The Houston region’s economic growth might not be as strong as reported and seems likely to slow next year as the petrochemical expansion winds down and oil prices remain modest, according to a new forecast from the University of Houston.
Energy companies spent billions of dollars to build and expand chemical plants along the Houston Ship Channel to process cheap natural gas from Texas shale fields into plastics and other petrochemicals in recent years, creating thousands of construction and manufacturing jobs, said the forecast’s author, the economist Bill Gilmer, director of the Institute for Regional Forecasting at the UH’s Bauer College of Business. With the sector largely built out, the Houston area’s growth next year will depend primarily on prices and national economy, both of which have shown signs of weakening.
The Houston economy will continue to expand next year, but at a slower pace as oil remains stuck in the $50 to $60 a barrel range and the record national expansion, heading for its 11th anniversary, shows its age. Assuming the price of oil is $55 per barrel through 2024, Houston would likely add around 57,000 jobs per year to the regional economy, a bit slower than the pace of growth projected for this year.
This year, Houston’s economy has looked strong. The metro region has appeared to post big job gains through much of 2019 and the local unemployment rate fell to 3.8 percent in October, in line with the national rate of 3.6 percent. But Gilmer said those statistics likely overstate the strength of the local economy and will be revised downward by the U.S. Labor Department early next year.
Houston’s economy is back to basics now after a few temporary boosts in recent years. During the last oil bust, supporting industries were still playing “catch-up” from the earlier expansion driven by $100 per barrel oil, so even during the downturn, Houston employers kept adding jobs. But that momentum is played out.
With oil prices stuck in the $50-$60 per barrel range, U.S. oil production is likely to continue slowing. If crude sticks to that range through 2024, jobs in the oil and gas industry would likely shed about 5,000 jobs. Prices at $65 a barrel would keep Houston energy employment mostly stable.