The Houston Economy Jesse Thompson Regional Business Economist The Federal Reserve Bank of Dallas, Houston Branch January 2017 Image from http://peoplesguidetohouston.wordpress.com/category/uncategorized/
Employment Index, Dec-2014=100 104 103 2015: Houston Plateaus 2016: Houston Loses 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 Growth Rate 10 1.4% growth in 2H:2016. Houston returns to expansion in August? 1 5 0-5 In April 2015, Houston began to broadly contract.? -10-15 U.S. Recessions (NBER) Houston Recessions Houston Employment 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 NOTE: Houston recession dates based on Houston Business Cycle Index. Data is quarterly; Q3:2016 is an estimate. SOURCE: NBER, BLS, and the Dallas Fed. 0
Employment Total Trade, transp & utilities (21%) rofessional & business svc (16%) Government (13%) Education & health services (13%) Leisure & hospitality (11%) Manufacturing (7%) Construction (7%) Financial activities (5%) Other services (3%) Mining & logging (3%) -6.7 Sept. to Dec. Dec.15 to Dec.16-5.6-5.9 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. -4.3-3.5-2.7-2.9-0.7 0.2 0.2 0.1 1.0 0.9 0.6 1.9 2.2 2.9 2.8 3.3 3.4 3.1 3.5
Real Retail Sales & Wages Billions of 2016:Q1 dollars 49 Real Wages Paid in Houston Fall in Q1 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 71,000 Jobs lost. 290 280 270 65 260 50 Crude oil price 250 35 20 ~61K Houston Core Oil-&-Gas-Related Jobs Lost Since Dec-2014 2014 2015 2016 2017 NOTE: Rig count and crude production seasonally adjusted. Rig count and nominal oil price indexed to June 2014. U.S. rig count 240 230 220
Oil and Gas Jobs Percent Change 25 Selected Mining-Related Job Growth 15 5-5 -15-25 -35-45 Fabricated metals Architectural, engineering & related Total Extraction Support activities for mining Agriculture, construction & mining machinery Note: data are three-month annualized percent changes. 2014 2015 2016
Inventories 50 45 Distillate fuel Crude (ex SPR) Gasoline Days of inventory tick up, crude and distillate down since last FOMC. Last FOMC 40 35 30 25 20 2014 2015 2016 Note: dashed lines are seasonally adjusted. Numbers are for week ending november 25th. SOURCE: EIA
Survey: Need WTI~$50 to drill Sept. WTI: $45
Oil & Gas Extraction Rigs Gas Basins Inch Up Rigs Permian Drives Recovery Rigs 100 90 80 70 60 50 40 30 20 10 Marcellus Utica Haynesville 0 20160506W 20160603W May 20160701W 20160729W 20160826W 20160923W Sept. 20161021W 20161118W 20161216W Jan. 100 Eagle Ford 280 90 Williston 260 80 Permian 240 70 220 60 200 50 40 180 30 160 20 140 10 120 0 100 20160506W 20160603W May 20160701W 20160729W 20160826W 20160923W Sept. 20161021W 20161118W 20161216W Jan. SOURCE: Baker Hughes
Refining & Petrochemicals
Oil/Gas Ratio 8 7 6 5 4 3 2 1 Refining & Petrochemicals Downstream advantage eroding? Brent Spread WTI/HH Dollar Spread 30 25 20 15 10 5 0-5 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-10
Refining 2009$ per barrel deviation from Mean. 25 20 15 10 5 0-5 -10-15 Higher-cost Producer Measures of Margins at or Near Historical Mean. Global Boom in Demand Local Cost Advantage Normal? Muse, Stancil & Co. East Coast Margins Muse, Stancil, and Co. Gulf Coast Margins WTI Crack NOTE: Q3:2015 estimated. Crack spread based on WTI 1-month futures excl refining and transportation costs. Data adjusted to real using CPI and seasonally adjusted. SOURCE: EIA. WSJ. BLS. Pace Consulting, Muse Stancil and Co.
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
Manufacturing Upstream Manufacturing Finding Balance, Machinery Still Struggling Through Several Headwinds 4.9 1.2 0.8 1.5 0.3-1.2-3.1-2.5 May to August December to August -11.7-9.7-6.2-7.8-14.9-15.1 Total nondurable goods (37%) Chemicals (17%) Petroleum & coal (5%) Total durable goods (64%) NOTES: Data show the annualized and seasonally adjusted Percent change.. Sorted from largest to smallest industry. Fabricated metal products (22%) Machinery (20%) Computers & electronic products (7%)
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 7 Job growth slowing. 6.6 6 5 Sept. to Dec. Dec.15 to Dec.16 Average since 2000 4 3 3.0 3.3 2 2.1 2.3 1.4 2.3 1 0 Total Ambulatory health (47%) Hospitals (27%) Other health (26%) 0.5 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* 5 Construction Employment Falls. September to December December to December Average since 2000 0 0.4 0.5-2.7-2.0-1.1-1.0-1.8-5 -5.6-7.6 10 Total construction Construction of buildings Heavy & civil construction -9.6 Specialty trades Real estate & leasing NOTE: Real estate and leasing is not a subsector of construction.
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 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 *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
Outlook
Outlook Percent change Houston Purchasing Managers Index and Employment Growth 10 8 6 4 2 0 Index value 70 65 60 55 50-2 45-4 -6-8 U.S. recessions Houston employment HPMI 40 35-10 30 1996 1998 2000 2002 2004 2006 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. 2008 2010 2012 2014 2016
Outlook Percent growth 10 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, tepid 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 Houston Running Out of Steam as grim outlook for Upstream persists / spills into other industries. Forecast: Dec-2015 to Dec-2016 Houston Job Growth*: 0.2% in 2016 0 to -1% in 2017 Texas Job Growth: 1.5-2.5% in 2017
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The Houston Economy Jesse Thompson Regional Business Economist The Federal Reserve Bank of Dallas, Houston Branch January 2017 Image from http://peoplesguidetohouston.wordpress.com/category/uncategorized/