Having lost the opportunity for a quick recovery, all the employment scenarios for Houston point to another slow year in 2016. So far, much of the economic damage from low oil prices is confined to oil production, oil services, and oil-related manufacturing. As the rig count bottoms out in 2016, oil-related layoffs should slow sharply. However, additional time without a real turnaround in oil markets provides the opportunity for economic damage to spread through many sectors that have yet to feel much pain.
Many businesses in Houston will tell you that they have yet to see much effect of the drilling bust. Strong job growth continues unabated in sectors such as education, healthcare, leisure, hospitality, and local government. Sales and price levels are holding up for single-family housing. Apartment occupancy and rents are still strong. Retail sales are still growing, and restaurants are still crowded.
Some of this activity stems from Houston’s current economic strengths: US economic growth and petrochemical expansion. Some activity is the result of past momentum. Houston added nearly 680,000 payroll jobs between 2003 and 2014, the equivalent of a metro area the size of Oklahoma City. Even as job growth slowed in 2015, there remained serious demand for housing, shopping centers, bars and restaurants, schools, roads, and other infrastructure. But the catch-up phase will lose momentum as slow growth extends into 2016.
Finally, 2015 population growth probably remained at very high levels, as in-migration typically continues for several quarters after job growth slows. But with a second year of poor job growth, news will spread that that Houston is no longer a growth mecca for the nation’s unemployed. Figure 8 shows the how the slowdown of in-migration might work in our three scenarios. In no case does it begin to accelerate again before the second half of 2017.
