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Economy at a Glance

Mid-Year Economic Update, Tariffs, Venture Capital, and Houston's Future
Published on 8/14/19
Economy at a Glance - August '19

Houston: The Economy at a Glance is a free monthly publication, which offers the latest data along with expert commentary on the Houston region’s economy.

This month’s edition of the Greater Houston Partnership's Houston: The Economy at a Glance provides a mid-year economic update, discusses the impact of recent tariffs, looks at the rise of venture capital, and provides the most recent projections related to Houston's economic and demographic future.

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ECONOMIC UPDATE

Metro Houston created 44,400 jobs in the first six months of ’19, according to the Texas Workforce Commission (TWC). That puts Houston on track to gain 80,000 to 90,000 jobs this year.

But TWC has a history of overestimating gains, often by wide margins. The agency initially reported Houston created 108,300 jobs in ’18, only to later revise that figure to 73,300 jobs. TWC struggles to capture losses as well. The agency initially reported a gain of 23,200 jobs in ’15, the first year of the fracking bust, only to revise that to a loss of 2,500.

The agency is likely missing the mark again this year. A host of data suggest much slower growth. The Partnership estimates June year-to-date (YTD) jobs numbers are off by 10,000 to 15,000 jobs. If the Partnership’s estimates prove accurate, the region is on track to create 65,000 to 75,000 jobs in ’19, a figure more in line with our forecast of 71,000 for the year. 

Purchasing Managers Index

The Houston Purchasing Managers Index (PMI) offers the best evidence that Houston’s growth is slower than the job numbers suggest. Readings above 50 signal expansion, below 50 contraction. The PMI peaked at 64.0 in March and has trended down since. June’s reading of 51.2 and July’s of 51.4 were the lowest since fall ’17 when Hurricane Harvey inundated the region.

Energy

The recovery in oil and gas remains shaky and the sector may actually be contracting. Consider:

  • The North American rig count has fallen from 1,075 the first week of January to 934 the second week of August.
  • The price of West Texas Intermediate peaked at $76.40 in early October ’18 and has slipped to $54.63 the first week of August. 
  • The Texas Railroad Commission has issued 7,166 drilling permits through July of this year, 1,166 fewer than this time last year. 
  • The International Energy Agency has lowered its global oil demand growth forecast to 1.1 million barrels per day in ’19 from 1.4 million, its initial forecast this year.

Trade

After enjoying double-digit growth for the past two years, trade via the Houston-Galveston Customs District has slipped to low, single-digit growth. Factor in 1.6 percent inflation over the past 12 months and the value of Houston’s trade is essentially flat.

Houston Trade YTD June 19

Commercial Real Estate

Houston’s office market has seen positive absorption in only five of the last 12 quarters, according to NAI Partners.  The market has more than 60 million square feet of vacant or soon-to-be-vacant space. That’s a vacancy rate of 25.9 percent. In a healthier market, the rate would be in the low- to mid-teens. 

The industrial market is overbuilt as well, but few brokers admit it. Tenants absorbed only 4.2 million of the 8.9 million square feet of industrial space delivered so far this year, according to NAI. The vacancy rate (empty space plus soon-to-be empty) has jumped from 8.0 percent in Q2/18 to 10.3 percent in Q2/19.  Of the 19.2 million square feet of space to be delivered in ’19 and the 13.5 million in ’20, only 27.5 percent is preleased, according to Cushman & Wakefield.

 

Continue reading this month's Economy at a Glance for more on the mid-year economic update, tariffs, venture capital invested in the region, and projections related to Houston's future. 

Economy
Executive Partners