HOUSTON EMPLOYMENT FORECAST - 2019 December 2018 - Greater Houston Partnership
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2019
HOUSTON
EMPLOYMENT
FORECAST
Greater Houston Partnership Research | December 2018 December 2018
Publication Underwritten by:
This forecast was prepared by Patrick Jankowski with assistance from Elizabeth Balderrama, Roel Gabe Martinez, Bo Nie, Josh Pherigo, Skip Kasdorf,
Nadia Valliani and Melissa Verhoef. This publication was designed by Marc Keosayian and Suzanne Morgan.
Cover image: Bryan Malloch
INTRODUCTION METRO HOUSTON FORECAST, JOB GAINS
December ’18 - December ’19
Health Care | 9,000
The Greater Houston Partnership
forecasts the nine-county metro
Houston area will create 71,000 jobs Construction | 8,900
in ’19. Employment will grow in all
sectors, with health care, construction Administrative Support and Waste Management | 7,600
and administrative services turning in
the strongest performances. Energy
Professional, Scientific, and Technical Services | 7,200
will continue to recover. Manufactur-
ing output will grow. Construction
activity will pick up. Retail will benefit Manufacturing | 6,300
from population growth. Profes-
sional services will find new clients Restaurants | 6,000
throughout the region. And health
care will recapture its crown as the
region’s leading job generator. The Retail | 5,600
year should end with 3.2 million
payroll jobs, a net increase of more Government | 5,100
than 600,000 over the past 10 years.
Only New York, Los Angeles and
Transportation, Warehousing, Utilities | 2,600
Dallas have created more jobs over
the same period.
Wholesale | 2,400
WHERE ARE Oil and Gas | 1,900
WE NOW? Other Services | 1,800
Houston has emerged from one of Real Estate and Rental and Leasing | 1,800
the worst energy downturns of the
past 35 years. Oil prices fell by 75 Educational Services | 1,500
percent, the rig count by 80 percent
and exploration budgets by 62 Finance and Insurance | 1,400
percent. One in every four energy
jobs in Houston was lost.
Arts and Entertainment | 1,000
In previous downturns, a collapse in
energy prices would have devastated Hotels | 700
the entire economy. This time, Hous-
ton held up quite well. Job losses
in energy were offset by job gains Information | 200
elsewhere. Maybe the jobs didn’t pay
as well as the ones lost, but they did Source: Greater Houston Partnership
offer opportunities for employment.
Home sales plateaued but never options for filling it. The Federal What does all this tell us? Oil is still
plummeted. Weaker demand helped Deposit Insurance Corporation didn’t important, but it no longer determines
slow the escalation of home values step in to take over any insolvent Houston’s fate. We survived the
that had priced many would-be Houston banks, unlike the ’80s, when downturn with minimal damage to the
buyers out of the market during all the city’s largest banks failed. overall economy because Houston’s
the energy boom. The plunge in oil And the local unemployment rate ties to the U.S. and global economies
prices didn’t precipitate a collapse rose above the national rate, but it are as strong as its ties to the oil
in commercial real estate. However, never reached the levels of the Great and gas industry.
some office building owners found Recession and stayed well below the
themselves with too much empty peak experienced during the ’80s.
space on their hands and few good
1
Greater Houston Partnership Research | December 2018
THE ASSUMPTIONS
All forecasts are based on assump- • Fluctuations in the U.S. stock • People continue to move here
tions―some reasonable, others market are short-lived and share from other cities, counties, states
outlandish. The Partnership’s outlook values continue to rise. and countries.
is based on the following realis- • The appreciation of the dollar • And the region avoids another
tic assumptions: against other major currencies has natural disaster like Hurricanes
• Real U.S. gross domestic product a negligible impact on trade. Harvey or Ike.
(GDP), the broadest measure of • Houston exporters subject to If a single assumption proves wrong,
the nation’s economic activity, tariffs levied in the trade war the Partnership’s forecast would
grows 2.7 percent or better in ’19. find alternate markets for their still hold. If two prove wrong, the
• U.S. job creation averages products. forecast would need to be tweaked.
200,000 per month, sustaining But if three or more prove wrong,
• Political turmoil in Washington has
domestic demand for products the entire forecast would need to
minimal influence on business or
and services from Houston. be revisited. The greatest risks to
consumer confidence.
• The price of West Texas Intermedi- Houston in ’19 are from plummeting
• Any tax law changes or environ-
ate (WTI), the U.S. benchmark for oil prices, interest rates that rise too
mental or business regulations
light sweet crude, averages $55 quickly, a U.S. trade war that expands
that emanate from Washington
per barrel or better over the year. beyond China, or a collapse of the
have minimal repercussions on
U.S. stock market that pulls business
• Any rise in interest rates has a the industries that drive Houston’s
and consumer confidence down with
minimal impact on construction or economy.
it. Those events are possible, but not
capital investments.
probable, in ’19.
A FINAL NOTE
The purpose of this forecast isn’t to A clearer understanding of the trends surrounding oil prices, global trade
score a bull’s-eye, though the Part- driving growth or decline should help and politics in Washington, the more
nership would be pleased if it did. the business community make better insight, the better. Now the details
Rather, the purpose is to highlight the investment, staffing and purchase behind the numbers.
forces shaping Houston’s economy. decisions. Given the uncertainty
METRO HOUSTON JOB GROWTH, December to December, (000s)
118.8 116.7
107.0
91.1 90.7 90.0
83.1 85.4
71.0
59.7 62.9
49.8
39.3
21.6
1.3
-1.7 -2.5 -2.2
-11.6
-110.6
YTD
’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18* ’19**
Sources: Texas Workforce Commission and Greater Houston Partnership *October YTD ** Partnership forecast
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Greater Houston Partnership Research | December 2018
in November are discussing an oil well and still make a profit with oil at
glut. Concerns that sanctions against $52 per barrel.
Iran will create supply shortages
have evaporated. Russia and Saudi Another period of low oil prices is
Arabia, who six months ago agreed unlikely to lead to significant layoffs.
to boost output, now hope OPEC After three years of job cuts, staff-
will agree to production cuts at its ing levels are thin. There’s already
December meeting. a worker shortage in the industry,
ENERGY And the U.S. keeps on drilling. The
especially in the field. Firms worried
about losing their crews or losing
U.S. rig count has inched up 34 rigs their leases will continue to drill wells.
Oil is in the black again. In Q3/18, the from early September to mid-No-
vember. The U.S. Energy Information Minor job cuts will still occur in ’19, but
combined profits of the 25 largest
Administration (EIA) forecasts the these will be in response to compa-
exploration, oil field service, and
U.S. will produce 1.2 million more nies selling assets or making strategic
equipment manufacturing firms
barrels per day in ’19 than it did in ’18. decisions to exit certain plays. The
exceeded $28.5 billion. Granted, the
Though WTI traded in the mid-$50s layoffs will be offset by hiring else-
earnings of ExxonMobil, Chevron,
in November, EIA expects crude to where, especially in oil field services,
Shell, Halliburton, Schlumberger
average $65 a barrel in ’19. And a equipment manufacturing and digital
and BP inflate the total, but even
recent survey by the Federal Reserve analysis. Hiring will more than offset
the majority of smaller firms are
Bank of Dallas found that most firms job losses. On net, the Partnership’s
profitable again.
in the Eleventh District can drill a forecast calls for the energy industry
The downturn cost Houston 86,400 to add 1,900 jobs in ’19.
high-paying energy jobs. Since the
recovery began, about 24,400 jobs
have been recouped, that’s less than
ENERGY OVERVIEW
a third of the region’s losses. More
than 160 exploration, oil field service Peak Trough Most Recent
and midstream companies in Texas
filed for bankruptcy during the down- U.S. Rig Count 1,931 404 1,081
turn. Three years of layoffs, cost-cut-
ting and restructuring has made Oil Prices (WTI, $/bbl) $107.95 $26.19 $59.93
those which survived leaner, more U.S. Exploration Budgets
productive and more cost-conscious. (Billions) $231.80 $88.20 $132.50
That’s a good thing since the indys- Houston Energy
300,100 213,700 237,700
try’s outlook changes rather quickly. Employment
In less than six weeks, the price of
Sources: Baker Hughes, U.S. Energy Information Administration, Oil & Gas Journal,
domestic crude has fallen by $20 per Texas Workforce Commission
barrel. Analysts that in September
spoke of the markets finally balancing
OFFICE
Depending upon which report one when job losses and energy bank-
reads, in Q3/18 Houston recorded ruptcies peaked.
either its first positive or least nega-
tive absorption in nearly four years. The office market, however, has a
The timing of the reports fits the long way to go before it recovers.
historic pattern for the region. Office Brokerage reports place the amount
activity tends to lag behind the rest of of vacant space at 50 to 60 million
CONSTRUCTION the economy by two years going into square feet. That’s equivalent to
a recession and two years coming 1,300 acres of office space, which
out. For Houston, the bottom of the would be a decent size ranch in most
most recent downturn was mid-’16, Texas counties.
3
Greater Houston Partnership Research | December 2018The office vacancy rate currently OFFICE SPACE UNDER CONSTRUCTION
stands in the low 20s. A healthier Million Square Feet
rate would be in the mid-teens. In
a normal year, the market absorbs 20.0
2 to 4 million square feet of space,
suggesting that Houston needs four
to five years of healthy absorption to
12.6
bring the direct vacancy rate down to
a less concerning level. 10.2
The good news is that builders have 5.5
stopped building, at least in the 3.4
office market. As of Q3/18, less than 2.6 2.1 2.4 2.9
three million square feet was under
construction, much of it preleased.
Q3/10 Q3/11 Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18
And CoStar projects less than 2.0
million square feet will be built in ’19 Source: Transwestern
and again in ’20.
INDUSTRIAL
The industrial market (warehouse, More than 11 million square feet of HOUSTON INDUSTRIAL
distribution and manufacturing) has space is currently under construction
fared much better. Developers have and will be delivered in the next six
SPACE DELIVERED
Million Square Feet
delivered 53 million square feet of to 12 months. That volume equates
space since over the past five years to about two percent of existing Year Peak
yet the current vacancy rate stands inventory. Only a third is preleased,
at 5.1 percent. The needs of e-com- however. The speed at which the ’14 8.5
merce, Houston’s growing population speculative space is leased will signal
and activity at the Port of Houston whether the market is overbuilt or ’15 13.3
continue to drive industrial demand. warrants more warehouses and distri-
bution centers. ’16 13.8
’17 8.8
RETAIL
The onslaught of e-commerce square feet is under construction, UC** 11.2
hasn’t dampened demand for retail of which 75 percent is preleased.
space. The vacancy rate was 5.4 Given projected population, income Total 53.164
percent in Q3/18 compared to 6.3 and job growth, developers should Source: CoStar
percent in Q3/13, and that’s after face no difficulty leasing space now
** Under Construction as of Q3/18
developers have added 28.2 million under construction or any that breaks
square feet of space to the market ground next year.
over the period. Another 4.7 million
MULTI-FAMILY
Conventional wisdom holds that developers build Class A apartments, The market signals are somewhat
the apartment market shifts from typically those in the best loca- muddled because of Hurricane
tenant-favorable to landlord-favor- tions with a high level of amenities. Harvey. Thousands of Houstonians
able whenever occupancy tops 90 Class A occupancy stood at 87.8 with flood-damaged homes moved
percent. Landlords can then raise percent in October ’18, well above into apartments immediately after the
rents without losing tenants and the May ’16 nadir of 76.5 percent storm, boosting occupancy and lifting
developers can break ground on new but below the inflection point for a rents. Many in the real estate commu-
projects, confident they will lease up landlord-favorable market. Class A nity took this as a sign the market
quickly once completed. rents have trended up since late-’17, needs more apartments. But the
but flattened in mid-’18 and even Harvey effect is fading. Leases signed
With a few exceptions, most Houston slipped a bit since. immediately after the storm are now
4
Greater Houston Partnership Research | December 2018expiring. Some renters are renewing packing during the holiday season. A 21,300 added in ’16 and the 20,300
while others are moving back home. clearer picture of the market should added in ’15, the height of the build-
Complicating matters, absorption emerge after the first of the year. ing boom. If the Partnership’s jobs
always turns negative in the fourth forecast proves accurate, the market
quarter. Families are reluctant to The good news is that apartment could absorb another 12,000 units
relocate once the school year begins. construction remains subdued. in ’19 without negatively affecting
Others want to avoid the chaos of Developers are on pace to add rents or occupancy.
8,200 units in ’18, well below the
SINGLY-FAMILY
New home construction also has held difficult for some families to qualify ton are for homes priced between
up well. As of Q3/18, Houston was for a mortgage, local builders have $200,000 and $400,000. Popula-
second in the nation in housing starts, become resourceful at controlling tion and job growth next year will
behind Dallas-Fort Worth. Though costs and maintaining affordability. support an increase in single-family
rising interest rates will make it more Seventy percent of all starts in Hous- starts in ’19.
PROJECTS TO WATCH
A number of large projects are in the • Construction could begin in late • And in the four elections held
works that could boost construction ’19 on the first phase of the $15-bil- since November ’17, local vot-
activity in ’19 and ’20: lion bullet train between Houston ers approved $8.7 billion in
and Dallas. city, county and school district
• Germany-based Convestro plans
construction bonds. This figure
to start construction in ’19 on a • Houston City Council recently
includes the $2.5 billion Harris
$1.7 billion methylene diphenyl approved $1.23 billion for improve-
County voters approved in August
diisocyanate plant in Baytown. ments to Mickey Leland Inter-
’18 for flood control.
national Terminal, the Federal
• LyondellBasel recently broke
Inspection Services building and Other than the office and multifam-
ground on a $2.4 billion propylene
other facilities at Bush Interconti- ily sectors, construction activity is
oxide and tertiary butyl alcohol
nental Airport. holding steady or picking up. Hiring
plant in Channelview.
should benefit. The forecast calls for
• McNair Interests plans to break
the sector to add 8,900 jobs in ‘19.
ground next year on a $500-mil-
lion, high-end mixed-use develop-
ment in the Uptown/Galleria area.
commercial clients. Wholesale falls jobs in ’15 and ’16. Nondurables fared
into two categories, durables (goods much better, with job growth essen-
typically lasting three or more years) tially flat in ’15 and showing marginal
and non-durables (goods easily growth in ’16.
consumed or that become compo-
nents of another good). As noted earlier, the outlook for
energy is improving. For manufac-
WHOLESALE In Houston, wholesalers’ fortunes
tend to follow one of two paths—they
turing it’s the brightest it’s been in
years. That growth should spill over
TRADE track manufacturing, which tends to
track the oil and gas industry, or they
into durables wholesale trade. Strong
employment and population growth
follow retail sales, which tend to track should lift nondurables as well. The
Wholesalers are the classic middle- population, income and job growth. forecast calls for wholesale trade to
men, buying in bulk from manufactur- add 2,400 jobs in ’19.
ers, consolidating their purchases into The recent downturn in the oil and
warehouses, then reselling in smaller gas industry was hard on durables
quantities to retail, industrial and goods wholesalers, the sector losing
5
Greater Houston Partnership Research | December 2018reached during the fracking boom. Asian nation. The dollar continues
In October ’18, the typical manufac- to strengthen, making U.S. goods
turing worker logged a 44.9-hour more expensive to foreign buyers.
week, up from 41.3 hours in March And two-thirds of the respondents
’16, the bottom of the downturn. And to a recent manufacturing survey by
the May ’17 issue of Site Selection the Federal Reserve Bank of Dallas
rated Houston the top global metro reported difficulty in hiring workers.
MANUFACTURING for metals, machinery and equip-
ment, and chemicals and plastics The forecast sees continued growth
manufacturing. Evidently, others have in manufacturing tied to upstream
read the report. Since the begin- energy, but at a slower pace than in
The outlook for manufacturing is the
ning of the year, 60 manufacturing ’18. Shipments of chemicals, plas-
brightest it’s been in years. The surge
concerns have announced plans to tics and refined products should
in exploration activity is driving the
locate, expand or consolidate opera- expand as plants constructed during
demand for oil field equipment. The
tions in Houston. the building boom find markets for
recent $60-billion expansion of the
their products overseas. And the
region’s chemical industry has led to
On the downside, growth in the U.S. strong U.S. economy should spur
increased exports of plastics, resins
rig count may have peaked. Orders further demand for goods “Made
and refined products. The region
for new pumps, pipes and engines in Houston.” The forecast calls for
created 11,400 manufacturing jobs
may slow as a result. The ongoing the manufacturing sector to add
in the first 10 months of ’18, but it’s
U.S.-China trade dispute will eventu- 6,300 jobs in ’19.
still 30,000 jobs short of the peak
ally impact Houston’s exports to the
METRO HOUSTON MANUFACTURING EMPLOYMENT
Q2/’18
Machinery and Metals
44% 99,450 Jobs
26% Chemicals, Refining, Plastics
58,960 Jobs
Computers and Electronics
8% 18,970 Jobs
Food and Beverages
7% 15,610 Jobs
Printing and Paper
3% 6,510 Jobs
Cement and Concrete Product Manufacturing
2% 4,760 Jobs
Transportation Equipment
2% 5,100 Jobs
1% Furniture and Appliances
2,650 Jobs
Wood Products
2% 3,160 Jobs
Medical Equipment and Supplies Manufacturing
1% 1,920 Jobs
Textiles and Apparel
1% 2,110 Jobs
Miscellanous Manufacturing
3% 6,700 Jobs
Source: Texas Workforce Commission
6
Greater Houston Partnership Research | December 2018METRO HOUSTON TRANSPORTATION JOBS*
Sector Jobs % of Sector
TRANSPORTATION,
Freight Forwarding, Cargo Handling 30,322 24.5
WAREHOUSING
Trucking 25,876 20.9
AND UTILITIES
Air Transportation 19,631 15.9
Warehousing 17,481 14.1
The jobs in this sector come in all
Pipelines 11,259 9.1
modes—air, water, trucking, rail, pipe-
line, couriers, bus, freight forwarding Couriers 11,207 9.1
and stevedoring. Each has a different
economic driver: Water Transportation 3,993 3.2
• AIR: business and leisure travel
Buses and Taxis 3,945 3.2
• WATER: international trade, fuels
and chemicals production Total 123,714 100.0
• TRUCKING: manufacturing,
*As of June ’18
wholesaling and port traffic
Source: Texas Workforce Commission
• PIPELINES: oil and gas
production
• WAREHOUSING: manufacturing HOUSTON-GALVESTON CUSTOMS DISTRICT TRAFFIC
and wholesaling September YTD, Millions of Metric Tons
• SUPPORT SERVICES: all the 215.6
aforementioned
• UTILITIES: commercial and resi-
dential construction
With the improvement of Houston’s 198.2
196.3
economy, business and leisure travel
has picked up. The Houston Airport
System will likely set a record for 189.4
187.4
passenger traffic in ’18. Trade via the 184.7
region’s four ports continues to grow.
Through September, overall tonnage 180.2
is up 9.9 percent compared to last
173.9
year. Midstream companies can’t
build pipelines fast enough to bring
crude from the Permian Basin to the
refineries and export terminals on
the Texas Gulf Coast. And the region
continues to add new homes and
commercial buildings that will require
service from the local utilities. The
forecast assumes these trends will
continue and calls for this industry ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18
group to add 2,600 jobs in ’19. Source: WISERTrade
7
Greater Houston Partnership Research | December 2018METRO HOUSTON MEDIAN HOUSEHOLD INCOME
$63,802
$62,580 $62,552
$61,768
RETAIL $59,827
$59,597
$60,248
The fundamentals that drive
retail—jobs, population, income,
home construction, access to ’11 ’12 ’13 ’14 ’15 ’16 ’17
credit and consumer confidence— Source: U.S. Census Bureau
all favor Houston.
INCOME: After several years of stag- CONSUMER CONFIDENCE: Data
JOBS: After two years of stagnation, nation, average household income from the Federal Housing Finance
job growth returned to Houston in rose in ’17, and total salaries paid to Agency show home values in Hous-
late ’17. Employment is forecasted to workers in the Houston area in Q2/18 ton have risen 15.1 percent over the
grow above trend through the end of were up $2.2 billion, or 5.0 percent, past three years. Not withstanding
’18 and likely through ’19, and―barring from Q2/17. They’re still down from the recent drops, the Dow Jones
a collapse in oil prices or a national the historic peak, however. Industrial Average is up nearly 65
downturn―into ’20 as well. percent from five years ago. As a
HOME CONSTRUCTION: Develop- result, Houstonians should have
POPULATION: Metro Houston ers will build more houses in ’19 than
added nearly 950,000 residents more in their IRAs, 401(k)s and mutual
they did in ’18. As the adage goes, funds, and their homes are likely
between April 1, 2010 and July 1, 2017. “Retail follows rooftops.” New home
Roughly 55 percent of the growth worth more now than at the begin-
construction will draw retailers to ning of the decade. Consumers who
came from natural increase (births Houston’s suburbs.
minus deaths) and 45 percent from feel they are financially better off are
net migration (people moving here likely to spend more.
ACCESS TO CREDIT: According
minus those moving out). Various to Equifax, the share of the region’s All factors that support retail growth
forecasts suggest the region will add population with subprime credit align in Houston’s favor. The fore-
600,000 to 700,000 residents over scores continues to decline, suggest- cast calls for the sector to add
the next five years. ing local consumers are finding it 5,600 jobs in ’19.
easier to finance their purchases.
M ETRO HOUSTON POPULATION
Population Change from Prior Year Annual Growth Rate
’11 6,057,947 110,528 1.9%
’12 6,183,726 125,779 2.1%
’13 6,329,553 145,827 2.4%
’14 6,496,862 167,309 2.6%
’15 6,664,187 167,325 2.6%
’16 6,798,010 133,823 2.0%
’17 6,892,427 94,417 1.4%
Source: U.S. Census Bureau
8
Greater Houston Partnership Research | December 2018in the city. Corpus Christi-based
American Bank and Kansas City-
METRO HOUSTON
based Commerce Bank plan to enter BANK OVERVIEW
the Houston market, but each will Deposits
open a single branch. Most out-of- Year Branches
$ Billions
town banks are entering the market
by acquiring an existing Houston
’08 1,545 109.3
bank. Six such deals have been
FINANCE AND announced over the past 12 months. ’09 1,542 118.2
INSURANCE Meanwhile, JPMorgan Chase plans to
close its fraud protection and work-
’10 1,558 137.1
force management units in Houston ’11 1,534 154
Finance and insurance includes eliminating 102 jobs. And Wells Fargo
commercial banks, credit unions, has announced plans to cut head- ’12 1,530 179.1
insurance brokers, insurance carriers, count nationwide by 10 percent over
investment advisors, mortgage bank- the next three years. More cuts will ’13 1,526 208
ers and security brokerages. come as the industry reassesses the
role branches and staff play in a world ’14 1,514 242.5
Employment growth has been flat where most customers handle their
in recent years as banks close banking on mobile phones. ’15 1,492 215.2
branches, replace tellers with ATMs
and devote more resources to On the finance and insurance side, ’16 1,483 219.2
online banking. Houston now has Houston’s population continues to
125 fewer branches (an 8.1 percent grow, expanding the potential pool of ’17 1,450 240.9
drop) than it did 10 years ago. Bank auto, home, life and health insurance
deposits, however, are up $136.3 customers, and the need for addi- ’18 1,420 245.6
billion (a 124.7 percent increase) over tional agents, claims processors and *As of June 30 th each year.
the same period. managers to service those accounts. Source: Federal Deposit Insurance
Though banking will likely cut jobs in Corporation
A handful of institutions have expan- ’18, insurance will add enough jobs to
sion plans in the works. Frost Bank offset those losses. The forecast calls
will build 25 new financial centers for the sector to gain 1,400 jobs in ’19.
in Houston over the next two years,
nearly doubling its current presence
Real estate and rental and leas- ments to the market. Home sales will
ing includes the sale, leasing and remain strong in ’19. Consumer rent-
management of real property als have grown with the population.
(single-family homes, apartments, Heavy equipment rentals saw a boost
office buildings, warehouses) plus from post-Harvey cleanup, but that
the rental of vehicles, appliances, activity has wound down.
furniture, construction and industrial
equipment. All depend on growth of ’19 should be a year when real estate
REAL ESTATE AND the broader economy. sales activity picks up and equip-
ment leasing benefits from strong
RENTAL AND Leasing of office space has begun to construction activity. The subsector
LEASING
pick up. The industrial market is the should finish the year with a net gain
strongest of all commercial sectors. of 1,800 jobs.
Developers continue to add apart-
9
Greater Houston Partnership Research | December 2018• Lower reimbursements by the to visit the doctor, the clinic and the
federal government for patients hospital more frequently.
treated under Medicare and
Medicaid; With Democrats now controlling
the U.S. House of Representatives,
• Consumers, facing higher deduct- Congress is unlikely to repeal the
ibles, who become more selective Affordable Care Act. The ACA has
about when and how they seek substantially increased the number
HEALTH CARE AND treatment; and of Houstonians with health care
SOCIAL SERVICES
• Competition from health care pro- insurance. But with Republicans
viders outside traditional settings. controlling the senior leadership
positions in Austin, Texas is unlikely
Twenty years ago, most patients to expand Medicaid coverage. Texas
Several health care providers—CHI received their care in a doctor’s office is one of only 14 states not to do so.
St. Luke’s, Memorial Hermann Health or hospital. Now, patients might visit As a result, Texas still has the larg-
System, University of Texas MD a clinic inside a pharmacy, an urgent est population without insurance
Anderson, Bay Area Medical Center, care facility in a shopping center or coverage in the U.S. The resistance
East Houston Medical Center, Kindred seek diagnosis and a prescription via to expanding Medicaid will continue
Hospital—announced layoffs in ’17 teleconference over the internet. to place a strain on hospital budgets
and the sector lost jobs for the first
and local property tax payers.
time in Houston’s history. Though While the industry is under constant
the loss was small, only 1,400 jobs, pressure to control costs, its patient The forecast assumes population and
it was a loss nonetheless and a load continues to expand. The region job growth will continue, U.S. and
shock for a sector that added 10,000 records 100,000 births each year. state legislators make no significant
or more jobs each of the previous Each baby begins a cycle of check- changes to the ACA, Medicare and
three years. The loss challenged the ups, vaccinations and treatments Medicaid programs, and there won’t
widely held belief that health care in for typical childhood illnesses. The be mass layoffs at area hospitals. The
Houston will grow ad infinitum and region adds population every year sector should create 9,000 jobs in ’19.
cushion the region against downturns through net migration. Each arrival
in other sectors. will eventually need to find a doctor,
dentist or preferred clinic in their new
Health care faces a number of hometown. And Houston’s over-
ongoing challenges: 65 population expands by 30,000
• Pressure from insurance compa- residents each year. As seniors deal
nies to control costs; with the maladies of aging, they tend
The sector includes employment can be attributed to the long-term
services (contract workers), services trend of firms outsourcing as many
to buildings (janitors and maids), non-core operations as possible
investigation and security services and relying on contract workers for
(guards and watchmen), administra- functions once performed by perma-
tive and business support services nent full-time employees. This is true
ADMINISTRATIVE
(back office operations), and waste for both blue-collar and white-col-
collection and treatment (garbage lar occupations.
SUPPORT AND collection and disposal).
As Houston’s economy continues
WASTE
From the bottom of Great Reces- to improve, firms will hire additional
sion (January ’10) until September contract workers to handle increasing
MANAGEMENT ’18 (the most recent data available
at this writing), the sector added
demand, outsourcing will expand and
firms will sign new contracts to main-
AND REMEDIATION 75,900 jobs, a 50.0 percent increase.
Only the restaurant sector added
tain their landscaping and protect
their properties. The forecast calls for
SERVICES more―79,300 jobs, a 44.1 percent
increase. Much of the sector’s growth
the sector to create 7,600 jobs in ’19.
10
Greater Houston Partnership Research | December 2018smorgasbord of activities—amuse- With the exception of the major
ment parks, arcades, botanical institutions, like the Houston Texans,
gardens, bowling centers, fitness the Museum of Fine Arts, Houston
and sports centers, golf courses and or 24-Hour Fitness, most firms in the
country clubs, marinas, museums, sector are modest enterprises with
musical groups, parks, racetracks, small staffs. Additions to payroll come
spectator sports, theaters and zoos. one or two employees at a time.
ARTS,
Significant growth occurs only when
Employment in the sector is highly a new museum or amusement park
seasonal, peaking in the summer
ENTERTAINMENT, months when children are out of
enters the market. The Partnership
doesn’t anticipate any major events
RECREATION
school, families are on vacation and of this nature in ’19. Growth will be
Houstonians are spending more organic and based on the same
time outdoors. The start of the arts factors influencing retail growth—
The sector might be more appro- season offsets some of the losses income, population and employment.
priately named “Culture, Play and in outdoor activities in the fall, and The forecast calls for the sector to
Fitness,” or “Things Houstonians Do the sector almost always ends up add 1,000 jobs in ’19.
in Their Spare Time.” It includes a with net job gains.
sound recording; radio and television it is, tends to occur in years in which
broadcasting; telecommunications; Houston is already experiencing
data processing; news services and strong gains elsewhere in the econ-
internet publishing. The sector has omy. The forecast assumes Houston’s
lost jobs in 12 out of the last 20 years robust economic health causes this
and overall employment is substan- downward trend to pause, the sector
INFORMATION tial lower than it was two decades adding 200 jobs by year’s end.
ago. Social media has reduced the
roles of print and broadcast media
The information sector includes and technology continues to replace
newspaper, magazine and book labor in telecommunications. Still,
publishers; software publishers; the sector does occasionally add
motion picture and video production; employment. Job growth, meager as
The sector includes private elemen- of public education, workers seek-
tary, middle and high schools; private ing to upgrade skills to pursue new
junior and senior colleges and univer- careers or hang on to the ones they
sities; for-profit business, vocational have, and aggressive marketing by
and technical training programs; and private universities. The forecast
education support services. assumes all these factors remain in
EDUCATIONAL A number of factors drive enrollment:
place in ’19 and calls for the sector to
create 1,500 jobs.
SERVICES a growing school age population,
parents’ concerns about the quality
11
Greater Houston Partnership Research | December 2018tific, technical services,” category, the growth provides opportunities for
catchall for any service that doesn’t firms throughout the sector. Over
fit in the categories neatly outlined the past 20 years, the sector has
above. This is one sector, however, added on average 4,700 jobs a year,
where the Partnership believes job substantially more in boom years,
growth has been overstated and will significantly less in lean times. Job
be revised downward in March. growth throughout Houston should
PROFESSIONAL, The forecast assumes that U.S.
be better than average next year. The
forecast calls for professional, scien-
SCIENTIFIC AND economic growth remains strong,
that the energy industry continues
tific and technical services to create
TECHNICAL
7,200 jobs in ’19.
to improve, and that local economic
SERVICES METRO HOUSTON PROFESSIONAL, SCIENTIFIC AND
TECHNICAL SERVICES*
Identified with white-collar jobs and
Firms
billable hours, professional, scien-
tific and technical services includes Sector # % of Total
accounting, engineering, architec-
ture, law, computer systems design, Management and technical consulting services 4,890 24.5
management consulting, research
labs, advertising, marketing and Legal services 3,647 18.3
public relations firms.
Computer systems design and related services 3,627 18.2
During the fracking boom, the sector
added 44,600 jobs, a 25.6 percent Architectural and engineering services 3,035 15.2
increase. During the bust, the
sector lost 5,700 jobs, a 2.6 percent Accounting and bookkeeping services 2,350 11.8
decrease. Most of the job losses
occurred in architecture and engi- Other professional and technical services 1,037 5.2
neering as energy firms delayed or
cancelled projects and chemical plant Specialized design services 538 2.7
and office construction wound down.
Advertising, PR, and related services 474 2.4
Growth returned in mid-’17, and the
year finished strong with a net gain Scientific research and development services 338 1.7
of 9,400 jobs. The biggest gains are
in management consulting, followed Total 19,936 100.0
by the “all other professional, scien- *As of June ‘18
Source: Texas Workforce Commission
Other services includes repair shops nizations. The sector is dominated
(automotive, electronic equipment, by small firms with few employees.
household appliances), personal care Employment growth here tends to
(barber and beauty shops, nail salons, mirror that in the overall economy.
weight loss centers), funeral parlors The forecast calls for the sector to
and cemeteries, dry cleaners and create 1,800 jobs in ’19.
laundries, and membership orga-
OTHER SERVICES
12
Greater Houston Partnership Research | December 2018boost demand in ‘18, occupancy and FOOD SERVICES
revenues have slipped.
Restaurants and bars have a notori-
Future growth will depend on the ously high failure rate, but every year
opening of new hotels and motels, the region gains more than establish-
each needing additional manag- ments it loses. Houston has 3,200
ers, clerks and maids to operate. more bars and restaurants today
CBRE estimates there are 40 hotels than it did a decade ago, along with
ACCOMMODATION (15 upper-priced, 25 lower-priced) 79,300 additional jobs in those eating
AND FOOD SERVICES currently under construction. These
will add another 5,200 rooms to the
and drinking places.
market, boosting inventory by 4.5 Growth depends on several factors—
ACCOMMODATION percent. Unfortunately, CBRE also increases in budgets for business
forecasts demand to grow only 4.3 entertaining, growing consumer confi-
Hotel occupancy depends heav- dence, healthy job growth, increas-
percent, resulting in a drop in occu-
ily on business travel and tourism. ingly hectic lifestyles, consumers’
pancy rate and revenue. The new
After struggling for two years under willingness to try new concepts, and
hotels will need to be staffed, but not
the weight of the energy downturn, lack of will or skill to cook at home.
to the levels they would be if demand
occupancy and revenues picked up in Houston should see a net gain of 300
were stronger. The forecast calls for
’17, first with the onslaught of visitors bars and restaurants next year, as
the sector to add 700 jobs in ’19.
for Super Bowl LI, then again when strong economic, population and job
flood victims displaced by Hurricane growth support a host of new open-
Harvey sought shelter in hotels and ings. The Partnership forecasts food
motels. Absent any similar events to services to add 6,000 jobs in ’19.
TOTAL TAXABLE
As the region’s population grows, PROPERTY VALUE*
so does the need to expand police
9 -County Houston Metro Area
and fire protection, water and sewer
services, libraries and road repairs. (Billions)
The ability to expand those services
depends on funding. Local munici- ’13 $460.2
palities depend heavily on property
GOVERNMENT and sales taxes, counties mainly on
property taxes and school districts ’14 $506.6
on property taxes, state funds and
federal grants.
The public sector employs 400,000
Houstonians, making it the leading ’15 $566.1
Property values in all nine metro
employer in the region. Approx- counties have grown substantially
imately two-thirds work at state- over the past five years. For example,
funded universities, community ’16 $611.0
appraised property values in Harris
colleges and school districts. Cities, County, the City of Houston and the
counties and state and local agen- Houston Independent School District
cies employ another 90,000. Fewer (HISD) are up 48.3 percent, 48.6 ’17 $636.6
than 30,000 Houstonians, less than percent and 52.1 percent respectively
1.0 percent of all workers, are on the over the past five years. Change ’13-’17
federal payroll. $176.4 38.3%
Sales tax revenues tend to mirror the
Source: Texas Comptroller of Public Accounts
13
Greater Houston Partnership Research | December 2018business cycle. Collections for the 10 disadvantaged and one-third are Federal employment―NASA, the U.S.
most populous metro areas stagnated English Language Learners (ELL) and Postal Service, U.S. district courts,
during ’15 and ’16 and began improv- require a higher level of engagement and more―has grown marginally over
ing in ’17. Through the first 11 months and resources to educate. For the the past decade, federal payrolls
months of ’18, collections for the ’18-’19 school year, HISD’s recapture expanding by 200 to 300 in a typi-
group were up 9.2 percent. payment exceeded $240 million. cal year, an insignificant increase in
HISD is not alone. More than 400 a region with more than 3.1 million
The trends in property values and districts across the state, 18 in the jobs. State employment in fields
sales tax collections suggest the Houston area, are considered proper- other than education has followed a
region’s municipalities should have ty-rich and required to send money to similar pattern.
the revenues to expand services, Austin. This limits their ability to hire
which translates into expanding additional teachers and staff to serve Given all these factors, even with a
payroll. But the City of Houston is a the larger populations. Over the past healthy economy Houston is unlikely
special case. In ’04, residents voted five years, enrollments in the Houston to see a surge in public sector
to amend the city charter to limit area school districts have increased employment in ’19. Any growth will be
the annual growth of property tax by more than 120,00 students. modest. The forecast calls for 5,100
revenue to the combined rates of jobs to be added next year.
inflation and population growth, or
4.5 percent, whichever is lower. Fiscal
year ’17 was the third year the char- SALES TAX ALLOCATIONS
ter amendment capped property tax
Millions, November Year To Date
revenues. That will likely occur in ’18
10 Most Populous Houston Area Cities
and ’19 as well.
And in the November ’18 election, Change From Previous Year
City YTD '18
voters approved Houston firefight- $ %
ers receiving pay parity with Hous-
ton police officers. Mayor Sylvester
Houston 630.658 48.139 8.2
Turner estimates the cost to the city
at roughly $100 million. Given that
Pasadena 31.493 2.185 7.4
Houston is not allowed to raise taxes
to pay for the salary increase, the city
will need to cut expenses elsewhere. Pearland 30.881 2.825 10.1
Mayor Turner has said this could
lead to layoffs of as many as 800 League City 21.523 2.447 12.8
city employees.
Sugar Land 48.982 4.750 10.7
HISD faces similar constraints. In ’93,
the Texas State Legislature created Baytown 19.710 1.504 8.3
a recapture system, more commonly
known as “Robin Hood,” to redistrib- Missouri City 9.038 1.149 14.6
ute tax money from school districts
with high property values to districts
Conroe 45.254 5.540 13.9
with low property values. The Texas
Education Agency (TEA) has desig-
Galveston 19.721 1.029 5.5
nated HISD a property-rich district,
meaning HISD must share its wealth
with property-poor districts in the Texas City 21.891 3.353 18.1
state. No consideration is made for
the fact that three-fourths of Hous- Friendswood 7.778 1.445 22.8
ton ISD’s students are economically
La Porte 9.322 1.259 15.6
Source: Texas Comptrollers of Public Accounts
14
Greater Houston Partnership Research | December 2018IN LIGHT OF THE CURRENT DATA
The Partnership’s forecast for 71,000 be included in the 12-month calcula- administrative records, especially
jobs in ’19 may seem low in light of tions and TWC will report substan- unemployment insurance premiums
recent Texas Workforce Commission tially lower numbers. which more accurately reflect the
(TWC) reports that the region created number of workers on payroll. These
114,000 jobs in the 12 months ending Second, employment estimates will annual “benchmark” revisions are
October ’18. One must take those be revised in March, and because often significant. That will likely be
reports with a grain of salt. current estimates don’t comport with the case with the ’18 data because
other indicators such as office and the recent monthly TWC estimates
First, the October 12-month total apartment absorption, the revisions paint a picture of regional job growth
includes November and December likely will show slower growth than is that seems both implausible and
’17, months in which Harvey recovery currently being reported. The monthly unsustainable. In anticipation of
efforts helped to stimulate the local TWC report is based on a survey downward revisions in the estimates,
economy. Construction, retail, restau- of employers. Like any survey, it’s the Partnership has elected to base
rants, wholesale trade and employ- subject to error, especially when TWC its ’19 forecast on a more subdued
ment services set records for job estimates employment for nonreport- picture of regional job growth in the
growth at the end of ’17. As Houston ing establishments. The revisions wake of Harvey.
moves into ’19, those months won’t released in March will be based on
BENCHMARK REVISIONS, MARCH CHANGES TO ANNUAL GROWTH
Jobs (000s)
48.6
36.7
33.9 34.3
30.9
16.9
7.3 8.0
4.4
-3.9
-6.2
-15.6
-18.1 -18.3
-25.7
-35.7
’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17
Source: Texas Workforce Commission
15
Greater Houston Partnership Research | December 2018CONCLUSION
The Partnership’s forecast represents have overreacted to news of the STOCK MARKET
the organization’s best efforts to exemptions. Given the cost-cutting
explain the factors influencing activ- measures and efficiency gains of The Wall Street Journal reported in
ity, and more specifically job growth, the past three years, the U.S. energy late November that stocks, bonds
in Houston’s economy. Like all fore- industry is better prepared to handle and commodities are staging a rare
casts, the Partnership’s prognosis a low-price scenario should it last simultaneous retreat, deepening a
runs the risk that emerging trends more than a few months. However, sense of unease on Wall Street. In
might derail the analysis. As we put OPEC, Russia and their allies have late November, the Dow Industrial
the forecast to bed and prepared called a meeting in early December Average traded 2.2 percent below
to send the final document to the to discuss crude production cuts. where it began in January. The selloff
printer in late November, three such Should they reach an agreement― reflects a healthy but painful readjust-
trends made the news. and as we go to press news reports ment of investor expectations. The
indicate that seems likely―oil prices Federal Reserve’s gradual raising of
• WTI fell to near $52 per barrel,
should ratchet up again. interest rates is also diminishing the
• The OECD proclaimed that global appeal of the stock market to many
growth has peaked, and investors. And technology stocks
GLOBAL GROW TH continue to take a beating over
• The Dow fell to its lowest level of
the year. concerns about privacy issues and
In late November, the Organisation
the peaking of growth in the sector.
for Economic Co-operation and
All three suggest the engines Almost no one, however, is predicting
Development (OECD) issued a report
that drive Houston’s growth are a recession next year. The consensus
stating that global growth peaked
sputtering. A closer look at the among forecasters at the National
in ’18 and has begun to slow amid
details behind each report shows Association for Business Economics
rising trade and financial risks. That
that’s not the case. is that real U.S. GDP growth will aver-
theme was picked up by most news
age 2.7 percent in ’19, only slightly
outlets. The slowdown comes from
lower than the 2.9 percent in ’18.
OIL PRICES an outflow of capital from emerging
Houston ties to the U.S. economy will
economies, the weakening of their
continue to foster growth in ’19.
Global oil prices surged above $70 currencies, and the withdrawal of
per barrel in the fall of ’18 as the fiscal and monetary stimulus in the
Trump Administration, having pulled world’s advanced economies. What
out of the Iran nuclear deal, threat- was lost in media coverage was that The external factors that drive
ened sanctions on any country that the OECD still expects the global Houston’s economy―energy prices,
purchased crude from Tehran. Trad- economy to grow some 3.5 percent the ongoing U.S. expansion, global
ers expected a global crude shortage in ’19 and 3.5 percent again in ’20. growth―still align in Houston’s favor.
and bid prices up. In early Novem- That’s only slightly off the pace of 3.7 The internal factors―net migration,
ber, however, the administration percent for ’18. Houston is not facing construction, consumer confidence―
announced temporary exemptions the economic collapse of its major fall into place as well. Houston should
from the sanctions for eight countries, trading partners. enjoy healthy economic growth in ’19,
including the two largest buyers of and barring a U.S. or global downturn
Iranian crude, India and China. These or a collapse in oil prices, that growth
waivers erased any uncertainty should continue into ’20.
premiums that had propped up oil
prices. Just as traders overreacted
to news of the sanctions, they likely
Data used in the analysis and forecast came from the following sources: Apartment Data Services, Baker Hughes, CBRE, CenterPoint Energy, City of Houston Aviation
Department, City of Houston Building Permit Department, Colliers International, CoStar, Dodge Data & Analytics, Equifax, FMI Corporation, Federal Deposit Insurance
Corporation, Federal Housing Finance Agency, Federal Reserve Bank of Dallas, Federal Reserve Bank of St. Louis, Haynes and Boone, Houston Business Journal, Hous-
ton Chronicle, Houston Association of Realtors, Institute for Supply Management, JLL, John Burns Real Estate Consulting, MetroStudy, Meyers Research, NAI Partners,
National Association for Business Economics, Organisation for Economic Co-operation and Development, Oil & Gas Journal, Port Houston, TexAuto Facts, Texas Comptrol-
ler of Public Accounts, Texas Workforce Commission, The Wall Street Journal, Transwestern, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, U.S. Census
Bureau, U.S. Energy Information Administration, WISERTrade and various company websites.
16
Greater Houston Partnership Research | December 2018Stay up to date on the Houston economy through the year.
Check out other Partnership Research publications at
houston.org/economy.
20 1 8 H O USTO N
HOUSTON ECONOMIC
FACTS HIGHLIGHTS
20 1 8
TALKING POINTS
GLOBAL
HOUSTON
M AY 20 1 8
Key Economic Indicators
H O USTO N
THE ECONOMY
AT A GLANCE
17
Greater Houston Partnership Research | December 2018Patrick Jankowski, CERP
Senior Vice President, Research
Follow on Twitter:
@pnjankowski
Connect with me:
linkedin.com/in/pnjankowski
Publication underwritten by:
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