FORECAST HOUSTON 2 EMPLOYMENT - Greater Houston Partnership

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FORECAST HOUSTON 2 EMPLOYMENT - Greater Houston Partnership

       December 2021
FORECAST HOUSTON 2 EMPLOYMENT - Greater Houston Partnership
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Greater Houston Partnership Research December 2021
FORECAST HOUSTON 2 EMPLOYMENT - Greater Houston Partnership

The Partnership’s forecast calls for                               and professional, scientific and                     expansion, robust global trade,
Metro Houston to create 75,500 jobs                                technical services. Despite healthy                  energy consumption returning to
in ’22.1 Growth will occur in every                                job growth, Houston will likely                      pre-crisis levels, pent-up consumer
sector of the economy, including                                   fall 10,000 to 20,000 jobs shy of                    demand, and local population growth.
several that struggled to create jobs                              pre-COVID employment levels when                     The recovery will continue to face
in recent years. The greatest gains                                ’22 comes to an end.                                 headwinds, however. Elevated
will occur in administrative support                                                                                    inflation, supply chain woes, and
and waste management; government;                                  Five factors will support job growth                 worker shortages will temper growth,
health care and social assistance;                                 next year—the ongoing U.S.                           but they won’t halt it. There’s too
                                                                                                                        much pent-up demand for that. The
                                                                                                                        risks to growth tend to be more
                                                                                                                        political than economic, like an
            December ’21 - December ’22                                                                                 escalation in tensions between China
    Administrative Support
                                                                                                                        and the U.S., a massive cyberattack
      Waste Management                     9,000                                                                        on U.S. facilities, or widespread
                                                                                                                        social unrest, either at home or
    Professional, Scientific,                                                                                           abroad. And one can’t rule out the
    and Technical Services                 8,700
                                                                                                                        possibility of a new COVID variant
            Health Care and                                                                                             sweeping through the nation. While
           Social Assistance               8,400
                                                                                                                        the Partnership acknowledges these
                                                                                                                        are valid concerns, in preparing this
      Restaurants and Bars                 7,200                                                                        forecast it chose to focus on the
                                                                                                                        economic factors that will impact
                    Government             7,100                                                                        Houston in ’22. Here’s what’s driving
                                                                                                                        Houston’s growth.
     Warehousing, Utilities                6,500                                                                        U. S. Grow th

                Manufacturing              5,000                                                                        As of November ’21, the nation had
                                                                                                                        recovered 18.2 million of the 22.4
       Energy (Exploration,
                                           4,000                                                                        million jobs lost in the early stages
         Oil Field Services)                                                                                            of the pandemic. Pre-crisis, the
                                                                                                                        U.S. created around 200,000 jobs
             Wholesale Trade               3,000                                                                        per month or 2.4 million per year.
                                                                                                                        Forecasters call for growth in ’22 to
                   Construction            2,700                                                                        track well above historic trends. The
                                                                                                                        consensus of the 47 professional
               Other Services              2,300                                                                        forecasters surveyed in September by
                                                                                                                        the National Association for Business
                    Finance and                                                                                         Economics is for the U.S. to average
                                           2,100                                                                        321,000 net new jobs per month
                                                                                                                        in ’22. The economists surveyed
      Educational Services                 2,000                                                                        by The Wall Street Journal expect
                                                                                                                        350,000 jobs per month. The Survey
                    Retail Trade           2,000                                                                        of Professional Forecasters calls for
                                                                                                                        456,300. At any of those rates, the
           Real Estate and                                                                                              U.S. would recoup all the jobs lost
         Equipment Rentals                 2,000
                                                                                                                        in the pandemic by December ’22
       Arts, Entertainment,                                                                                             at the latest.
            and Recreation                 1,600
                                                                                                                        Global Trade
                             Hotels        1,200                                                                        Houston’s economy is deeply
                                                                                                                        tied to global trade and foreign
                     Information           700                                                                          investment. The region has trading
                                                                                                                        relationships with more than 200

 Metro Houston, formally known as the Houston-The Woodlands-Sugar Land Metropolitan Statistical Area,        Greater Houston Partnership Research December 2021 | 1
includes Austin, Brazoria, Chamber, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller Counties.
FORECAST HOUSTON 2 EMPLOYMENT - Greater Houston Partnership
countries. Nearly 5,000 Houston-              98.5 million barrels per day (B/D) in                        from movie tickets, to dishwashers,
area firms are engaged in global              February ’20 before falling by nearly                        to dental services. Metro Houston
commerce, including more than                 18 million barrels over the next two                         added 91,100 residents in ’20,
2,300 local manufacturers. And more           months. Demand began to recover                              boosting the region’s population to
than 1,700 firms in Houston report            in May ’20 and has since accelerated                         over 7.1 million. After several years of
foreign ownership.                            and is expected to reach pre-COVID                           decline, inmigration, international and
                                              levels next year.                                            domestic, has picked up.
Census Bureau data shows Houston’s
exports in Q2/21 had already
                                                    Global Crude Demand                                           Metro Houston Population
surpassed the previous peak,
                                                 Forecast, Million Barrels/Day                                         Growth, ’000s
even with the current supply chain
issues making shipping products                                                                                                Natural
                                                 Quarter           OPEC                 EIA                       Immigration Increase                     Total*
more difficult.
                                                  Q4/19           101.07              101.6                     ’11          49.6           59.2           108.8
      Metro Houston Exports*                      Q2/20            82.60               84.9                     ’12          69.0           57.8           127.1
          Second Quarter, $ Billions              Q3/21            97.89               98.6                     ’13          86.5           57.3           144.5
 Q2/21        Q2/20       Q2/19      Q2/18        Q3/22           101.75              101.6                     ’14         109.7           60.9           171.8
                                               Sources: Organization for Petroleum
                                               Exporting Countries, U.S. Energy
                                                                                                                ’15         108.4           62.7           171.4
   34.8        21.4           30.7     26.9    Information Administration                                       ’16         71.6            63.9           135.5
                                              Pent- Up Consumer Demand                                          ’17         33.3            59.1            92.6
 *Origin of Movement Series
 Source: U.S. Census Bureau                                                                                     ’18         21.9            54.0            76.0
                                              Consumers are flush with cash
                                                                                                                ’19         37.2            51.2            88.5
As the global economy continues               and ready to spend. Early in the
to recover, Houston’s exports will            pandemic, households saved 26.1                                   ’20         44.3            46.7            91.1
continue to grow. The International           percent of their disposable incomes.                           *Columns may not sum to total due to
                                                                                                             rounding errors and data omissions
Monetary Fund (IMF) projects global           As of Q3/21, that had slipped to 8.9                           Source: U.S. Census Bureau
growth at 4.9 percent in ’22. The             percent but remains well above the
World Trade Organization (WTO)                7.5 percent average in the five years                        An improving job market, low cost
expects global merchandise trade              prior to the pandemic. Household                             of living, and high quality of life
to increase by 4.7 percent in ’22, up         balance sheets are also in better                            should boost Houston’s population
from 4.1 percent in its March forecast.       shape. Debt service as a percent                             by 100,000 residents or more in ’22.
                                              of disposable personal income is at                          One should be mindful, however, that
Energy Demand                                 its lowest point since the Federal                           if population growth follows historic
                                              Reserve began keeping records 40                             trends, half those gains will come
Houston is the leading domestic
                                              years ago. And consumers are sitting                         from the net natural increase (i.e.,
and international center for virtually
                                              on massive savings, as much as $1.6                          births minus deaths), and the other
every segment of the energy
                                              trillion according to a recent report in                     half from in-migration (one-fourth
industry—exploration and production,
                                              The Wall Street Journal.                                     international, one-fourth domestic).
transmission, marketing, service,
trading, supply, offshore drilling, and                                                                    Put another way, only half the
                                              Local Population Grow th
technology. Global crude demand                                                                            region’s growth comes via the moving
drives a major portion of Houston’s           A growing population supports a                              van, the other half comes from the
economy. Crude consumption topped             growing demand for everything                                maternity ward.


As of September ’21, Metro Houston            90.1 percent of their losses, retail 86.5                    wholesale trade belong to that group.
had recouped 245,600 jobs, or                 percent, other services (i.e., personal                      They began to shed jobs well before
roughly 68 percent of the 361,400 lost        services), 94.0 percent.                                     COVID-19 arrived and continued
in the early stages of the pandemic.                                                                       to shed them after the economy
The sectors most impacted by social           For industries struggling prior to                           reopened. Those sectors account for
distancing are near full recovery.            the pandemic, COVID-19 made                                  over half the jobs needed to close the
Restaurants and bars have recouped            their situations worse. Energy,                              gap and recapture its pre-pandemic
                                              manufacturing, construction, and

2 | Greater Houston Partnership Research December 2021              2
                                                                     OPEC = Organization for Petroleum Exporting Countries; IEA = International Energy Agency; EIA =
                                                                    U.S. Energy Information Administration.
FORECAST HOUSTON 2 EMPLOYMENT - Greater Houston Partnership
peak. The good news is that the                          for what they say about Houston’s                         this forecast went to press, crude
outlook for all four has improved in                     recovery. Those indicators are                            traded above $80 per barrel, a level
recent months and they’re taking                         the spot price for West Texas                             not seen since the fall of ’14. Higher
steps, albeit tiny ones, toward                          Intermediate, the Houston Purchasing                      prices are finally bringing relief to
recouping their losses.                                  Managers Index, Houston/Galveston                         Houston’s energy industry. In Q3/21,
                                                         customs district traffic, and claims for                  the major oil companies reported
The Partnership interviewed dozens                       unemployment benefits.                                    their highest quarterly profits in years.
of individuals, reviewed scores of
reports, read hundreds of articles,                      West Texas Intermediate (WTI), the                        In October, the Houston Purchasing
and analyzed countless data sets                         U.S. benchmark for light, sweet crude,                    Managers Index (PMI) registered
in preparing this forecast. In the                       has traded at $70 or higher on the                        61.0, the highest reading since
process, four indicators stood out                       NYMEX since mid-September. As                             March ’19. Readings above 50
                                                                                                                   indicate growth over the next three
                                                                                                                   to four months; readings below 50
                                                                                                                   suggest contraction. October marks
              PROGRESS TO DATE, METRO HOUSTON EMPLOYMENT                                                           the 15th consecutive month it has
                                                                                                                   registered above 50. The string of
                 Jobs Left                                                                                         plus-50 readings indicates Houston’s
                 to Recoup                                                                                         recovery has been underway
                                                                                                                   for some time.
                                                                                                                   Metro Houston averaged 5,000 initial
                                     32.0%                                                                         weekly claims for unemployment
                                                                                                                   benefits in the month of October.
                                                       245,600                                                     That’s down from 9,800 the same
                                                                                                                   month in ’20 and from 65,000 per
                                                        68.0%              Jobs Recovered                          week in April ’20. Fewer workers are
                                                                           To Date                                 filing continued claims as well, just
                                                                                                                   over 28,000 in September ’21, down
                                                                                                                   from 195,000 in September ’20. The
                                                                                                                   ranks of Houston’s unemployed are
                                                                                                                   approaching pre-pandemic levels.

                                                                                                                   Through the first nine months of ’21,
                                                                                                                   the Houston/Galveston Customs
                   HOUSTON PURCHASING MANAGERS INDEX                                                               District handled over $123.2 billion
                     Above 50 = Broad Economic Expansion                                                           in exports, up 33.5 percent from the
                                                                                                                   same period in ’20. The district is only
         70                                                                                                        $4.0 billion from passing the total
                                                                                                                   exports ($127.0 billion) for all of ’19.
         65                                                                                                        At the current pace, Houston should

                                                                                                                   finish ’21 with a record volume of
         60                                                                                                        exports passing through the district
                                                                                                                   (+$150 billion). The export data
         55                                                                                                        indicates the strength of demand
                                                                                                                   overseas for the crude, refined

                                                                                                                   products, chemicals, and equipment
                                                                                                                   that Houston manufacturers produce.




              ’08 ’09   ’10   ’11    ’12   ’13   ’14   ’15   ’16   ’17   ’18   ’19   ’20   ’21   ’22
  Source: Institute for Supply Management-Houston

                                                                                                        Greater Houston Partnership Research December 2021 | 3
FORECAST HOUSTON 2 EMPLOYMENT - Greater Houston Partnership
METRO HOUSTON JOB GROWTH, December '21 to December '22, ('000s)
                                                                                        117.4          116.8
                                   91.6           91.0                                          89.8
                                                                                 83.0                                                 82.8                   80.7
60.1                                                                                                                           54.4          54.4

             -1.4                                                                                              -2.4     -2.4



’00    ’01   ’02    ’03     ’04    ’05    ’06     ’07     ’08     ’09     ’10    ’11     ’12    ’13    ’14     ’15      ’16    ’17    ’18    ’19     ’20     ’21* ’22**
Sources: Texas Workforce Commission         *September YTD **Partnership forecast


Only eight times in the past 21 years                    to be one of the better years for job                        Houston’s economy. A clearer
has annual growth exceeded 75,500                        growth in Houston.                                           understanding of the trends driving
jobs, the Partnership’s forecast                                                                                      growth (or losses) should help the
for ’22. Those eight years tend to                       One Final Note                                               business community to make better
coincide with rising oil prices or                                                                                    investment, staffing and purchase
                                                         The purpose of this forecast isn’t to
prices at an unsustainably high level.                                                                                decisions. Given the uncertainty
                                                         score a bullseye with the numbers,
Factor out the booms (and the busts),                                                                                 surrounding the economy, the more
                                                         though the Partnership would be
and metro Houston typically creates                                                                                   insights, the better. Now the details
                                                         pleased if it did. Rather, the goal
65,000 to 70,000 jobs in a “normal”                                                                                   behind the numbers.
                                                         is to highlight the forces shaping
year. Measured against that, ’22 looks


Since early October, West Texas                          has changed in recent years.                                 five episodes in which crude prices
Intermediate (WTI) has traded at $80                                                                                  have risen or fallen 40 percent or more
per barrel on the spot market. In the                    Those changes are well-documented,                           over less than six months.
past, crude trading at that level would                  but to understand how they will
lead to a surge in drilling activity,                    determine industry’s course over                             Volatility has led to more companies
a wave of equipment orders, firms                        the next 12-18 months it helps                               hedging their production. A recent
scrambling to find geologists, and                       to restate them.                                             analysis by World Oil found that 90
conversations with real estate brokers                                                                                percent of oil and gas firms hedged
                                                         Oil prices have become more volatile,                        their production in ’20, up from 73
about the need to lease more office
                                                         even by energy industry standards.                           percent the year before. Hedging
space. None of that has happened,
                                                         Since ’14, the industry has endured                          locks in the price oil companies
which shows how much the industry

4 | Greater Houston Partnership Research December 2021
will receive for crude delivered at a      aggressive stances on combatting                               Against this backdrop, the industry
specific date in the future.               global warming. ExxonMobil and                                 must deal with a looming crisis
                                           Chevron suffered shareholder                                   in Europe. Low inventories and
The industry has fallen out of favor       rebellions from climate activists and                          expectations of a colder than normal
with Wall Street. Oil firms were able to   disgruntled institutional investors                            winter have tripled natural gas prices
rapidly grow production through most       over the oil giants’ plodding adoption                         on the continent in recent weeks.
of the last decade because investors       of strategies for a low-carbon future.                         Utilities which can substitute oil for
were willing to lend them funds to         More recently, one of Shell Oil’s major                        natural gas are doing so, but this has
drill more oil wells. Between 2010         investors called for the corporation                           driven up the global price of crude.
and 2020, the industry raised over         to spin off its liquefied natural gas,
$300 billion from outside investors,       renewables, and marketing businesses                           The good news is that global demand
according to a study by Deloitte. But      into a standalone company.                                     will soon recover to pre-crisis levels,
promised returns never materialized,                                                                      keeping prices well above $52 per
so investors pulled back. Drillers must                                                                   barrel, the average break-even point
now exercise “capital discipline,”           U.S. Crude Production and Oil                                for a well drilled in the U.S. Crude
funding any exploration activities out           and Gas Employment*                                      will likely trade well above that in the
of internal cash flow. The impact can                                           Employment (000s)         coming months. In early November,
be seen in the decline in the rig count,                                                                  the futures strip had WTI trading on
which began in December ’18.                                        Avg                    Change         the NYMEX at $71 per barrel or higher
                                                                   Annual        As of      from
                                              Year                 MB/D        December   Prior Year
                                                                                                          through December ’22. EIA forecasts
The industry has become more                                                                              crude to average $68 per barrel in ’22,
productive. Drillers have a better            ’14                   8.8         535.8           34.0      still high enough to earn a profit on the
understanding of shale geology,                                                                           typical new well.
                                              ’15                   9.4         435.6         -100.2
drilling equipment is more efficient,
and firms are more selective about            ’16                   8.8         355.3          -80.3      All this bodes well for Houston’s
where they drill. According to the U.S.       ’17                   9.4         384.6           29.3      energy sector. Higher demand will
Energy Information Administration             ’18                   10.9        423.1           38.5      sustain oil prices near their current
(EIA), initial production from wells                                                                      level. That will boost U.S. drilling
                                              ’19                   12.3        393.6          -29.5
drilled in the Permian Basin and                                                                          activity leading to new equipment
Bakken nearly doubled from October            ’20                   11.3        323.2          -70.4      orders and additional hiring. But the
’16 to October ’21.                        Net Change Since Dec ‘14                                       early ’20s won’t look like the early ’10s.
                                           * Exploration and production and oil field services            Production growth, equipment orders,
The industry has learned to do             Source: U.S. Energy Information Administration,
                                                                                                          and job gains will be more subdued.
                                           U.S. Bureau of Labor Statistics
more with less. From December ’14                                                                         The forecast calls for Houston’s
to December ‘19, upstream energy                                                                          energy sector to add 4,000 jobs in ‘22.
(exploration, production, oil field
services) shed roughly one-third of
its U.S. workforce yet grew domestic
production by 3.4 million barrels over                                            U.S. RIG COUNT v. WTI SPOT PRICE
the same period.                                                                          Rig Count           WTI ($/Barrel)
                                                                 2,500                                                                        120
Climate change and looming peak
demand now dominate long-term
planning. Consumption of crude will                              2,000                                                                        96
likely peak within the next 15 to 20
                                                                                                                                                    WTI Spot Price
                                                U.S. Rig Count

years, according to most scenarios.
Some firms, like BP and Shell, have                              1,500                                                                        72
sold off acreage and assets to focus
on non-fossil fuel technologies.                                 1,000                                                                        48
Others, like ConocoPhillips, have
snapped up acreage, ensuring
crude and natural gas remain in their                             500                                                                         24
portfolios well into the future.
                                                                    0                                                                         0
Shareholders continue to pressure                                        ’14    ’15     ’16      ’17    ’18       ’19     ’20   ’ 21   ’ 22
energy companies to take more
                                                  Source: Baker Hughes

                                                                                               Greater Houston Partnership Research December 2021 | 5

Houston manufacturers have faced              four that respondents named were:                The flotilla of ships waiting off the
numerous challenges in recent                                                                  coast of California to unload their
                                              •     Increased raw material costs (86.4
years. Hurricane Harvey struck in                                                              cargoes underscores the problems
’17, flooding much of the region.                                                              with supply chains. Long-distance
Production was offline for weeks at           •     Attracting and retaining a quality         trucking costs have risen 24.1
some facilities and months at others.               workforce (80.0 percent)                   percent since April ’20, according to
In ’18, President Trump launched a            •     Supply chain challenges (79.8              the Bureau of Labor Statistics. And
trade war with China, the region’s top              percent)                                   Moody’s has incorporated several
trading partner back then. Houston’s                                                           high-frequency metrics to create a
exports to China fell by $482 million         •     Transportation and logistics costs         supply chain stress index. In normal
that year and another $2.8 billion the              (69.1 percent)                             times, the index should be at 100. In
following. In ’19, the energy industry                                                         mid-October, the index hit 125.
                                              Raw material costs have skyrocketed.
scaled back on drilling. Orders for
                                              Since April ’20, the global price of             Manufacturers are also dealing with
rigs, pumps and pipes plummeted.
                                              copper has risen 85.3 percent, the               a lack of shipping containers, making
In ’20, the pandemic arrived on
                                              price of aluminum 78.3 percent, and              it more difficult to get their product to
Houston’s doorstep. Consumers
                                              cotton 59.5 percent. Although lumber             market. Throughout the year, shipping
shut their wallets and factories
                                              prices have fallen considerably in               lines reposition those big, steel boxes
closed their doors. The component
                                              recent months, they’re still up 38               to where they are most needed and
of the Houston PMI that measures
                                              percent from April ’20.                          can fetch the highest rates. Asian
production fell to 34.5, the lowest
point on record.                                                                               exporters, desperate to get their
                                              The extent of the worker shortage
                                                                                               products into the U.S., are bidding
                                              can be seen in the latest Job
In ’21 winter Storm Uri wreaked                                                                up rates. The Wall Street Journal
                                              Openings and Labor Turnover
havoc on the region’s petrochemical                                                            reports the cost to ship goods from
                                              Survey (JOLTS) compiled by the
industry when it swept through                                                                 Asia to the U.S. is now four to ten
                                              U.S. Department of Labor. As of
Texas. Many companies declared                                                                 times the cost prior to the pandemic,
                                              September ’22, there were 897,000
force majeure when power outages                                                               so shippers are repositioning as
                                              manufacturing job openings across
and frozen equipment prevented                                                                 many empty containers overseas
                                              the U.S. The nation averaged
them from delivering on their                                                                  as possible. Prior to the pandemic,
                                              394,000 openings per month in the
contracts. At one point, 45 percent                                                            the Port of Houston handled about
                                              five years leading up to the pandemic.
of U.S. PVC capacity, 55 percent                                                               36,000 empty containers each
of chlorine capacity, 60 percent of
caustic soda capacity, 73 percent of
polyethylene capacity, 80 percent                                      Houston Manufacturing Employment*
of paraxylene capacity, and 84                                                                              Jobs      % of Total
percent of polypropylene capacity
was offline. The freeze hit at a time             Chemicals, Plastics, Fuels                                57,429       27.4
when inventories were already low.                Machinery, Computers, Electrical Equipment                56,612       27.0
Nine months later, some plants are
                                                  Fabricated Metal Products                                44,065        21.0
still struggling to return to pre-freeze
                                                  Food & Beverges                                           15,800       7.5
production levels.
                                                  Miscellaneous Products                                    9,907        4.7
Now, the industry must deal with                  Primary Metals                                            9,870        4.7
a host of other issues. In a Q3/21
                                                  Paper & Wood Products                                     9,517        4.5
survey, the National Manufacturers
Association (NAM) asked its members               Transportation Equipment                                  4,333        2.1
to identify the biggest challenges                Textiles & Apparel                                        2,310        1.1
facing their firms. Respondents could             Total                                                    209,843      100.0
select more than one issue. The top
                                                  *as of Q2/21
                                                  Source: Texas Workforce Commission

6 | Greater Houston Partnership Research December 2021
month. The ratio of empty exports        to recover before resuming its               employment to rise over the next
to empty imports held close to 1:1.      slide in August ’19. The pandemic            four quarters.
But that has shifted dramatically in     accelerated the trend. The sector lost
recent months. From June ’21 through     26,000 jobs during the early stages          An increase in drilling activity should
September of ’21, the port averaged      of the pandemic and continued to             lift the demand for oil field equipment
66,000 empty containers per month.       shed workers even as the economy             in ’22. Houston’s chem plants sell
The ratio of empty exports to empty      reopened. The sector began to                much of their production overseas, so
imports is now 5:1.                      recover earlier this year but will likely    they should benefit from the increase
                                         take several years to return to its          in global growth. Since January of this
Manufactures also face a shortage        previous peak. Nearly 18,000 of the          year, 53 companies have announced
of truck drivers to get their products   21,400 jobs left to recoup are tied to       plans to expand or establish
to market. The industry was short        oil and gas, and drilling activity is not    manufacturing plants in Houston.
80,000 truckers prior to the             expected to return to pre-pandemic           They will need to hire workers to
pandemic. That shortage will soon hit    levels for several years.                    run those plants. And Houston
100,000, according to the American                                                    will continue to add residents,
Trucking Association.                    Despite these challenges,                    benefitting the food processors in the
                                         manufacturers remain optimistic. In          region. Bottom line, the outlook for
Manufacturing employment in              its Q3/21, 87.5 percent of participants      manufacturing in Houston continues
Houston peaked in December ’14           in a NAM survey responded that the           to improve. The forecast calls for the
at 261,000 jobs. It trended down         outlook for their firms was positive         sector to add 5,000 jobs in ’22.
following the fracking bust, bottoming   leading into ’22. The majority expect
out in December ’16, then struggled      sales, production, wages, and


The construction sector’s woes           Of f ice                                     The pipeline may have finally begun
predate the pandemic. COVID-19                                                        to dry up. Most of the 3.7 MSF of
only made matters worse. Though          Demand for office space peaked               office space under construction
recognized as an “essential industry”    in ’14. Since then, the market has           in Q3/21 will deliver in late ’21 or
by the U.S. Department of Homeland       logged negative absorption in 18 out         early ’22. As of late October, only
Security (which allowed construction     of the past 28 quarters. Houston’s           15 office projects comprising less
to continue during the pandemic),        overall vacancy rate now approaches          than 1.7 MSF of space have broken
many developers suspended work           that of the 1980s. The market has            ground in ’21. Construction is falling
or cancelled projects anyway. The        over 71.2 million square feet (MSF)          to levels not seen since the 1980s
outlook for construction has improved    of vacant or available space. That’s         oil bust. Demand will remain weak,
since then, but it now faces a new       the equivalent of 50 empty Williams          however, as tenants with hybrid work
set of challenges—shortages of           Tower office buildings.                      schedules are still assessing how to
materials, extended delivery delays,                                                  best use their existing space.
                                         Lease rates have been flat or
soaring prices, labor shortages,
                                         declining in Houston since the               Industrial/ Warehouse
and workers’ resistance to vaccine
                                         end of ’14. Developers have been
mandates. Construction firms seem to
                                         slow to read the market or have              Developers have delivered over
be taking these challenges in stride,
                                         simply chosen to ignore the signals.         122.0 MSF of industrial space since
though. They remain optimistic about
                                         They’ve added another 19.5 million           Q1/14, or 17 percent of the region’s
’22. To understand the industry’s
                                         square feet of office space since            current inventory (718.9 MSF). The
pain, it helps to understand the state
                                         the start of ’16.                            space was built to serve the needs
of Houston’s real estate markets.
                                                                                      of e-commerce, industrial suppliers,

                                                                           Greater Houston Partnership Research December 2021 | 7
third party logistics firms, and retail       Multifamily                                                  Several factors are contributing to
distribution centers.                                                                                      multifamily’s banner year. Job growth
                                              ’21 has been one of the best years                           has picked up. Population growth is
The market had been leaning                   on record for Houston’s multifamily                          likely stronger than the U.S. Census
toward overbuilding for some time.            market. Occupancy, absorption, and                           Bureau has reported. Would-be
Delivery of new space has exceeded            rents are up across all classes of                           homeowners, priced out of the single-
absorption five out of the past six           property. Landlords have been able                           family market, are opting to rent
years. The vacancy rate for the               to scale back the incentives they                            apartments instead. Renters, weary of
newest Class A space, that built since        offer to attract new tenants. And                            sharing quarters with a roommate, are
’19, hit 25.0 percent in Q4/21, well          construction of new properties has                           splitting up. And young adults who
above the average of 7.4 percent for          finally tapered off.                                         moved in with their parents during
the overall market.                                                                                        the early stages of the pandemic are
                                              All that reflects a dramatic shift in
                                                                                                           finally moving out.
The pace of construction has tapered,         conditions over the past 12 months.
though, with only 14.7 MSF under              From ’14 to ’20, developers overbuilt.                       It’s unclear how long market
construction in Q3/21, down from              Occupancy would briefly top 90                               conditions will lean in the landlord’s
18.6 MSF in Q3/20. And Q3/21 marks            percent, then thousands of new units                         favor, but as of late October
the second consecutive quarter in             would flood the market and the rate                          more than 13,500 units were
more than three years that demand             would fall below 90 again. 3 But that                        under construction with another
for industrial space (11.6 MSF)               changed earlier this year. Houston                           28,600 announced or in the early
outpaced new space delivered to the           emerged from the early stages of the                         planning stages.
market (6.0 MSF)                              pandemic with considerable pent-up
                                              demand. Apartment Data Services                              Single-Family
Retail                                        reports the market has absorbed
                                              35,544 units in the 12 months ending                         Single-family is also enjoying a
Retail describes a type of commercial                                                                      banner year. Research firm Zonda/
                                              October ‘21. That’s more than
property, not the function that occurs                                                                     Metrostudy reports builders are on
                                              were absorbed in ’18, ’19 and ’20
within it. A retail center might include                                                                   track to start over 43,000 homes
                                              combined. Such strong demand is
a clinic (health care), branch bank                                                                        in ’21. That’s the highest level
                                              driving up rents, with Class A rates
(finance), pizza parlor (restaurant),                                                                      of starts since the mid-00s, the
                                              up 16.5 percent and Class B up 11.6
fitness center (recreation), liquor store                                                                  heyday of the housing boom fueled
                                              percent compared to October ’20.
(retail), and a dry cleaner (personal                                                                      by subprime lending. This time is
                                              And would-be tenants are finding
services). The vacancy rate, while                                                                         different, however. Lending standards
                                              fewer deals. In Q3/21, only 35 percent
up from pre-pandemic levels, has                                                                           are much stricter and there’s less
                                              of properties offer an incentive
hovered between 5.0 and 6.0 percent                                                                        speculation in the market.
                                              (deposit, wavers, floor plan upgrades,
since the beginning of ’17.
                                              etc.), down from 69 percent at
                                                                                                           Several factors account for the
Developers have added 5.5 to 7.7              the end of Q4/20.
                                                                                                           boom. Mortgage rates remain at
MSF of retail space per year over                                                                          historic lows making payments more
the past five years. In Q3/21, 4.1 MSF            Houston Multifamily Trends                               affordable. Millennials are finally
was under construction, slightly                                                                           becoming homeowners and driving
below the recent trend. Pandemic-                         Units        Units         Avg. Ann              up demand. The adoption of hybrid
induced delays account for part                  Year     Added      Absorbed       Occupancy
                                                                                                           work schedules is driving the need
of the slow down, that and retail’s                                                                        for dedicated home offices. And
                                                  ’12     5,954       14,953             89.4
uncertain future as more consumers                                                                         there’s a dearth of resale homes
turn to e-commerce.                               ’13     12,314      16,080             90.4
                                                                                                           on the market.
                                                  ’14     17,472      15,788             91.0
There’s a common phrase in                        ’15     20,679      13,289             90.4              In the 12 months ending October ’21,
commercial real estate: “retail                                                                            brokers have closed on more than
                                                  ’16     21,702       5,028             88.3
follows rooftops.” The housing                                                                             130,000 re-sale homes (single-family,
boom underway in Houston’s                        ’17     13,980      17,328             89.3
                                                                                                           duplexes, condos and townhomes).
distant suburbs will provide new                  ’18     5,655        8,749             89.6              At the current rate, Houston has less
opportunities for retail in ’22. Overall          ’19     17,095      14,534             89.3              than a two-month supply of homes
population growth and job creation                ’20     21,781      11,574             88.4              for sale. Six months is the norm. High
will also drive the demand for retail                                                                      demand and limited supply have
                                                ‘21 Oct
space in the coming year.                         YTD
                                                          12,825      35,544             91.9              driven up prices. The median price
                                                                                                           of a single-family home has risen by
                                               Source: Apartment Data Services                             $100,000 in the past seven years.

8 | Greater Houston Partnership Research December 2021                      3
                                                                              When occupancy rates top 90, that indicates it’s a landlord friendly market. When they fall
                                                                            below 90 percent, that indicates a tenant friendly market.
SEPTEMBER MEDIAN PRICE, SINGLE-FAMILY HOME, $                                             surveys from over 2,000 real estate
                                                                                                   professionals, including investors,
                                                                                  305,000          fund managers, developers, property
                                                                       265,995                     companies, lenders, brokers, advisers
                               226,500      235,000        240,000
      205,000    218,245                                                                           and consultants.

                                                                                                      HOUSTON CONSTRUCTION
                                                                                                       CONTRACTS AWARDED,
                                                                                                     SEPTEMBER YTD, $ BILLIONS*
        ’15         ’16          ’17            ’18           ’19        ’20         ’21
                                                                                                    17.822                     17.797
     Sources: Houston Association of Realtors
                                                                                                                 17.022                     17.112

Demand for new and resale homes                       The industry faces several challenges
may have plateaued. A few builders                    as it enters the new year. Supply
have brought back incentive                           chain issues continue to dog the
packages to help close deals.                         industry. Builders report delays of
Others have recognized the need                       four to six months on appliances,
to increase brokers’ commissions to                   windows, cabinets, and marble                  ’17           ’18           ’19         ’21
maintain the current pace of sales.                   countertops. Labor, always short
                                                                                                    Source: Dodge Data & Analytics
And the resale market recorded 1.8                    in construction, is even more so              * Does not include streets, bridges,
months of inventory in October ‘21,                   now. And vaccine mandates from                utilities and non-structural projects
low by historic standards but an                      Washington don’t sit well with some
improvement from 1.3 months in May.                   construction workers, including a            To summarize, Houston’s office
Home supply averaged 3.7 months in                    few who have threatened to quit and          glut will dampen the need for new
the five years prior to the pandemic.                 find employment in another sector or         office construction. The demand of
                                                      with another contractor not subject          e-commerce and container traffic
Three high-profile projects broke                     to the mandate.
ground in ’21 that will help sustain                                                               at the port will spur the need for
construction activity over the                        Despite the headwinds, the outlook           additional warehouse and distribution
next several years:                                   for construction has improved, albeit        space. As the housing boom
                                                      marginally, since the first of the year.     continues in the distant suburbs,
•   The Texas Medical Center broke                                                                 developers will break ground on
    ground on TMC3, a 37-acre                         The September report from Dodge
                                                      Data indicates construction activity         retail centers to serve these more
    campus that will include shared                                                                remote populations. The demand for
    and proprietary research centers,                 year-to-date is up 5.0 percent in
                                                      the first nine months of this year.          single-family homes remains steady,
    multidisciplinary labs, healthcare                                                             so construction will likely maintain
    institutions, a hotel and conference              That’s much improved from Q1/21
                                                      when activity year-to-date was               its current pace. Homebuilders have
    center, a residential tower, retail,                                                           enough orders on the books and
    restaurants, and a unique double-                 down 14.2 percent. Through the first
                                                      eight months of ’21, City of Houston         potential buyers on waiting lists to
    helix green space.                                                                             remain busy well into ’22. Multifamily
                                                      building permits were flat compared
•   Hines broke ground on Levit                       to the prior year. That’s much               construction will rise to meet the
    Green, a 53-acre development just                 improved from Q1/21 when activity            growing demand. The outlook for
    east of the Texas Medical Center                  year-to-date was down 30.8 percent.          heavy/industrial construction remains
    that will offer research facilities,                                                           cloudy, but engineering/procurement/
    office, residential, shopping and                 Outside investors view of Houston            construction firms remain optimistic
    dining, outdoor amenities and                     real estate has been improving               about their prospects in the new year.
    green space for Houston’s biotech,                over time. In “Emerging Trends in            The Partnership expects the pace of
    life sciences and medical research                Real Estate 2022,” the Urban Land            construction will pick up marginally
    communities.                                      Institute (ULI) ranked the outlook           next year. The forecast calls for the
                                                      for Houston real estate 24th out             sector to create 2,700 jobs in ’22.
•   Midway broke ground on East
                                                      of the 80 U.S. and Canadian cities
    River, a 150-acre site near
                                                      in the study. That’s a significant
    downtown that will include office
                                                      improvement over ’21 when Houston
    and retail space, a green space
                                                      ranked 52nd, and in ’18, when
    plaza, multifamily housing, a
                                                      Houston ranked as low as 60th. The
    cinema, nine-hole golf course,
                                                      ranking is based on interviews and
    restaurants, and bars.

                                                                                        Greater Houston Partnership Research December 2021 | 9

Houston’s wholesale trade sector has          The supply chain issues affecting               A full recovery in Houston’s wholesale
been one of the slowest to recover            the broader economy hit wholesale               sector depends on several factors:
from the COVID-induced recession.             especially hard. As the economy                 •   Growth in the domestic rig count.
As of mid-September, the industry             reopened, they found themselves                     As noted earlier, drilling activity
had recouped less than 15 percent             short on inventory and unable to                    should pick up in ’22.
of its initial job losses. Even though        secure supplies from manufactures
job growth picked up mid-year,                and other vendors. In September,                •   Growth of the U.S. economy. As
wholesale will be among the last              the wholesale inventory-to-sales                    noted earlier, the U.S. economy
sectors to return to pre-pandemic             ratio was at its second lowest level                should grow at 3.5 percent or
employment levels.                            since October ’14. The industry                     better in ’22.
                                              is also dealing with a shortage of              •   Resolution of the supply chain
To understand why the recovery has            freight handlers, forklift operators                issues plaguing the economy.
been so slow, it helps to understand          and truck drivers.                                  Media reports suggest this may
the role wholesale trade plays in the
                                                                                                  take 12 to 18 months to fix.
region’s economy. Consumers buy               Wholesale trade in Houston faces an
from retailers, like H-E-B, Kroger,           extra challenge—much of it is tied              •   Investments in local roads and
Walmart, and Academy Sports &                 to the oil and gas industry. They sell              port infrastructure. The Port of
Outdoors. Businesses, institutions,           directly to the oil field service firms             Houston Authority has embarked
and the government buy from                   and drillers, or to the manufacturers               on a billion-dollar project to
wholesalers. Some of the larger               of oil field and drilling equipment.                deepen and widen the Houston
wholesalers in Houston include Sysco          As noted earlier, the domestic rig                  Ship Channel and expand and
(restaurant supplies), MRC Global             count peaked in December ’18.                       improve the region’s container
(pipes, valves, flanges), Cardinal            Manufacturing and wholesale                         terminals.
Health (medical supplies), W.W.               employment peaked seven months                  •   Companies replacing just-in-time
Grainger (industrial equipment), and          later in July ’19.                                  inventory systems with just-in-
The Grocer Supply Co. (groceries,                                                                 case systems. Given current
household sundries.) Wholesalers                                                                  supply chain woes, companies
purchase in large quantities                                                                      will need to carry higher levels of
from manufacturers, hold those                                                                    inventory in the future.
inventories in their warehouses,
then break those goods and                                      U.S. WHOLESALERS INVENTORY TO SALES RATIOS*
supplies into smaller quantities for
delivery to their clients. Over 11,000                   1.70
wholesale establishments served
Houston as of Q2/21.
The fortunes of the wholesale sector
track those of the overall economy.
Like so many other industries, it was
caught unawares at the start of the

pandemic. The sales-to-inventory                         1.40
ratio shot up to unhealthy levels.
To survive, wholesalers had to                           1.30
cut costs, which meant laying off
workers. In Houston, one in every
12 lost their jobs. They also cut back
on their own orders and sold down
their inventories.                                       1.10
                                                                ’12   ’13   ’14   ’15   ’16   ’17     ’18    ’19    ’ 21    ’ 22

                                                Source: U.S. Census Bureau                                    *seasonally adjusted

10 | Greater Houston Partnership Research December 2021
•   Traditional growth drivers.           The demand for wholesale products           that more factors will lean positive
    Houston should see population,        won’t abate in ’22. If anything, it         than negative and that the region’s
    employment, foreign trade, and        will accelerate, especially if the          wholesale trade sector will add
    GDP continue to expand.               energy industry resumes drilling.           another 3,000 jobs in ’22.
                                          The Partnership’s forecast assumes


The sector includes all modes of          up from 15 percent in January but           the trucking jobs lost in the crisis.
transportation (air, pipelines, rail,     still insufficient to spur a rebound        Employment is at a record high.
trucking, water), support services        in global travel. International traffic
(freight forwarding, packing, and         should soon get a boost, however,           Houston continues to add industrial
crating), warehousing and utilities.      since the White House recently lifted       space. The boom has been fed by
Each is recovering at a different pace,   COVID-19 travel restrictions for fully      consumers embracing e-commerce,
but in the aggregate, employment          vaccinated international visitors. But      Houston’s growth as a logistics hub,
now exceeds pre-crisis levels due         a full recovery is several years away.      and the surge in container traffic at
to the strong growth in trucking          According to the International Air          the port. This in turn has fed the need
and warehousing.                          Travel Association (IATA), domestic         for more warehouse workers.
                                          travel won’t fully recover until ’23,
Houston Airports should handle                                                        Trucking is the critical link in the
                                          international not until ’24.
over 39.0 million passengers in ’21,                                                  supply chain. Cargo may arrive in
up from the 24.7 million in ’20 but       Through the first nine months of            Houston by air, rail, or water, but
well below the 59.8 million of ’19.       ’21, tonnage through the Port of            a truck will haul it from the port or
Passenger traffic began to recover        Houston was down 4.8 percent from           airport to its final destination, either
in the late spring as U.S. vaccination    ’20, the drop attributed to reduced         across town or across the state.
rates topped 50 percent, families         shipments of crude and refined              The demand for drivers will remain
booked summer vacations, and              products. Container traffic, however,       high well after the supply chain
business travelers grew more              was on pace to set a record in ’21          issues are resolved.
comfortable with flying again. The        with no indication the pace will let up
                                                                                      Though over half the nation’s
late-summer Delta surge briefly           in ’22. Manufacturers, wholesalers,
                                                                                      pipelines are controlled from
slowed the recovery, but passenger        and retailers need to replenish their
                                                                                      Houston, employment has remained
traffic picked up again in the fall.      inventories and are driving the surge.
                                                                                      flat for the last 20 years. Automation
                                          Year-to-date, containerized imports
Airlines are calling back employees                                                   and economies of scale have curbed
                                          were up nearly 30 percent, more
on furlough and looking to hire                                                       the need for additional manpower.
                                          than offsetting the nearly 15 percent
thousands more to handle the                                                          The region is unlikely to see any
                                          drop in exports. The region is clearly
anticipated increase in passenger                                                     employment growth in this sector in
                                          benefitting from the investment in
traffic. As of September ’21, domestic                                                ’22. The same goes for local utilities.
                                          new cranes and wharf-side facilities
traffic was at 67.9 percent of            the Port of Houston Authority has           The shift toward e-commerce and
pre-pandemic levels. Last September,      made in recent years.                       home deliveries has kept Houston’s
domestic traffic was at 40.7 percent
                                                                                      couriers and package delivery
of the previous year’s pace.              Nationally, trucking volumes remain
                                                                                      services busy throughout the
                                          6 percent below pre-crisis levels,
International traffic has been slower                                                 pandemic. There’s no sign that will let
                                          according to the American Trucking
to recover. In an October survey by                                                   up, even as the pandemic subsides.
                                          Association (ATA). There just aren’t
Morning Consult, only 30 percent          enough drivers. Despite that,               The outlook for transportation,
of respondents indicated they             Houston has managed to recoup all           warehousing and utilities is among
were comfortable flying overseas,

                                                                          Greater Houston Partnership Research December 2021 | 11
the brightest of all sectors. IATA                            PORT OF HOUSTON CONTAINER TRAFFIC 12-Month Moving Total
expects air passenger traffic to
pick up in ’22. The WTO forecasts
continued growth in global trade.
Local merchants need to restock
their shelves, wholesalers their                                      3.0
warehouses, and manufactures their

                                                   Millions of TEUs
inventories. And U.S. online sales are
forecast to leap from $993 billion in
’21 to over $1 trillion in ’22.
The transportation/warehousing
sector will record strong job growth
well beyond next year. Only another                                   1.5
recession could disrupt its path, and
that’s unlikely for at least the next few                             1.0
years. The forecast calls for Houston                                       ’11     ’12    ’13    ’14   ’15     ’16   ’17        ’18    ’19     ’ 21     ’ 22
to add 6,500 transportation jobs in                Source: Port of Houston Authority                                  TEU = Twenty-foot Equivalent Unit
the coming year.


Retail sales now exceed their                  U.S. retail sales topped $620 billion                            and mass merchandise stores nearing
pre-pandemic level. Consumers have             the first nine months of ’21, up 13.1                            historic levels. Retailers like Macy’s,
fatter wallets and lower debt levels.          percent from $548 billion in the                                 Marshalls, T.J. Maxx, Kohl’s and Foot
Only a handful of stores declared              comparable period the year prior.                                Locker, which struggled in the early
bankruptcy in ’21. But online shopping         Purchases were up across all sectors,                            stages of the pandemic, reported
continues to make inroads into brick-          with clothing, sporting goods and                                rebounds in sales in ’21.
and-mortar retail, and supply chain            home furnishing logging the greatest
bottlenecks and labor shortages                percentage gains. In-store foot traffic                          The website tracked
weigh on retail perhaps more than              is finally approaching pre-pandemic                              30 bankruptcies in ’20, including
another sector.                                levels, with supermarkets, hardware                              major brands like Brooks Brothers,

                           HOUSTON RETAIL FOOT TRAFFIC, OCT '21 AS PERCENT OF OCT '19

                                                                  110              110           107
     102                                 102                                                                  106                         105             102
                               87                                                                                           90

   Apparel       Dining      Fitness   Groceries    Hardware                      Health      Spa/      Superstores    Office          Electronics        All
                                                                                             Beauty                   Supplies                         Categories

12 | Greater Houston Partnership Research December 2021
JCPenny, Lord & Taylor, Pier 1, and        And like other sectors, retail                              for one in every 20 dollars spent
Stein Mart. Through August of this         is struggling to find workers.                              on a retail purchase. In Q2/21, it
year, the site had identified only eight   Nationwide, retail had nearly 1.1                           accounted for one in every eight. One
bankruptcies, L’Occitane being the         million job openings in September,                          offsetting factor has been Houston’s
only prominent brand. The trend in         according to the U.S. Department                            housing boom. As noted earlier,
retail has clearly shifted from sad        of Labor. To combat the shortage,                           the region will likely add around
closings to grand openings. The Daily      Amazon, Best Buy and Target have                            43,000 single-family homes this
in Retail, a retail research platform,     all raised their minimum wages to $15                       year and a comparable number next.
counted 5,725 store opening                an hour. Walmart matched that for                           Home sales drive the need for new
announcements nationwide through           many of its employees, but still has a                      furniture, lawn and garden tools, and
Q3/21. That’s nearly double the 2,890      starting wage of $11 per hour.                              consumer electronics. The residents
closings the firm identified over the                                                                  will also need to shop for groceries,
same period a year earlier.                Retail lost more jobs (99,500) in                           pet supplies, gasoline, alcoholic
                                           Houston than any other sector in                            beverages and to fill doctors’
Consumer purchasing power                  the early stages of the pandemic.                           prescriptions. Houston will see more
continues to grow. In Q2/21, U.S.          As of mid-September, the sector                             retail centers in the distant suburbs
personal income was nearly $950            had recouped 86.5 percent of                                over the next few years.
billion (4.8 percent) above ’20 levels.    those losses. But that may be a bit
(Comparable data for metro Houston         misleading since retail employment                          The forecast assumes the
is not available.)                         always surges in the fall as merchants                      fundamentals that traditionally drive
                                           hire temporary workers for the                              retail—jobs, population, income,
The summer surge in COVID cases no         holiday shopping season.                                    home construction, access to credit
longer seems to weigh on consumer                                                                      and consumer confidence—still favor
confidence. The Conference Board’s         Houston’s retail sector began to shed                       Houston. Online sales will eat into
Consumer Confidence Index® stood           jobs prior to the pandemic. TWC                             brick-and-mortar sales but a surge
at 113.8 in October (1985=100),            reported nominal losses in ’17, ’18,                        in activity in the suburbs will offset
up from 109.8 in September. The            and ’19 and significant losses in ’20.                      those losses. The forecast calls for
proportion of consumers in the             Brick-and-mortar retail has struggled                       retail to reverse the trend of losses
board’s survey that said they plan         as online shopping captures a larger                        incurred over the past four years and
to purchase homes, automobiles,            share of the consumer’s wallet.                             add 2,000 jobs in ’22.
and major appliances in the near           In Q2/11, e-commerce accounted
future all increased in October—a
sign that consumer spending will                                  RETAIL EMPLOYMENT, METRO HOUSTON, AS OF DECEMBER
continue to support economic
growth well into ’22.
Bottlenecks at factories, ports and                               320
container yards have sent costs
                                              Employment, 2010s

skyrocketing, squeezing retail                                    310
margins, and creating inventory                                   300
shortfalls. In September, inventories
were at their lowest level in five                                290
years, according to the U.S. Census
Bureau. As a result, some appliance
brands are hard to find, food items                               270
- especially imported ones - are
missing from grocery shelves, and
shoppers have fewer choices in                                    250
apparel and accessory stores.                                           ’10   ’11   ’12   ’13   ’14   ’15    ’16      ’17    ’18    ’19   ’20

                                              Source: Texas Workforce Commission                                   *average 12-months ending 9/21

                                                                                           Greater Houston Partnership Research December 2021 | 13

The information sector includes cable          competing with web-based media,          of the pandemic. Movie theatres
services, data processing, motion              workers replaced by technology, and      accounted for over half the sector’s
picture and video studios, movie               the need to cut costs has reduced        losses, so as ticket sales rise, so
theatres, newspaper, magazine and              the number of firms and employees        should employment. The boost in ad
book publishers, radio and television          in the sector. The events of March-      revenues should enable newspapers,
broadcasting, sound studios,                   April ’20 added to the sector’s          periodical publishers, radio, and
and satellite, wired and wireless              long-standing woes.                      television broadcasters to replace
telecommunications.                                                                     some of the personnel laid off in ’20.
                                               But the outlook has improved over        Advances in technology continue to
The heyday for the sector was                  the last 12 months. Advertising          reduce the need for manpower in the
in the late ’90s and early ’00s. It            spending is recovering. In the U.S.,     telecom sector.
logged continuous growth for over              revenues will hit $278 billion in ’21,
a decade, plateauing December                  an increase of 23 percent, according     The forecast assumes an overall
’00 at 49,400 jobs then begining a             to Magna, a media intelligence           improving economy, a growing desire
steady decline. As of September ’21,           company. Moviegoers are returning        for consumers to experience movies
local employment stood at 28,800               to the cinema. The industry is on        in theatres, that media and telecom
jobs a 41.7 percent fall from its peak.        track to sell over 400 million tickets   companies resume hiring, and no
Telecommunications accounts for the            in ’21, nearly double the 223 million    additional job losses occur in data
bulk of the losses.                            sold in ’20 but far short of the 1.2     processing and telecommunications.
                                               billion sold in ’19.                     The forecast calls for information to
Houston is not unique. Information                                                      recoup another 700 jobs in ’22.
employment in the U.S. peaked                  As of September ’21, the sector
around the same time. Mergers                  had recouped only 600 of the
and acquisitions, traditional media            4,500 jobs shed in the early stages

                                         FINANCE AND

The finance and insurance sector               14 months all jobs lost in the early     Banking
includes corporations engaged in               stages of the pandemic. Finance
lending (banks, credit unions, credit          and insurance was among the              The banking community, fearing
cards, sales financing, mortgage               first to reach that milestone. As of     significant loan losses early in the
brokers), firms involved in securities         September ’21, employment stood at       pandemic, set aside billions in
trading (brokerages, portfolio                 an all-time high.                        capital to cover those losses. But
managers, investment advisors),                                                         Paycheck Protection Program (PPP)
companies that handle insurance                The sector faces numerous challenges,    loans kept many businesses solvent.
(life, health, property, medical,              though. Some are legacies of the         Households used their stimulus
commercial), and employee benefit              pandemic, others the result of long-     checks to pay down debt. And the
plans and pension funds. The sector            term trends. Those challenges provide    economy reopened quicker than
benefited from the quick rebound of            opportunities for growth in ’22.         anticipated. The share of loans 90
the U.S. economy, recouping in the                                                      days or more past due fell, albeit

14 | Greater Houston Partnership Research December 2021
slightly, from Q2/20 to Q2/21. Not        With fewer accidents, fewers doctors’                   Schwab gained a record four
needing those excess reserves,            visits, and fewer elective procedures,                  million new clients last year. More
banks recently released those             there were fewer claims to process.                     than half were under 40.
billions, allowing them to report hefty   Insurance firms held onto their                   •     When millennials first entered
profits for Q3/21. They are flush with    employees anyway, shedding only                         the workforce, insurance plans—
cash and ready to lend to businesses      200 jobs in March-April ’20 and                         specifically life and home—were
and consumers.                            recouping them all by May.                              seen as a luxury. Now, a bit older
Securities Trading                        A few factors that will influence growth                and entering new life stages,
                                          in finance and insurance next year:                     millennials have realized that
The collapse of the stock market                                                                  employer-supplied insurance may
early in the pandemic ravaged the         •   Since ’12, the banking industry                     not be enough.
portfolios of many investors. Over            has shuttered over 120 brick-and-
                                              mortar branches in Houston. As                •     After several hurricanes (Harvey,
roughly 30 days, the Dow Jones                                                                    Imelda, Nicholas), a pandemic
Industrial Average fell 10,960 points         more services move online, the
                                              industry will need fewer tellers but                (COVID-19), and a winter storm (Uri),
(37.1 percent), the S&P 500 Index                                                                 firms are more aware of the need
1,149 points (33.9 percent), and the          more programmers.
                                                                                                  for business interruption insurance.
NASDAQ Composite 2,956 points             •   Between Q2/19 and Q2/21, $84
(30.1 percent). The drop was short-           billion in deposits flowed into               The forecast assumes only a minor
lived, however. By June ’20, the              FDIC-insured banks in Houston.                slowdown in U.S. economic growth;
NASDAQ had returned to its previous           The banks are looking for places to           that Houston will continue to recoup
peak, the S&P by August, and the              lend these funds.                             jobs lost early in the pandemic;
Dow by November. Like the plunge in                                                         that there’s an uptick in energy,
                                          •   According to the Fed’s October
share values, job losses were short-                                                        manufacturing, and construction
                                              Senior Loan Officer Opinion
lived. The sector shed 600 jobs the                                                         activity; that the pace in-migration
                                              Survey, banks have eased their
first two months of the pandemic but                                                        to the region accelerates; and the
                                              lending standards and are
recouped them all two months later.                                                         single- and multifamily housing
                                              experiencing stronger demand
Investors still needed to manage their                                                      continues to boom. The forecast
                                              for loans of all types—commercial,
portfolios, even if those portfolios                                                        calls for finance and insurance to add
                                              industrial, residential mortgage.
were worth much less than they were                                                         2,100 jobs in ’22.
a few months earlier.                     •   Millennials are entering the stock
                                              market. Online broker Charles
                                                         INSURED BANK DEPOSITS, METRO HOUSTON*
Consumers were primarily focused                                                    $Billions                                333.7
on health, safety, and economic                                                                                      305.6
concerns during the early stages
of the pandemic, not shopping for                                242.5                     240.9     245.7   249.6
insurance. New policy sales fell by 10                   208.0            215.2   219.2
to 30 percent. Vehicle miles traveled            179.1
dropped by almost 40 percent.
Many Houstonians, concerned over
exposure to the virus, canceled
trips to the doctor. Twice during the
pandemic, hospitals were banned                   ’12     ’13     ’14      ’15     ’16      ’17       ’18     ’19     ’20     ’21
from performing elective procedures.           Sources: Federal Deposit Insurance Corporation                          *as of June 30

                                      REAL ESTATE AND
                                      RENTAL AND LEASING

The title is a bit misleading. Only       The real estate portion includes                  includes the rental of vehicles,
one-third of the jobs involve real        the sale, leasing, and management                 appliances, furniture, construction,
estate. The remainder involves            of real property (single-family                   and industrial equipment.
the rental of business equipment,         homes, apartments, office buildings,
consumer goods, and other items.          warehouses). The rentals portion

                                                                              Greater Houston Partnership Research December 2021 | 15
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