Two local predictions for Houston's economy came out in recent weeks. The first from Bill Gilmer, economist and director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business. The second from Patrick Jankowski, chief economist of the Greater Houston Partnership, a business financed economic development group.
Gilmer puts job growth next year around 62,100. Jankowski puts it lower, at 42,300 (which would be a pretty significant slowdown of more than 22,000 jobs from what Jankowski estimates Houston is on track to add this year, at 64,400).
But the one thing these two local economists — and every other economist I speak with regularly about the local economy — agree on? We’re about to slow down.
Both Gilmer and Jankowski agree that the Texas Workforce Commission’s estimates of employment growth thus far this year likely overstate the strength of the local economy and will almost surely be revised downward by the U.S. Labor Department in early 2020.
"It's not as strong as we would like it to be, but it's still growth," Jankowski said at his forecasting event Thursday.
Frack to the Future: Houston’s economy looks like the 1980s
Jankowski, in his Thursday talk, compared Houston's economy to the aftermath of the 1980s oil bust, when the real estate market had been over-saturated and the industrial market overbuilt. It's a similar pattern, though hopefully, this time we can avoid the banking collapse.
But like the 1980s, a major factor holding Houston’s economy back is the slumping energy sector, which makes up 9 percent of the local economy, according to the Greater Houston Partnership, and is headed for another downturn. This time, it’s due to Wall Street investors who have tightened capital spending for exploration and production companies and a slowing global economy that has hurt demand for fuel products (though, there are some indications it is beginning to pick up, Jankowski points out).
But, fewer wells are being drilled and the rig count is down to its lowest level since March 2017. The slump will almost certainly mean job losses in Houston’s energy sector next year.
Oil prices were up to more than $59 per barrel Friday after OPEC agreed to cut production by 500,000 barrels per day, but that’s still within range of what most local economists expect over the long term. Most agree that oil prices are likely to remain stuck in the $50-$60 per barrel range unless something drastic changes.
Gilmer's jobs forecast, for example, assumes between $55-60 per barrel next year.
ConocoPhillips chief economist Helen Currie, speaking at the same Greater Houston Partnership event, said the oil major expects global oil supplies to grow next year. More supply typically means lower prices, and Currie said she sees the oil market as largely balanced.
Jankowski expects the Houston region to lose a net 4,000 energy jobs next year.
Of course, the big “But” in these forecasts are the small matters of oil geopolitics and a raging trade war. As Currie pointed out, OPEC is always a factor that can drastically shift the outlook for the oil market, as well as politics in countries such as Iran and Venezuela.
But, absent something that bumps oil prices back up past $65 per barrel (not even an attack on Saudi Arabia’s oilfield did that), it seems Houston business community can confidently plan for a slowdown next year.
erin.douglas@chron.com
Twitter.com/erinmdouglas23
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December 07, 2019 at 02:18AM
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Reporter's notebook: One thing economists agree on? Houston's economy will slow with energy next year - Houston Chronicle
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