As oil prices continue to fall and the energy industry makes changes to its workforce, local officials in the Katy area are awaiting the full effect the industry’s downturn will have on the region.
“We’re still trying to get our arms around that,” said Lance LaCour, Katy Area Economic Development Council president. “There’s still quite a bit of activity in the energy sector, but some of the larger companies have had some layoffs.”
The price of oil in June 2014 was $108 per barrel. On Jan. 21, the price per barrel was slightly more than $29. The lower price of oil, combined with various geopolitical factors in the Middle East, has led many oil and gas extraction companies to react to the market changes with layoffs and staff reorganizations.
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In the Houston-The Woodlands-Sugar Land metropolitan area, which includes Katy, the overall unemployment rate for all industries saw an increase from 4.3 percent in November 2014 to 4.9 percent in November 2015, according to data from the Texas Workforce Commission.
The federal Bureau of Labor Statistics tracks jobs in the oil and gas extraction industry and in the Houston-The Woodlands-Sugar Land region, a total of 1,100 jobs were lost—from 55,000 in January 2015 to 53,900 jobs in November 2015.
“I don’t know if we’ll ever really get an exact number on the impact to Katy,” LaCour said of the oil and gas industry job losses.
Greater Katy area effect
Dr. Bill Gilmer, director of the University of Houston’s Institute for Regional Forecasting, said although the U.S. economy is doing well, the oil industry is facing difficult times in the immediate future.
“It’s the west side of Houston that’s going to feel the negative impacts of the downturn,” Gilmer said. “The west side is really going to suffer. 2016 is the year we’re going to see a big slowdown in employment.”
The oil and gas employees that will be most affected by the downturn are centered around Katy, he said.
“Many of those workers are [in Katy] because they have access,” Gilmer said. “That suburb and everywhere around there, that is ground zero for all those engineers, chemists and geophysicists. It’s ground zero for the kinds of jobs at risk.”
Clark Martinson, general manager of the Energy Corridor District, said the problems facing the oil and gas industry are unique and although there have been layoffs, many companies are offering early retirement packages as well as reorganizing their staffs to be more efficient.
“It’s a different kind of layoff situation than I’ve seen in the past,” Martinson said. “Not all of these people are losing their jobs.”
Although many other industries such as food service, retail sales, construction and office space leasing have not seen declines in revenue, or job losses, some expect 2016 will be the year when the true effects of the oil and gas industry layoffs will be felt.
Gilmer said the Houston region added about 680,000 residents between 2003 and 2012, which led to construction of new office buildings, hotels, housing and restaurants to accommodate the influx of new residents.
Gilmer said the region now has too much office space, and local municipalities are still issuing occupancy permits for expected population increases that may not happen.
“We have way overbuilt,” he said.
The effect on the local hotel and dining industries may be felt, too, Gilmer said.
“When people go out to eat, they’re not getting the most expensive items on the menu,” he said. “Hotels in Houston are very dependent on business travelers. Right now, conferences are being canceled.”
City of Katy concerns
Byron Hebert, city administrator for the city of Katy, said the city has had a sales tax increase of an average of 5 percent for the past three years. In 2016, city officials are predicting only a 1 to 3 percent growth in sales tax revenue.
“The city is not immune,” Hebert said. “The city is going to feel it. It is feeling it now. Any time the Energy Corridor has troubles, you really have to pay attention to your sales tax revenue.”
Hebert, who was the city’s finance director for 14 years before becoming city administrator in 2014, said during past recessions the city could rely on the energy industry to help weather the storm. That is no longer the case, he said.
“Depending on how long this lasts, we’re going to have to look at next year’s budget,” Hebert said. “The longer this goes, how bad it gets, no one knows.”
One of the biggest areas expected to be affected is construction.
“You’re going to see a pullback on construction spending,” Hebert said.
Local restaurants prepare
Several area restaurant owners and managers said the oil and gas industry layoffs will have mixed effects on their businesses.
Jorge Sneider, co-owner of Las Alamedas Mexican Grill in Katy, said he has heard a lot of complaints from other restaurant owners as well as food vendors regarding the economy.
“There’s a lot of speculation as to why. Probably No. 1 is oil and gas,” Sneider said. “The vendors tell us that the restaurants aren’t buying as much product.”
Sneider said he does not expect to have to lay off any of his own employees this year, but he is bracing for lower sales.
“At worst, we probably expect the same sales as last year,” Sneider said. “Not improve; not lose money. Sales are not as strong as they were.”
Alex Salmassia, owner of Da Vinci Ristorante Italiano in Katy, said the oil and gas industry decline has had no affect on his business.
“I don’t see any difference [in business],” Salmassia said. “I have a small neighborhood restaurant. People still keep coming.”
Salmassia said it is natural for many business owners to blame the oil and gas problems for slow sales.
“Everybody thinks that way,” Salmassia said. “I own oil stocks; I understand. But oil can go to zero dollars a barrel and we won’t be affected.”
Will Hong, manager of Sushi Hana in Katy, said he has not noticed any downturn in sales yet.
“The business is still good,” Hong said. “We’ve not been that affected. Most of the people who come to eat here, they still come here.”
Housing and multifamily markets
Bruce McClenny, president of Apartment Data Services LLC, said in the Katy area more than 4,000 new apartment units were opened in 2015, and at least 2,500 new units are being built this year.
However, many of the apartments are not being rented, and there is a “flatness” in sales and high vacancy rates, he said.
“The market is slowing, and we tend to attribute that to the oil industry,” McClenny said. “Things were going so well, and all the sudden it’s not.”
In the housing market, however, things are still positive, said Christi Borden, a Realtor with Better Homes & Gardens Real Estate Gary Greene in Katy.
“I think we’re just stabilizing,” Borden said of the housing market. “There will be more competition, and there will be fewer buyers for properties. We’re not seeing a backward slide in prices.”
Borden said the main issue she has noticed so far is buyer confidence.
“The confidence level is what I’m worried about,” she said. “If we have a very prolonged oil decline, that will impact pricing.”
Borden said the quality of life in Katy helps keep residents in the area even when they lose jobs.
“Schools and quality of life, as well as our ever-developing retail infrastructure, will help mitigate some of the negative effects of the oil-driven economy,” Borden said. “They’ll stay in the area just to keep their children in the schools.”
Martinson said one promising aspect of the downturn is many of those who have lost jobs in the oil and gas sector are not moving out of the Katy area.
“The people still living here, they are starting their own companies,” Martinson said. “The talent we have is just going to focus on new startup companies.”
As for dire predictions of businesses closing and mass layoffs in support industries, Martinson said he does not think it will get that bad.
“I don’t think there will be much of an impact,” Martinson said. “I don’t see any grocery stores closing. I don’t see restaurants closing.”
Additional reporting by Bethany Knipp
Job Resources
For workers facing job losses in the energy industry, there are several community resources to help those who have been laid off.
Epiphany of the Lord Catholic Community church has a job fair twice a year for professionals: one on the fourth Thursday in January and one on the fourth Thursday of July.
Ed Conner, an Epiphany job fair coordinator, said the organization’s July 2015 job fair attracted 910 candidates.
“I think we will probably set records this January, sad to say,” Conner said.
Conner said during the Great Recession in 2008 and 2009, the number of job seekers was also high.
Conner said those who work in accounting, finance, engineering, IT, sales, marketing and medical professions make up about 75 percent of the candidates who come to the job fair.
About 50 employers come to the job fair, Conner said.
Epiphany also holds weekly networking meetings and monthly seminars for people to learn about resumes, interviews and salary negotiation strategies.
Conner said he expects attendance numbers at those events to increase as well.
Lance LaCour, the president of the Katy Area Economic Development Council, said the KAEDC could have a job fair as well by the end of the second quarter of the year.
He said the KAEDC has been working with Workforce Solutions, which has an office at Katy Mills, to see how people can transfer their skills to other industries.
“For instance, people who may want to move from energy to health care because health care is growing,” LaCour said.
Jenny Johnson, a manager of workforce services for Workforce Solutions said the company calls that “rebranding one’s skills.”
“The biggest thing for anyone who’s looking for work is that we still have jobs,” Johnson said. “It’s how they want to transition, if they want to transition from where they are into another occupation or perhaps this is their opportunity to rebrand their skills or to look at another type of employment.”
• Epiphany of the Lord Catholic Community, 1530 Norwalk Drive, Katy, 281-578-0707
• Workforce Solutions, 5000 Katy Mills Circle, Ste. 659, Katy, 281-644-1030
Bethany Knipp
