Houston Economic Update September 2010

A publication of the Greater Houston Partnership Volume 19, Number 9

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September 2010

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Employment Continues to Recover —

Employment is perhaps the most watchedof all economic indicators. Everyone knows what it means to have a job, and in thepast year and a half, many have come to know what it means to lose one. It’s lessclear what is meant by indicators like interest rate spreads; nondefense capitalgoods; or the M2 money supply. But it is obvious what it means when your neigh-bor, your brother or you are out of work.Clearly, the employment data has its problems. It fluctuates because of seasonalfactors. Retailers, ramping up for the holiday shopping season, add sales staff inNovember; and as sales wind down, they let workers go in January. School pay-rolls rise in the fall as educators return to campus, but drop in June with the sum-mer vacations.The Texas Workforce Commission (TWC) and the Houston branch of the FederalReserve Bank of Dallas attempt to factor out these seasonal fluctuations. By doingso, they hope to determine a true picture of what’s happening in the labor markets.Here are their “seasonally adjusted” employment numbers for the recent recessionin Houston-Sugar Land-Baytown Metro Area:

EMPLOYMENT

DATA

UNADJUSTED

ADJUSTED

BY

TWC

ADJUSTED

BY

THE

FED

Peak

Employment

Month

December

’08

August

’08

August

’08

Peak

Employment

2,632,300

2,619,200

2,622,100

Trough

Month

January

’10

January

’10

January

’10

Trough

Employment

2,479,500

2,503,300

2,512,000

Jobs

Lost

in

Recession

152,800

115,900

110,100

July

’10

Employment

2,511,100

2,520,400

2,541,100

Jobs

Added

Since

Trough

31,600

17,100

29,100

Percent

Recouped

20.7%

14.8%

26.4%

Average

Monthly

Job

Gains

5,267

2,850

4,850

Looking at either adjusted or unadjusted data, it appears that the region stoppedlosing jobs in January of this year, and has been adding jobs, albeit slowly, sincethen. Six months into the recovery, Houston has replaced one-seventh to one-fourth of the jobs it lost, depending upon which adjusted numbers you use. Based

HOUSTON—THE ECONOMY AT A GLANCE

on rate of job creation over the past half year, Houston could recover all the jobslost in the recession in another 18 to 36 months. Please note, this is a “back of theenvelope” calculation, and full recovery could occur sooner or later, depending onsuch factors as the lifting of the drilling moratorium, the imposition of carbon capand trade regulations, extension of the Bush era tax cuts, the performance of thestock market, improvements in the commercial real estate market, and budget aus-terity in Austin and Washington.Traditionally, GHP has monitored the number of jobs Houston has gained or lostover a 12-month period. That has been our way of handling the seasonality of thedata. The Texas Workforce Commission reports that the 12-month job loss in theHouston metro fell to 9,700 jobs, or 0.4 percent, from July ’09 to July ’10. That isa considerable improvement over the 80,800 job loss (3.1 percent), reported for the12 months ending July ’09. During the recession, the worst period was for the 12months ending November ’09, when the region shed 103,800 jobs. Over the pastsix months, the 12-month job losses have declined consistently; and if the trendcontinues, Houston’s 12-month job change should turn positive in the next monthor two.TWC and the Fed calculate seasonal adjustments only for total employment.Looking back at the unadjusted estimates of employment by industry during therecession, a few trends stand out.

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Since August ’08, when private sector employment began to decline, the oiland gas industry has added 3,200 jobs. The oilfield services sector has added jobs every month since April ’10. To date, the offshore drilling moratoriumisn’t showing up in the employment numbers.

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Employment in health care and social assistance has continued to grow, add-ing 18,200 jobs during the recession. Though recent health care legislationmay complicate the delivery and payment for services, it won’t stifle theneed for health care. Two demographic trends, an aging population and arapidly growing population, will continue to fuel the demand for health careworkers in Houston.

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Houston’s manufacturing sector is slowly recovering. Employment peakedat 245,100 jobs in December ’08, declined for 14 consecutive months, and istrending up, adding 4,000 jobs since the first of the year. The 12-month jobloss has declined from 27,000 in January ’10 to 1,100 in July ’10.To summarize, the job market shows some signs of recovery, but it still has quite away to go before reaching the previous peak.

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Houston to Lead in Population Growth —

The Houston–Sugar Land–BaytownMetro Area will lead the state in population growth, adding 3.53 million residents,

HOUSTON—THE ECONOMY AT A GLANCE

between ’09 and ’35, according to a forecast recently released by The PerrymanGroup. That reflects a 1.84 percent annual growth rate. Dallas-Plano ranks secondin projected population growth, adding 2.61 million residents during the sameperiod, a 1.84 percent compound annual growth rate, and Austin ranks third, add-ing 500,072 residents, a 2.65 percent compound annual growth rate.Perryman also forecasts that Houston will add an additional 1.325 million jobs andaccount for almost one-fourth of Texas job growth during that time frame. Thatreflects a 1.57 percent annual growth rate.Real gross product, the final value of all goods and services produced in Houstonadjusted for inflation, will grow from $284.5 billion in ’09 to $747.3 billion in2035. That reflects a 3.78 percent compound annual growth rate. The forecast is in2000 constant dollars.“The long-term forecast for the state is positive and a return to steady, healthygrowth is anticipated,” the report states.

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International Passenger Travel Increases

— The Houston Airport Systemserved 4.74 million passengers in July ’10, bringing its 12-month total to 49.0 mil-lion passengers. This is 6.7 percent less than the record 52.3 million passengersserved during the 12 months ending July ’08.Although most passengers are traveling domestically, the majority of growth oc-curred in international travel. The first seven months of the year saw a 4.4 percentincrease in international passengers, while domestic travel only rose 0.1 percent.The greatest rise in passenger volume occurred in travel to Canada (22.4 percent),Europe (12.4 percent) and the Middle East (11.6 percent increase). Dubai-basedEmirates recently announced plans to add a second daily nonstop flight fromHouston Intercontinental to the U.A.E. to handle growing demand for service tothe Middle East.“So far this year, each and every month has produced an increase in the number of international passengers,” said Director, Air Service Development, Genaro Peña.“The additional passengers and new nonstop flights have combined to create verypositive momentum for HAS in 2010.”Air freight volumes also continue to grow. HAS handled 76.7 million pounds of airfreight in July ’10, up 16.7 percent from July ’09. Year-to-date, HAS handled507.8 million pounds of air freight, up 17.6 percent compared to the same sevenmonths last year.

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International Trade Posts Gains —

Through the first six months of ’10, theHouston-Galveston Customs District handled $100.9 billion in trade, up 31.6percent from $76.7 billion the first six months of ’09. Exports totaled $44.4 billion,