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Economy at a Glance - April 2021

In this edition we explore the improving pandemic recovery and the expansion of Houston's tech workforce
Published on 4/14/21

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. Below is an excerpt from the report.

THINGS ARE LOOKING UP

It’s been a year since the COVID-19 virus struck the U.S., sending the nation into quarantine and precipitating one of the deepest recessions on record.

Real gross domestic product (GDP) fell 33.1 percent. Employers laid off 22.4 million workers. And at one point, nearly 33 million hourly, salaried, gig and self-employed workers filed for unemployment benefits.

Since then, the U.S. has made a remarkable recovery. Real GDP grew 33.4 percent in Q3/20 and 4.3 percent in Q4/20. When the Bureau of Economic Analysis (BEA) releases GDP estimates for Q1/21 later this month, the bureau’s likely to report GDP has already returned to pre-pandemic levels.

The U.S. will enjoy robust growth this year and well into next. In its April ’21 survey of prominent U.S. economists, The Wall Street Journal found that over half the respondents expect U.S. GDP growth of 6.3 percent or better this year. By comparison, U.S. GDP growth has averaged 2.5 percent per year over the last three decades. According to the Journal survey, growth will average 3.2 percent in ’22 before settling down to 2.4 percent in ’23. 

Job growth will be healthy, but it will take longer for the nation to reach pre-pandemic employment levels. Since April of last year, the nation has added over 14.0 million jobs, about two-thirds (62.4 percent) of the recession losses. In the same Journal survey, roughly half the respondents expect growth to average 500,000 jobs or less over the next 12 months. Only a handful expect growth to exceed 700,000 jobs per month, the pace needed for the U.S. to recoup all the recession losses by this time next year. Several outlier forecasts pull the average up to 546,000 jobs per month. If growth does indeed occur at that pace, by this time next year the U.S. will still fall 1.9 million jobs short of where it stood prior to the pandemic. 

The National Association for Business Economics (NABE) surveyed its members around the same time the Journal conducted its survey. NABE’s outlook is a bit tamer, with GDP growth averaging 4.8 percent this year. Fifty-nine percent of the respondents in the NABE survey don’t expect U.S employment to reach pre-pandemic employment levels until ’23 or later. 

The nation has made progress in reducing the number of hourly, salaried, gig and self-employed workers claiming unemployment benefits. During the first week of April, 18.1 million Americans filed claims, down 45 percent from the peak in July of last year. Filings are still abnormally high, however. In February ’20, the month prior to the pandemic, claims averaged 2.1 million each week.

The economy is improving because more people are getting vaccinated, states are lifting stay-at-home restrictions, consumers are more comfortable with shopping and dining out, people are traveling more outside the home, and the three federal stimulus plans passed by Congress in the past 12 months have injected trillions into the economy. 
 

  • The New York Times reports that as of April 10, at least 35 percent of the U.S. population has received one COVID shot and 21 percent are fully vaccinated. For Texas, the percentages are 32 and 19, respectively.
  • The Times also reports that as of early April no states had stay-at-home orders in place, only six states had restrictions on how businesses may operate, and 20 states had fully lifted their mask mandates.
  • Data from OpenTable, the online reservations plat-form, shows that during the first week of April restaurant reservations were down only 20 percent, com-pared to 40 percent in January and 100 percent the same week last year. 
  • The U.S. Department of Homeland Security screened a total of 14.5 million airline passengers the first 10 days of April ’21, a considerable jump from the 1.1 million screened over the same period in April last year. This April still reflects a 37.5 percent drop in passenger volume from April two years ago.
  • The three stimulus packages passed by Congress in the wake of the pandemic—the Coronavirus Aid, Relief, and Economic Security Act, the Consolidated Appropriations Act, and the American Rescue Plan Act—total $5.0 trillion in new spending. To put that in perspective, the U.S. spent a little more than $4.0 trillion on World War II. 

All this bodes well for Houston, which needs a robust U.S. recovery to drive the local recovery. As of February ’21 (the most current data available), Houston had recouped only 128,400 of the 361,100 jobs lost in the pandemic. That’s 35.2 percent compared to 62.4 percent for the nation.

February was a particularly weak month for the region. Houston created only 6,900 jobs, well below the 20-year average of 21,100 jobs for the month. Houston’s poor performance was due to the winter freeze, which caused massive power outages, forced businesses to close, and kept consumers at home.  The outages also impeded the Texas Workforce Commission’s ability to gather the data needed to produce its monthly employment reports.  Other indicators, like the Houston Purchasing Managers Index (see page 4) and sales tax collections, indicate Houston’s recovery is a bit stronger than the employment data suggests.  

But rising headwinds may slow the U.S. recovery. A U.S. Census Bureau survey conducted in March found that 4.2 million adults are unemployed and have stopped looking for work because they fear contracting the virus. That may explain why companies are finding it difficult to fill open positions. In March, 42 percent of small business owners reported they had job openings they could not fill, according to a recent survey by the National Federation of Independent Businesses. That’s 20 points higher than the 48-year historical average of 22 percent. And in NABE’s January survey, 28 percent of respondents reported difficulty finding skilled workers. The U.S. labor market won’t fully heal until the virus is tamed.

Past issues of Glance have stressed that Houston’s recovery will be prolonged. If Houston can grow at the same pace as projected for the U.S. in the Journal survey, the region would create 135,000 jobs over the next 12 months. That would still leave Houston 100,000 jobs shy of its pre-pandemic levels.  And the region must deal with a struggling energy industry, an overbuilt commercial real estate market, slower population growth, and a weak recovery overseas. 
 

  • In its most recent survey of energy companies active in the southwestern U.S., the Federal Reserve Bank of Dallas found 60 percent of firms expect employment to be flat or decrease slightly this year.
  • Absorption of industrial space continues to soften, re-tail space has turned slightly negative, and office space significantly negative through the first three months of this year, according to NAI Partners Houston.
  • Houston failed to make the United Van Lines list of the top 25 destinations for relocations in ’20. 

These and other factors will weigh on Houston’s growth over the next 12 months. The bottom line is that full employment recovery for Houston is two to three years away. 

 

HOUSTON’S TECH WORKFORCE EXPANDS

Houston’s digital tech workforce grew last year, nudging the metro up to 11th place, ahead of Philadelphia but behind Atlanta in the rankings of the nation’s major tech centers. That’s according to Cyberstates 2021, the Computing Technology Industry Association’s (CompTIA) annual assessment of the U.S. tech sector. 

The region added 8,100 tech workers in ’20, according to CompTIA’s estimates, bringing the total to 243,900.  Houston overtook Detroit, which lost tech workers last year. 

Cyberstates 2021 found that Houston had 9,286 tech establishments in ’20, up from 8,798 in ’19. Tech employment accounted for 7.5 percent of Houston’s total jobs in ’20, up from 7.2 percent in ’19. Tech occupation job postings totaled 63,324 in ’20, down 19.4 percent from ’19.

According to Cyberstates, Houston’s tech sector contributed $29.2 billion to the region’s gross domestic product (GDP) in ’19, 5.6 percent of the total. That’s up from $28.4 billion in ’18. By comparison, tech contributed $37.9 billion to Austin’s economy, 25.3 percent of its GDP, while Dallas’s tech sector contributed $66.7 billion, 13.1 percent of GDP. 

Cyberstates, which provides data for the U.S., all 50 states, and 46 major metro areas, is a respected and widely cited annual guide to the U.S. tech sector. The guide looks at all sectors involved in making, creating, enabling, integrating, and supporting technology in a region, whether as a product or service. One of the guide’s greatest strengths is that it examines a region’s tech workforce by occupation as well as industry, even when the occupation is in an industry most don’t consider “tech.” This helps level the playing field. For example, a web developer at Chevron would make the tech workforce tally for Cyberstates even though Chevron is not typically recognized as a tech company. 

Fewer than a quarter of Houston’s net tech workers are in technical occupations at “tech” companies. That’s the lowest share of any Top 20 metro and it helps to explain why Houston isn’t a more visible tech hub. But it doesn’t mean the region lacks talent. 

The report underscores just how much tech talent is embedded in non-tech industries in Houston. Most of Houston’s 155,400 tech occupations (engineers, coders, analysts) work outside the tech sector. Among large metros, Houston has the highest share of technical occupations embedded in non-tech sector companies.  

Data in the Cyberstates report makes obvious the differences in the tech sectors of Texas top three metros. Dallas’s tech industry is weighted toward IT services, telecommunications and internet services, no surprise considering Dallas is home to AT&T. Austin’s tech industry has a strong presence in Tech Manufacturing, a nod to its chip manufacturing sector and computer makers like Dell and Apple. Houston’s tech sector is weighted toward research and development, testing and engineering services. Houston has more tech workers in R&D and engineering (68,782) than Austin and Dallas combined. 

Note: The geographic area referred to in this publication as “Houston,” "Houston Area” and “Metro Houston” is the nine-county Census designated metropolitan statistical area of Houston-The Woodlands-Sugar Land, TX. The nine counties are: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller.

To continue reading, please download the full report. 

Key April Takeaways

Here are the facts to know about the Houston region this month
1
April Takeaway #1
The U.S. has made a remarkable recovery. Real GDP grew 33.4 percent in Q3/20 and 4.3 percent in Q4/20. When the Bureau of Economic Analysis (BEA) releases GDP estimates for Q1/21 later this month, the bureau’s likely to report GDP has already returned to pre-pandemic levels.
2
April Takeaway #2
If Houston can grow at the same pace as projected for the U.S. in the Journal survey, the region would create 135,000 jobs over the next 12 months. That would still leave Houston 100,000 jobs shy of its pre-pandemic levels.
3
April Takeaway #3
Houston’s digital tech workforce grew last year, nudging the metro up to 11th place, ahead of Philadelphia but behind Atlanta in the rankings of the nation’s major tech centers. The region added 8,100 tech workers in ’20, according to CompTIA’s estimates, bringing the total to 243,900.

Want to learn more? Contact our Research Team:

Patrick Jankowski, CERP
Senior Vice President, Research
713-844-3616
Elizabeth Balderrama
Manager, Research
713-844-3614

Previous Issues of Economy at a Glance

MAR
2021
Pandemic Employment Data
Read Report
FEB
2021
Coronavirus Impact and 2021 Outlook
Read Report
JAN
2021
Racial Demographics and Population Shifts
Read Report
NOV
2020
U.S. Recovery, 2021 Outlook
Read Report
OCT
2020
U.S. Recovery, Houston Update
Read Report
SEP
2020
COVID-19 Impact on Economy
Read Report
AUG
2020
Energy Change Over Time
Read Report
JUL
2020
COVID-19 Update, Houston Unemployment
Read Report
JUN
2020
COVID-19 Update, Affected Sectors, Energy
Read Report
MAY
2020
U.S. & Texas Outlook, GDP
Read Report
APR
2020
COVID-19 Update, PMI, Industry Outlook
Read Report
MAR
2020
Economic Impact, Global Outlook, Recession Probability
Read Report
FEB
2020
U.S.-China Trade Deal, USMCA
Read Report
JAN
2020
Houston GDP, Energy, Jobs
Read Report
DEC
2019
Sector by Sector Forecast for 2020
Read Report
NOV
2019
Houston Region Demographic Update 2
Read Report
OCT
2019
Houston Region Demographic Update 1
Read Report
SEP
2019
Houston's Growth Engines
Read Report
AUG
2019
PMI, Commercial Real Estate & Housing
Read Report

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