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Economy at a Glance

December edition: In-depth analysis of the Partnership's 2020 employment forecast
Published on 12/9/19
Economy at a Glance - December '19

This month’s edition of the Greater Houston Partnership's Houston: The Economy at a Glance provides an in-depth analysis of the Partnership's '20 employment forecast.

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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The Partnership’s forecast calls for the region to create 42,300 jobs in ’20.  Growth in ’20 in Houston will occur outside of energy, especially in sectors tied to population growth, the U.S. economy, and global trade. 

•    Health care, government, accommodation and food services, construction and administrative support services will turn in the strongest performances.
•    Professional scientific and technical services and transportation and warehousing will see moderate gains.
•    Other services, education services, finance and insurance real estate and arts, entertainment and recreation will log marginal growth. 
•    Manufacturing and wholesale trade will be flat to slightly up.
•    Energy, retail and information will contract.

Fortunately, both the U.S. and global economies should perform reasonably well next year.

U.S. Outlook

The U.S. economy continues to expand, albeit at a moderate pace. The U.S. Bureau of Economic Analysis reports U.S. gross domestic product (GDP) grew 2.1 percent in Q3/19. For the 12 months ending Q3, the U.S. grew 2.0 percent, adjusted for inflation. While somewhat off the pace of the past five years, it’s above what many economists expected. The rate also falls near the long-term average for the economy.

U.S. employers added 128,000 jobs in October, the most recent month for which data are available. Job growth would have been stronger if not for the United Automobile Workers (UAW) strike against General Motors. The labor action idled an estimated 42,000 employees. Those layoffs were temporary. Add those jobs to the initial report and the U.S. likely created 170,000 jobs in October, falling within the long-term average.

With unemployment at 3.6 percent, the U.S. labor market is the tightest it’s been in 50 years. The tight labor market has finally begun to affect wages and consumer optimism. The U.S. Bureau of Labor Statistics reports that the average hourly wage was 3.0 percent higher in October ’19 than a year prior. That’s affected consumer behavior. 

Total purchases in September were up 3.9 percent compared to September ’18. And in a July Gallup Poll, 53 percent of respondents described economic conditions as "excellent" or "good." Only 12 percent described U.S. economic conditions as “poor.” This optimism is important, considering consumers account for about two-thirds of all economic activity in the U.S.

One area of concern is business investment, up only 0.2 percent in October, well off the pace of 5.9 percent in October two years ago. Uncertainty over U.S. trade policy has forced many businesses to dial back or postpone investment decisions.

The outlook for U.S. manufacturing remains cloudy as well. The U.S. Purchasing Managers Index (PMI) for manufacturing registered 48.3 in October. Readings above 50 signal expansion in U.S. manufacturing; below 50, contraction. The services PMI, however, registered 54.7 in October. The difference is important considering that services contributes six times as much to GDP as does manufacturing.

Global Outlook

The outlook for global growth looks better today than it did a year ago. The Organisation for Economic Co-operation and Development (OECD) expects the global economy to grow 3.0 percent in ’20, marginally above the 2.9 percent this year, and decidedly not the crash many economists predicted earlier this year. Of the 20 largest economies, which account for nearly 80 percent of global economic activity, none will slip into recession in ’20. Twelve of these will see an uptick in growth. Lost in the discussion in recent months is that, with ’17 and ’18 being particularly good years for global growth, any movement back to the long-term trend would appear as a slowdown. But in an $80 trillion global economy, growth of just 3.0 percent translates to an additional $2.4 trillion in economic activity next year.

Continue reading this month's Economy at a Glance for more in-depth analysis of the Partnership's '20 employment forecast. 


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