Houston Economic Update

Houston Economic Update

The Houston area economy is treading water, following a period of stagnant growth that began with the oil downturn in late 2014.  Bill Gilmer, director the Institute for Regional Forecasting at the University of Houston’s Bauer School of Business, has forecasted that Houston will add about 38,000 new jobs in 2017 – more than twice as many as 2016, but far below the historical average, preparing us for a “pretty mediocre year” to quote Gilmer.

As the industrial construction boom that aided Houston through the oil downturn is coming to an end, tens of thousands of construction workers will be without a job.  In a perfect world, those workers could move into oil production.  But since Gilmer predicts that oil producers will exhaust the extremely productive wells, the production costs will be forced upwards and the future looks bleak for both the workers and the current oil prices. Despite Gilmer’s tepid forecast, there has been a rapid spike in rig count and manufacturing and petrochemical refining jobs.

Gilmer, like many economists, declined to predict where oil prices are headed. “All of the optimism we were seeing back in November has pretty much been flushed out of the market,” Gilmer said. ” The problems we have continue to be about oil.” Despite efforts to diversify the Houston economy, Gilmer said, the region still depends heavily on the energy industry. The ratio of energy jobs to non-energy jobs in Houston’s employment core hasn’t changed in 20 years.

There was however, a glimmer of hope shining on the otherwise bleak horizon. The residential housing market seems to have worked through the excess of high-end homes and production is returning in more modest housing that provides Houston with one of its key economic advantages — affordability.  This attracts workers and helps the economy grow.

Many Houstonians are “plenty tired of the crash of oil prices,” as paraphrased from Gilmer’s speech in late May.  “We’re not going to get strong growth based on $48 a barrel…” After a major oil bust, a “pretty mediocre year” is nothing to sniff at.