The Houston Economy Jesse Thompson Regional Business Economist The Federal Reserve Bank of Dallas, Houston Branch February PDF Free Download

The Houston Economy Jesse Thompson Regional Business Economist The Federal Reserve Bank of Dallas, Houston Branch February 2017 Image from http://peoplesguidetohouston.wordpress.com/category/uncategorized/

Employment Index, Dec-2014=100 104 103 2015: Houston Plateaus 2016: Houston Loses a Few Jobs U.S. (ex Texas) 102 101 Drilling activity collapses Texas (ex Houston) 100 99 98 Houston Oil prices stop falling in Q1:2016. 97 96 2014 2015 2016 SOURCE: Bureau of Labor Statistics, adjustments by the Dallas Fed. Metro Down 14K+ Jobs ytd in August

Employment Total Trade, transp & utilities (20%) rofessional & business svc (16%) Government (13%) Education & health services (13%) Leisure & hospitality (10%) Manufacturing (7%) Construction (7%) Financial activities (5%) Other services (4%) Mining & logging (3%) -8.3 Sept. to Dec. Dec.15 to Dec.16-6.6-4.7-4.4-2.5-2.6-1.4-0.1-0.4-0.5 0.2 0.0 1.1 1.9 2.0 3.3 2.9 2.9 3.1 2.8 2.1 NOTES: Data show seasonally adjusted and annualized percentage employment growth by industry supersector. Numbers in parentheses represent share of total employment and may not sum to 100 due to rounding. SOURCES: Bureau of Labor Statistics; adjustments by the Dallas Fed. 3.6

Real Retail Sales & Wages Billions of 2016:Q1 dollars 49 Real Wages Paid & Retail Sales Down From 2014 Retail Sales Billions of 2016:Q1 dollars 36 46 33 42 30 39 27 Wages 35 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SOURCES: Bureau of Labor Statistics; adjustments by the Dallas Fed. 24

Oil & Gas Extraction

Oil & Gas Extraction Index, June 2014=105.79 U.S. Rig Counts and Houston Employment 110 Thousands of jobs 300 95 80 Mining-related jobs: Total 75,000 Jobs lost since 2014. 290 280 270 65 260 50 35 Crude oil price U.S. rig count 250 240 230 20 2014 2015 2016 2017 NOTE: Rig count and crude production seasonally adjusted. Rig count and nominal oil price indexed to June 2014. 220

Oil and Gas Jobs Percent Change 25 Selected Mining-Related Job Losses Slowing 15 5-5 -15-25 -35-45 Fabricated metals Support activities for mining Total Architectural, engineering & related Extraction Agriculture, construction & mining machinery 2014 2015 2016 Note: data are three-month annualized percent changes. SOURCE: Bureau of Labor statistics; Seasonal and other adjustments by the Dallas Fed.

Survey: Need WTI~$50 to drill WTI: $53, ytd 2017

Oil & Gas Extraction Rigs Gas Basin Drilling Up Rigs Permian Drives Rig Recovery 100 90 80 Marcellus Utica Haynesville 350 300 Permian Eagle Ford Williston DJ-Niobrara 70 250 60 200 50 40 150 30 100 20 10 50 0 0 20160506W 20160603W May-16 20160701W 20160729W 20160826W 20160923W 20161021W 20161118W Oct-16 20161216W 20170113W 20170210W 20170310W 20170407W Apr-17 20160506W 20160603W May-16 20160701W 20160729W 20160826W 20160923W 20161021W 20161118W Oct-16 20161216W 20170113W 20170210W 20170310W 20170407W Apr-17 SOURCE: Baker Hughes

Inventories Million barrels 3,200 3,100 Total OECD Petroleum inventories projected to stay elevated Dec. 3087 3,000 2,900 2,800 2,700 2010-2014 average 2,600 2,500 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 SOURCE: Energy Information Administration.

Inventories U.S. crude inventories erode, product inventories surge. 50 45 Distillate fuel Crude (ex SPR) Gasoline 40 35 30 25 20 2014 2015 2016 2017 Note: dashed lines are seasonally adjusted. Numbers are for week ending november 25th. SOURCE: EIA

Refining & Petrochemicals

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Oil/Gas Ratio 8 7 6 5 4 3 2 1 Refining & Petrochemicals Downstream advantage eroding? Brent Spread WTI/HH Dollar Spread 30 25 20 15 10 5 0-5 0-10

2009$ per barrel deviation from mean Refining 25 20 15 10 5 0-5 -10-15 Muse, Stancil & Co. East Coast Margins Muse, Stancil, and Co. Gulf Coast Margins WTI Crack 1996 1999 2002 2005 2008 2011 2014 2017 Note: data are seasonally adjusted, centered three-month moving-averages. SOURCE: Muse, Stancil, & Co., Wall Street Journal, Bureau of Labor Statistics.

Billions of dollars 20 Downstream Advantage Downstream construction in Houston falls off in 2017 & 2018. Number of projects 35 18 16 14 12 10 8 6 4 2 Value of projects delivered Number of projects delivered $55 Billion in capital Investments announced in Houston-area alone. 30 25 20 15 10 5 0 2015 2016 2017 2018 2019 2020 2021 Note: Data are value of construction projects delivered. SOURCE: Baytown Economic Development Foundation. Institute for regional forecasting. 0

Punchline 2015 & 2016: Upstream Jobs Down Downstream-Related Jobs Up 2017: Upstream Jobs Up Downstream-Related Jobs Down Houston Region Job Growth Could be anemic into 2018

International Trade

Houston International Trade Index, Jun.2014=100 120 110 Value of Trade Falls With Oil and Strong Dollar Value of Trade Index Jan.1988=100; Axis Inverted 76 78 100 90 80 70 60 50 40 West Texas Intermediate Texas Value of the Dollar 80 82 84 86 88 90 92 94 30 2011 2012 2013 2014 2015 2016 NOTE: Data displayed are centered three-month moving averages, seasonally adjusted where appropriate. SOURCE: Census Bureau. Dallas Fed. Energy Information Agency. 96

Houston International Trade Index, Jun.2014=100 120 Value of Trade Falls While Volumes Stay Stable Value of Trade 110 100 90 Vessel Weight 80 70 60 50 40 30 2011 2012 2013 2014 2015 2016 NOTE: Data displayed are centered three-month moving averages, seasonally adjusted where appropriate. SOURCE: Census Bureau. Dallas Fed. Energy Information Agency.

Texas Medical Center

Health Employment Growth Percent 5.0 Job Growth Slowing. 4.5 4.0 3.5 Sept. to Dec. Dec.15 to Dec.16 Average since 2000 3.2 3.4 3.4 3.0 2.5 2.5 2.8 2.0 1.5 1.8 1.5 1.0 0.5 0.0 0.5 Total Ambulatory health (47%) Hospitals (27%) Other health (26%) NOTES: Data show seasonally adjusted and annualized percentage employment growth. Numbers in parentheses represent share of total health employment and may not sum to 100 due to rounding. SOURCES: Bureau of Labor Statistics; adjustments by the Dallas Fed.

Construction & Real Estate

Construction & Real Estate Percent* 10 Sept.16 to Dec. 16 Dec.15 to Dec.16 Average since 2000 Construction Employment Falls. 7.8 5 0-1.0-1.1-0.8-0.3-2.5-2.6-2.7-5 -6.4-6.9 10 Total construction Construction of buildings Heavy & civil construction Specialty trades Real estate & leasing NOTE: Real estate and leasing is not a subsector of construction.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Houston Home Sales Index Jan2000=100 150 Tight Market Pushes Up Prices Months supply of inventory 12 10 125 8 6 100 Median Home Sales* Month's of supply 4 2 75 0 *per the 12mma of payroll employment Note: Seasonally adjusted SOURCE: Houston Association of Realtors. Author's calculations.

Houston Home Sales 150 Total Multi-family pulls down total housing permits filed 1-Family Units 100 50 0-50 -100 2008 2009 2010 2011 2012 2013 2014 2015 2016

Outlook

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Outlook Percent change Houston Purchasing Managers Index and Employment Growth 10 8 6 4 2 0 Index value 70 65 60 55 50-2 -4-6 -8-10 U.S. recessions Houston employment HPMI 45 40 35 30 NOTE: Employment growth is a three-month percent change. SOURCES: Institute for Supply Managment; National Bureau of Economic Research; Bureau of Labor Statistics; Dallas Fed.

Outlook Percent growth 10 Total Number of Job Advertisements Slipping 8 6 Employment Total ads 4 2 0-2 -4-6 -8-10 2009 2010 2011 2012 2013 2014 2015 2016 2017 NOTE: Job ad data are a statistically optimized weighted moving averages, shifted forward two months.

Outlook Index, 1987=100 134 Major Leading Indexes paint improved, modest picture Index, 2010=100 125 132 130 128 126 124 122 Texas Leading Index U.S. leading index 123 121 119 117 115 113 111 109 107 120 2012 2013 2014 2015 2016 NOTES: July Texas Leading Index data point is an estimate. SOURCES: The Conference Board; Dallas Fed. 105

Looking Ahead

Looking Ahead Forecast: Dec-2015 to Dec-2016 Houston Job Growth*: -0.1% in 2016 0.5 to 1.5% in 2017 Texas Job Growth: 1.5-2.5% in 2017

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