Jenny Philip, director of research with the Greater Houston Partnership, spoke about the state of the region’s economy at the Cy-Fair Houston Chamber of Commerce luncheon Tuesday. She studies economic trends in the area including unemployment, energy, real estate, transportation and education.
What’s the latest on the oil and gas industry?
While the worst is over following the energy industry’s downturn, Philip said the economy is slowly but surely recovering.
The economy is growing from a low of 404 oil rigs—the fewest since the 1940s, according to Philip. Oil price drops were reflected in those numbers, and in February 2016, the industry hit a low of $26 per barrel of oil.
Since then, the price has nearly doubled. Houston is no longer in danger of going into a recession; it would have happened in the summer of 2016 if at all, according to Philip.
“We’re [now]looking at $45-$55 [per barrel]as far as the eye can see,” she said. “The oil and gas companies are saying $60-$65 is what they need in order to see real exploration occur, real capital investment.”
Most industry leaders do not believe Houston will return to its all-time high rig count of about 2,000 in the foreseeable future. The industry has become more efficient and therefore does not need as many rigs to produce the same amount of oil, Philip said.
Is this a repeat of the oil and gas downturn of the 1980s?
Not quite, Philip said In 1984-86, local banks folded, and residents were forced to leave their homes. This affected nearly everyone, but the difference is that the recent downturn caused more of a ripple effect.
From December 2014 to December 2016, Houston lost about 81,000 energy jobs—about one in four. Non-energy industries added more than 82,000 jobs during that same time period but because of the difference in wages, many more non-energy jobs are needed to replace those lost in the energy sector, she said.
“We’re starting to see spending power deteriorate in the region, and that’s where you start to see the impact on the non-energy sector,” she said.
What other factors have contributed to changes in the economy?
Philip said the metropolitan area saw more births from July 2015 to July 2016 than ever before. Young professionals who moved to Houston in the early 2010s for job opportunities have planted roots and are now starting to have children, she said.
Houston was the nation’s second fastest-growing metropolitan area last year, and the nine-county region now touts a population of 6.7 million, according to GHP research.
Economic growth in the U.S. helped sustain Houston during the downturn as well, Philip said. The GDP is expected to grow by about 2 percent this year.
Houston also has the largest export market in the U.S. Out of the $162.8 billion in trade handled by the Houston-Galveston Customs Districts in 2016, $93 billion came from exports.
How soon will the economy fully recover?
The Greater Houston area is in its seventh consecutive month of economic expansion. Philip said the employment curve tends to follow about three or four months behind.
While the economy is looking up, compared to the boom between 2012 and 2014, the positive growth might appear slow, she said. Oil and gas companies are slowly seeing work pick up again, but that does not guarantee they will see numerous new hires or increased wages anytime soon.
Philip said energy construction on the east side of town has also helped offset the downturn elsewhere.
“When you consider the drop in the rig count [and]the drop in oil prices, it’s pretty phenomenal that this is all the Houston area has suffered in the downturn,” Philip said.