This month’s edition of the Greater Houston Partnership's Houston: The Economy at a Glance provides an in-depth analysis of how recent shifts in the energy industry, global trade and the U.S. economy affect Houston's economy now and in the short-term. We also present forecasts of the likelihood of an upcoming recession and global growth rates.
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.
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Three engines drive Houston’s growth: oil exploration, foreign trade and the U.S. economy. The region receives help from population gains, but that’s tied to job growth. Large construction projects, like the recent petrochem boom, assist as well. But for the most part, Houston relies on the big three—energy, trade and the U.S. economy.
Lately, energy hasn’t contributed much to Houston’s growth.
The U.S. and global economies must remain healthy for Houston to continue growing. But those engines are sputtering as well. The World Bank, the International Monetary Fund (IMF), and the Organisation for Economic Co-operation and Development (OECD) all forecast slower growth this year.
The U.S.-China trade war shoulders much of the blame for the global slowdown. Tariffs and other barriers have made imports more expensive, disrupted supply chains, and cast uncertainty over hiring and investment decisions.
The trade war isn’t the only factor slowing growth, however. Most of the world’s largest economies face other challenges as well. For example:
In summary, 18 of the world’s 20 largest economies are forecast to have slower growth in ’19 than the year before.
Global Impact on Houston
The global slowdown is being felt locally. Year-to-date, exports are down to 10 of Houston’s top 20 destinations: Canada, Chile, China, Italy, Mexico, Peru, Saudi Arabia, Singapore, U.A.E and Venezuela. Shipments to Mexico, Houston’s #1 trading partner, have slipped $1.3 billion, or 14.1 percent. Exports to China, Houston’s #2 trading partner, are off $3.1 billion, or 54.5 percent. If not for substantial increases in trade with Brazil, India, Netherlands and South Korea, exports would have fallen below last year’s pace. That’s already happened with imports, primarily due to reduced trade with China, Iraq, Mexico and South Korea.
Houston is more vulnerable to a global slowdown now than before. An oft-cited study by The Brookings Institution found that the share of Houston’s gross domestic product (GDP) tied to exports nearly doubled from 8.9 percent in ’03 to 17.3 percent in ’17. That same study found that more than 330,000 local jobs are tied to exports. Houston led the nation in exports in ’19, with more than $120 billion shipped abroad. Houston’s closest competitor, New York, shipped only $99.2 billion. And the Partnership’s 2019 Global Houston report identified more than 7,000 Houston-area companies selling abroad.
The National Association for Business Economics (NABE) recently asked its members about the timing of the next recession. The majority of respondents expect a U.S. recession within the next two years.
The latest data seem to support their pessimism. The U.S. created only 130,000 jobs in August. Job growth has averaged 158,000 per month thus far this year, below the average monthly gain of 223,000 in ’18. Industrial production, which includes the output of all U.S. mines, factories and utilities, has fallen 1.4 percent since December. Business investment appears to have peaked in Q1/19, slipping 1.6 percent in Q2/19.
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.