The Houston Economy Jesse Thompson Regional Business Economist The Federal Reserve Bank of Dallas, Houston Branch June 2016 Image from http://peoplesguidetohouston.wordpress.com/category/uncategorized/
Houston Business-Cycle Index Percent* 14 12 10 8 6 4 2 0 Average since 2000 = 3.2 2015 growth rate = 0.2-2 -4 2016 YTD = -1.4-6 *Annualized month-over-month growth rate. SOURCE: Dallas Fed. 2012 2013 2014 2015 2016
Employment Growth Total Trade, transp & utilities (20%) Professional & business svc (15%) Government (13%) Education & health services (13%) Construction & mining (11%) -11.0 Leisure & hospitality (10%) Manufacturing (8%) Financial activities (5%) Other services (4%) Information (1%) Apr. 2015 to Apr. 2016 January to April -3.4-5.4-0.1-1.0-1.9-9.5-8.4-2.5-0.6-2.1 1.0 0.8 0.8 0.5 0.5 2.2 2.4 3.1 4.5 5.3 6.4 NOTES: Chart shows seasonally adjusted and annualized percentage growth by industry supersector. Numbers in parentheses represent shares of total employment and may not sum to 100 percent due to rounding.
Real Retail Sales & Wages Billions of 2016:Q1 dollars 52 Wages Flatten in 2015 Retail Sales Fall Billions of 2016:Q1 dollars 38 36 46 39 Wages 34 32 30 28 26 33 Retail sales 24 22 20 26 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 NOTE: shaded area is U.S. Recessions SOURCE: National Bureau of Economic Analysis. Texas Comptroller of the currecny; adjustmets by the Dallas Fed. 18
Employment Growth rate 10 8 6 4 2 0-2 Unemployment Drifts Up O.7 Points So Far. Labor Force Growth Accelerates. Unemployment rate Labor Force growth Percent 10 9 8 7 6 5 4 3 2 1-4 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 NOTES: Labor force data is an annual six-month percent change. SOURCE: Bureau of Labor Statistics.
Oil & Gas Extraction
Oil & Gas Extraction Index, June 2014=100 U.S. Production Falling Millions of barrels per day. 95 9.5 80 U.S. Oil-directed rig count U.S. crude production 9.0 65 50 Production down by 524K barrels per day since March 2015. 8.5 8.0 35 7.5 Crude oil price 20 2013 2014 2015 2016 NOTE: Rig count and crude production seasonally adjusted. Rig count and nominal oil price indexed to June 2014. 7.0
More job losses coming/already here as Bankruptcies Mount. Punchline 2015: Upstream CapEx in the U.S. Down ~40% 2016: CapEx to fall by Another ~40% in U.S. Cumulative 138 Oil &Gas Bankruptcies Nationally Representing ~$26.5 Billion in Debt May 16, 2016 (Haynes and Boone, llp) ~57,300 Core Oil-&-Gas-Related Jobs Lost Since Dec-2014
Upside Potential In Early 2017? When WTI Turns, How Long Before Rigs and Jobs Turn? Number of Quarters after WTI Peaks Number of Quarters after WTI Bottoms Rigs Energy Core Rigs Energy Core 1985Q4 1987Q3 1990Q4 1997Q4 2000Q4 2008Q2 2014Q2 Average 0 3 1 4 1 3 1 3 1 4 1 3 2 4 1 3 2 8 1 2 1 3 1 2?????? 1 2.8 1.2 4.2
Refining & Petrochemicals
Downstream Advantage Oil/Gas Ratio 10 9 8 7 6 5 4 3 2 1 U.S. Downstream Still Cost Advantaged. Brent Spread WTI/HH Dollar Spread 26 21 16 11 6 1 0 2009 2010 2011 2012 2013 2014 2015 2016-4
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 Flat to Up? Downstream-Related Jobs Down On net, 2017 probably good for the region, but Houston Region Job Growth Could Stay Below Average into 2018
Construction & Real Estate
Construction & Real Estate Percent* 40 30 20 Anomalous Growth in 2015:Q4 Revised Away Anomalous Contraction in 2016:Q1 Persists for now. Sept. 2015 to Dec. 2015 Dec. 2015 to Mar. 2016 Average since 2000 43.5 10 6.4 3.2 0 10-0.7-5.8-0.9 20 30 40-28.7 Total construction -23.4 Construction of buildings -19.9 Heavy & civil construction -33.9 Specialty trades Real estate & leasing NOTE: Real estate and leasing is not a subsector of construction.
Office CRE Square feet 3600 Total Office Construction and Starts Falling Square feet 16000 3100 Total Under Construction 14000 2600 2100 1600 1100 12000 10000 8000 6000 4000 600 Construction started 2000 100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 NOTE: Square feet of construction started is a centered three-quarter moving average. 0
Office CRE Percent 20 Office Vacancy Rates Tied with Post-Recession Peak 19 18 Sublet Direct 17 16 15 14 13 12 11 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 SOURCE: CBRE.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Houston Home Sales Index Jan2000=100 150 Prices level off as inventory rises 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.
Texas Medical Center
Health Employment Growth Percent Hospital employment growth very strong Apr. 2015 to Apr. 2016 Jan. 2015 to Apr. 2016 Average since 2000 6.7 7.1 4.5 3.5 3.7 3.3 3.8 Total Ambulatory health (46%) 0.1 Hospitals (27%) Other health (27%) 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.
Outlook
Outlook
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Outlook Percent change 8 6 Houston Purchasing Managers Index and Employment Growth Index value 70 65 4 60 2 55 0 50-2 45-4 -6-8 U.S. recessions Houston employment Houston PMI 40 35 30 NOTE: Employment growth is a three-month annualized percent change. SOURCES: Institute for Supply Management; National Bureau of Economic Research; Bureau of Labor Statistics; Dallas Fed.
2009 2010 2011 2012 2013 2014 2015 2016 Outlook Percent growth 10 New Job Ads Suggest Less Weakness In Job Growth Ahead 5 0-5 -10 Employment -15 New ads NOTES: Job ad data are a statistically optimized weighted moving averages, shifted forward two months.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Outlook Percent Change 30 U.S. and TX Leading Indexes Improve. 20 10 0-10 -20-30 U.S. LEI TX LEI -40 Note: data are annualized three-month percent changes. SOURCE: Conference Board. Seasonal and other adjustments by the DallasFed.
Looking Ahead
Looking Ahead Houston Running Out of Steam as grim outlook for Upstream persists / spills into other industries. Forecast: Dec-2015 to Dec-2016 Houston Job Growth: 0 to -1% in 2016 & 2017 Texas Job Growth: 0.5 to 1.5% in 2016
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The Houston Economy Jesse Thompson Regional Business Economist The Federal Reserve Bank of Dallas, Houston Branch May 2016 Image from http://peoplesguidetohouston.wordpress.com/category/uncategorized/
Oil and Gas Jobs Percent 25 Change 15 5 Selected Mining-Related Jobs 57,333 Core Oil-&-Gas- Related Jobs Lost Since Dec-2014-5 -15-25 Support activities for mining -35-45 Extraction Agriculture, construction & mining machinery Note: data are three-month annualized percent changes. Less than Half of Energy- Related Losses From Mining Directly. 2014 2015 2016