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Economy at a Glance - Oct 2020

In this edition we offer insight into the U.S. recovery and an update on Houston.
Published on 10/12/20

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.

U.S. Recovery

The U.S. economy continues to recover but the pace is slow and uneven. Some sectors have recovered over half of the jobs lost in the initial downturn; others have barely made a dent. Mining, which includes oil and gas, continues to contract.

The same holds true for workers. While employment has rebounded to near pre-COVID-19 levels for high-wage, high-skill workers, they remain significantly lower for low-wage, low-skill workers. As of late July, employment rates for workers in the bottom wage quartile were down 11.1 percent. Rates for the middle age quartile were down 5.0 percent, and the top quartiles, 1.3 percent, according to Harvard University’s Opportunity Insights Tracker.

Employers added 661,000 jobs in September. That’s well above the 200,000 per month average of the past 10 years. But job gains have begun to taper off, a worrisome sign that the recovery may stall. The nation remains 10.7 million jobs short of its pre-COVID level. In a recent Wall Street Journal survey, more than half the economists polled said they didn’t expect the labor market to claw back the jobs lost until ’23 or later. That’s slower than economists forecasted six months ago.

Initial claims for unemployment insurance (UI) remain stubbornly high, a sign that layoffs persist. In September, UI claims averaged 867,000 per week, an improvement from the August average of 1.0 million but still well above the darkest days of the Great Recession.  

Five months into the recovery, the layoffs many hoped would be temporary are now appearing to be permanent. The number of long-term unemployed (those jobless for 27 weeks or more) increased by 781,000 to 2.4 million in September. That’s almost double the 1.3 million long-term unemployed in September of last year. 

To read the rest of this section, please download the full report. 

Houston Update

Metro Houston added 5,300 jobs in August, according to the Texas Workforce Commission. In a booming economy, Houston might add 10,000 to 15,000 jobs in August. In a weak economy, between 3,000 and 5,000. Like the U.S. recovery, Houston’s recovery remains uneven and appears to be slowing.

Employment in the finance and insurance sector is higher now than prior to the pandemic. Record home sales, the surge in mortgage refinancing, and banks being inundated with Payroll Protection Plan applications has helped drive job growth.
Administrative and support services has benefited from the need to clean workplaces more frequently and sanitize them afterwards. The hiring of temporary workers during the early stages of reopening has also created new jobs.

Unable to spend on “experiences,” (i.e., movies, travel, performing arts,) consumers are spending more on “things,” (i.e., home improvements, furnishings). National data shows that sales of furniture, building materials, sports equipment, outdoor gear and groceries were up in August of this year compared to August of last year. Governor Greg Abbott’s Executive Order allowing stores, malls and shops to reopen at 75 percent of their pre-COVID capacity has helped support retail’s recovery.

Professional, scientific and technical services includes accounting, engineering, IT consulting, law, marketing and public relations. Much of this work can performed remotely, so job losses were minimal during the pandemic. This may be the next sector to return to pre-COVID employment levels.  

Governor Abbott’s orders reopening the Texas economy, plus consumers growing more comfortable dining out, has helped restaurants recoup over half the jobs lost in the March-April shutdown. This sector should see additional gains as a recent order by Governor Abbot allows bars to reopen at 50 percent of capacity, pending approval of the judges for the county in which they operate. However, the gains are likely to be minor as several Houston-area judges have delayed or decided to withhold their approval.

Health care and social assistance reported healthy job gains in May, June and July but saw losses in August. It’s unclear what caused the reversal. A possible explanation could be additional daycare closures, a subsector of social services.  
The other services sector includes personal care (barber-shops, hair salons, nail salons), repair services (vehicles, appliances) and religious organizations. The sector has also benefited from Governor Abbott’s orders allowing shops and salons to reopen.

Arts, entertainment and recreation recouped jobs early in the summer but began to shed them as vacation season ended, summer camps shut down, and families shifted their focus from outdoor activities to school.

Leasing activity has been either flat or down across all sectors of commercial real estate. A drop in both construction starts and oil and gas exploration has reduced the need for heavy equipment rentals. As a result, the sector struggles to recoup jobs lost early in the pandemic.

Accommodations (i.e., hotel/motels) continues to suffer from the lack of business travel. An uptick in leisure/weekend travel has not been enough to offset that loss. Employment will remain well below pre-COVID levels until corporate travel resumes.

Educational services, which includes private education, tutoring and testing services, received a boost to employment from school re-openings. Job growth should pick up as the academic year progresses.

Though single- and multi-family construction continues at a brisk pace, public works and heavy industrial projects has waned. Projects booked prior to the pandemic have kept many firms busy. As they work off their backlogs, additional layoffs are likely.

The transportation and warehousing sector has yet to benefit from the reopening of the economy.  Layoffs in aviation will continue if Congress can’t reach an agreement on additional assistance for the industry. Improving container traffic at the ports of Houston will offset only a fraction of aviation’s losses.

Without an increase in oil exploration or associated manufacturing activity, wholesale trade and the jobs it supports will be slow to recover.  

Job losses in the government sector added 300 jobs in August. This small gain would have been a significant loss if not for the hiring of temporary employees to assist with the 2020 Census. These jobs will disappear over the next three months. However, the pending loss will be more than offset by an increase in public education jobs as school districts and colleges ramp up for the fall semester.

Nearly all the losses in manufacturing can be attributed to the downturn in oil and gas. Low oil prices, weak demand, and the collapse in drilling activity has forced the energy industry to restructure. The sector has lost 15,300 jobs, one in every five, since the beginning of the pandemic. Those losses are likely to continue.
 

To read the rest of this section, please download the full report. 

Key August Takeaways

Here are the facts to know about the Houston region this month
1
October Takeaway #1
U.S. employers added 661,000 jobs in September. That’s well above the 200,000 per month average of the past 10 years. But job gains have begun to taper off, a worrisome sign that the recovery may stall. The nation remains 10.7 million jobs short of its pre-COVID level.
2
October Takeaway #2
Metro Houston added 5,300 jobs in August, according to the Texas Workforce Commission. In a booming economy, Houston might add 10,000 to 15,000 jobs in August. In a weak economy, between 3,000 and 5,000. Like the U.S. recovery, Houston’s recovery remains uneven and appears to be slowing.
3
October Takeaway #3
Houston’s recovery will be closely linked to the U.S. recovery. As the nation’s health improves, so will Houston’s. The nation has endured three recessions over the past 30 years (’90-’91, ’01-’02 and ’08-’09). With each succeeding recession, the job losses have sunk deeper and the recovery taken longer than the previous.

Want to learn more? Contact our Research Team:

Patrick Jankowski, CERP
Senior Vice President, Research
713-844-3616
Heath Duran
Manager, Research
713-844-3654

Previous Issues of Economy at a Glance

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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