presented the following facts:
- Houston, together with Washington D.C., was the last of the top 20 metropolitan areas in the United States to experience job losses. Houston did not start to experience net job losses until the middle of 2008, nearly 6 months to a year after most other cities.
- Houston’s net job loss during the Great Recession was only about 4.5% of all jobs, the third lowest percentage among the top 20 areas in the United States.
- Houston started to realize net job creation in January or February 2010, making the length of the Great Recession in Houston only about 16 months long. Most of the other major metropolitan areas experienced at least 2 or 3 years of net job losses before starting to realize net job creation.
- Houston had fully recovered from the Great Recession by the fourth quarter of 2011, having recovered as many jobs as had been lost. Washington D.C. is the only other major metropolitan area in the United States that has recovered all of the jobs lost during the Great Recession. However, several industries in Houston, specifically construction, manufacturing and transportation, have not recovered many of the jobs lost in the Great Recession.
Jankowski also noted that the economic recovery should continue to be strong in Houston, based on several key indicators:
- Oil prices have increased from a low of $40 per barrel in 2009, recently averaging $95.53 per barrel over the past 6 months. This is the upper range for the pricing sweet spot of $75 to $100 per barrel. Below this range, oil production suffers; but above this range, the overall US economy tends to suffer.
- Advances in exploration technology, specifically hydraulic fracturing, are a boom to the Houston economy. (Hydraulic fracturing is a capital intensive operation, and much of this technology and equipment is provided by Houston based companies.)
- The levels of US based exploration and production are increasing dramatically. For example, in the Texas Eagle Ford Shale, the number of drilling permits issued increased from 94 in 2009 to 2,828 in 2011, while the number of barrels of oil produced increased from 308,139 barrels in 2009 to 30,453,253 in 2011.
- Exploration and production activities similar to the Eagle Ford Shale are also being conducted in a number of other regions of the country and the world.
- Foreign trade continues to flow through Houston, with exports in 2011 increasing 26.7% over 2010 levels.
- Houston’s population continues to grow, currently at the rate of approximately 110,000 people per year. Over half of this growth is natural growth, as Houston experiences 65,000 more births than deaths each year. In-migration from other parts of the country and the world should continue as well, based on projected job growth for 2012.
Overall, Jankowski painted an optimistic picture of Houston’s economy and its continuing staying power in challenging economic times. We agree with him and that’s what we’re telling our clients.