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Health Care, Construction, Other Sectors to Drive Houston Job Growth in 2020

Published Dec 06, 2019 by A.J. Mistretta

Patrick Jankowski

Buoyed by gains in health care, construction and other key sectors, the Houston area is expected to gain more than 42,000 new jobs in the coming year. That’s according to the Greater Houston Partnership’s 2020 Employment Forecast released this week at the organization’s Houston Region Economic Outlook. The half-day event featured several industry leaders and economists who discussed what they’re seeing in the regional, national and global economies. 

The Partnership expects the health care, government, accommodation and food services, and construction sectors to drive job growth in Houston in 2020. Losses are likely in the energy, retail trade and information sectors.

"As Houston prepares to enter the 2020s, the region needs a new set of growth engines," said Patrick Jankowski, the Partnership’s Senior Vice president of Research. "Perhaps they will emerge from the Texas Medical Center, the Innovation Corridor or Houston's Energy Corridor. Until those new engines emerge, Houston's growth will depend heavily on the U.S. and global economies. Fortunately, both should perform reasonably well next year."

Jankowski said the 42,300 jobs the region is expected to gain in 2020 is more modest than the job gains made this year. While most sectors will see moderate employment increases, Jankowski points to a downturn that’s already begun in the energy industry that will stymie the broader jobs picture. Investment in the oil and gas sector is drying up, resulting in fewer wells being drilled, a drop in the rig count and a decline in new equipment orders. That picture, coupled with an over-saturated local real estate market, is similar to what Houston experienced coming out of the oil bust of the 1980s. “We’re not having a repeat of the ‘80s but it’s going to seem a lot more like that as we move through this period,” Jankowski said. 

In a keynote presentation looking at the broader landscape, Helen Currie, Chief Economist with energy giant ConocoPhillips, characterized the global economy as relatively healthy. “Based on recent downward revisions, we now project 3.1% global growth for this year,” Currie said. “We believe 2020 will be a better year economically than 2019, but keep in mind 2019 has still been pretty good.”

Though global manufacturing has been down along with consumer confidence, Currie said she expects government stimulus policies around the world will boost growth and steer economies back to trend in 2020. 

Jankowski said that despite the near-term concerns for Houston, he’s bullish on the region’s long-term health. “In Houston, history has always been on the side of the optimist, and that’s a safe bet.” 

Click here to see the full report, including additional jobs figures by industry. For a look back at the economy in 2019 by industry, click here for the Houston Economic Highlights report. And sign up to stay informed about new Partnership research. 

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Houston Economy to Face Major Job Losses, Recession from Coronavirus and Oil Plunge

4/1/20
Houston is likely to see significant job losses and a prolonged drain on its economy from the COVID-19 coronavirus.   That was one of the major takeaways from a virtual presentation by Patrick Jankowski, Partnership Senior Vice President of Research, on March 31. Jankowski discussed his latest analysis of COVID-19, collapsing oil prices, the imminent U.S. recession, and their impact on Houston’s economy.  Jankowski stressed that because of the unprecedented and ongoing nature of the situation, predicting the economic impact is difficult at this time. “With the situation changing daily, we can’t really get a good read on what’s actually going on yet,” he said.  Jankowski referenced the next Bureau of Labor Statistics’ jobs report, which will be based on the number of employees on payroll during the second week of March and won’t include the waves of layoffs that happened during the third and fourth weeks of March. It won’t be until the April report is released in early May when we will see the real impact on the job market. Pandemic will determine recession’s length and severity  “We are coming off a period of 113 consecutive months of job growth, the longest expansion in US history and a phenomenal jobs report,” Jankowski said. “Last week we saw 3.3 million claims for unemployment benefits, and I believe that number will only rise as more people are laid off, the system becomes less overloaded and people figure out how to apply for benefits.”  Given the single week of job losses based on the initial claims for unemployment insurance in Texas and Houston’s share of Texas’ jobs, Jankowski estimates mid-March losses in the region will be around 37,945 jobs.  Jankowski noted that measures to combat the coronavirus are also combating the economy. He referenced the U.S. GDP forecasts from major financial institutions that estimate a decline in GDP for the first quarter of the year that continues through the rest of the year.   “From my perspective - yes, we are in a recession and the situation will worsen in Q2,” Jankowski said. “We hope to have some growth in Q3, but we will end of the year worse off than at the beginning.”  Add that to the drop in oil prices and the Texas Railroad Commission being asked to regulate crude oil production for this first time since the 1970s, Jankowski believes the crude collapse will only add to Houston’s misery.  Small businesses and other industries hurt the worst  Jankowski mentioned the Partnership’s survey of its small business members and found that 29% were unable to deliver goods or services, 59% are operating below half capacity and the most concerning, that 41% can survive only 1 to 4 weeks.  He also highlighted industry sectors that are most at risk during this initial period and the 777,000 jobs tied to those sectors. The sectors include those impacted by social distancing (like retail), those whose services can’t be delivered remotely (such as plumbers and other home services), those that aren’t considered essential (such as the arts), and most small businesses (that tend to operate on thin margins).   “If this virus continues after May, every job is at risk, every sector is at risk,” Jankowski stressed.  “And even if you are working from home and able to provide services to some degree, you may be affected. We will see additional layoffs to what we’ve already experienced.”  Houston predicted to lose at least 150,000 jobs  There are two ways to predict how Houston will fare – looking at models based on assumption or based on history.   The Institute for Regional Forecasting shows 18 different scenarios of how the virus and oil prices will play out, with the most likely scenario from their prediction showing Houston down by 44,000 jobs. On the other hand, The Perryman Group’s model is forecasting 256,000 jobs lost.   “These are two very different forecasts and you’re really seeing that uncertainty play out in these models,” Jankowski said.   By referencing the history of recessions Houston has experienced, Jankowski estimates Houston’s jobs loss will hover between 150,000 jobs and 350,000 jobs.   “Given how Houston fairs when oil is faring badly and then when the US economy not doing well, we are likely to look like between 2008-09 recession and oil bust we had in the 1980s,” Jankowski said.   With a job loss of 13.2% from 1982, that amounts to about 417,450 jobs today. Using the Great Recession benchmark of 4.5%, that loss is closer to 142,325 jobs.  Collapsing oil prices on par with 1982 energy bust  With the tensions between Saudi Arabia and Russia spilling onto the world stage and affecting the price of crude, Houston has already felt the effects.   On March 30 of this year, the price of oil closed at $21.07 a barrel. During that same month in 1982, the price was $10.25 but adjusted for inflation, it closed at $24.37 a barrel.   “We can expect crude to slowly climb back into the low $30s by mid-summer without a Russia-Saudi deal,” Jankowski said. “We’ll see any jobs we regained from the 2014 fracking bust disappear and a leaner, smaller industry in the next two years with more consolidations and bankruptcies taking place.”  Houston in one word – resilient  One of the biggest determining factors in an economic rebound will be the level of fear people still have around the virus, Jankowski said. Even on the downward slope people will practice at least a degree of social distancing. He reiterated the damaging shock to consumer confidence the virus has caused.   “The economy really won’t be able to recover until people feel comfortable spending again. However, if there’s one word I would use to describe Houston, it would be resilient,” Jankowski said. “We've been through five downturns since the 1980s and yet the economy is larger now and more diverse than ever before.” 
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