houston economy at_a_glance_vol24

May 2015 ©2015, Greater Houston Partnership

At Last, Some Good News — The spot price for West Texas Intermediate (WTI), the U.S.

benchmark for light, sweet crude, closed at $59.63 per barrel on April 30. The following

day, Baker Hughes reported the fleet of drilling rigs working in North America fell to 905,

less than half the number of working rigs seven months ago. Both reports were good news

for the industry. Oil flirting with $60 suggests prices may be firming. A cellar-dwelling rig

count should gradually force production to decline, balancing supply and demand. Energy

markets welcomed these signs of hope. In April, they received several others:

RigData reported that 2,600 fewer wells were drilled in Q1/15 versus Q1/14. Since the

typical shale well delivers 70-80 percent of its production in the first year, a drop in new

wells drilled portends a near-term drop in production.

The U.S. Energy Information Administration (EIA) forecast production in the Bakken,

Eagle Ford and Niobrara would drop by 70,000 barrels per day in May. These fields,

along with the Permian Basin and the Utica, account for 95 percent of U.S. production

growth over the past few years.

EIA also reported that U.S. refiners have increased their crude purchases. Refinery input

always slips in the spring as plants idle capacity for routine maintenance and overhauls.

As the summer driving season approaches and repairs are completed, refiners ramp up

their crude purchases. EIA reports that U.S. refiners’ demand for crude rose by more

than 900,000 barrels per day in late April.

The inventory build at Cushing, Oklahoma, appears to be slowing. From December

through March, inventories grew by an average of 2.1 million barrels per week. The

pace slowed to 1.0 million barrels in mid-April. In the week ending April 24, inventories

actually fell by half a million barrels.

In its April Short-Term Energy Outlook (STEO), EIA forecast U.S. production to de-

cline May through September before growth, fed by higher oil prices, resumes in Octo-

ber. EIA projects U.S. production will average 9.2 million bbl/d in ’15 and 9.3 million

bbl/d in ’16.

Though supply and demand have a more sustainable impact on prices, the escalating

violence between Saudi Arabia and Yemen, Iran’s reported firing of shots across the

bow of a cargo ship near the Strait of Hormuz, and the continued civil unrest in Libya

and Iraq has also helped boost crude prices.

A publication of the Greater Houston Partnership Volume 24 Number 5 — May 2015

HOUSTON—THE ECONOMY AT A GLANCE


If history is a guide, the North Amer-

ican rig count may also be approach-

ing a bottom. Since ’90, the industry

has experienced five down cycles in

which the rig count has fallen by 40

percent or more. The sharpest decline

occurred from September ’08 to June

’09 when the rig count fell 56.9 per-

cent. The current rig count needs to

lose only 74 more rigs to equal the

worst percentage decline in the past

25 years.

Over the past few months, many exploration firms have drilled wells but chosen not to

complete them, essentially storing oil in the ground until crude prices rose and fracking

costs fell. Now, at $59 per barrel, a well producing 1,000 barrels per day―typical for an

Eagle Ford well―generates $16,000 more per day in cash flow than it did in mid-March,

or nearly $500,000 more per month. Furthermore, completion costs are down by 10-30

percent. Tudor, Pickering & Holt notes that every 10 percent reduction in well costs lowers

the breakeven point of a well by $5 a barrel. Of course, this figure will vary by well, for-

mation, and the company’s internal cost structure.

Halliburton estimates as many as 4,000 wells in North America await fracking, about two-

thirds of them in Texas. This “fracklog” is a mixed blessing. On one hand, it represents

much needed business for oil field service companies. On the other hand, it represents an

additional 400,000 to 500,000 additional barrels of daily production that would delay the

market’s recovery.

Negotiations with Iran might further complicate the situation. Iran is believed to hold at

least 30 million barrels in storage, and EIA believes that the nation has the technical capa-

bility to ramp up crude oil production to at least 700,000 bbl/d by the end of ’16. The pace

and magnitude at which those volumes reach the market would depend on terms of the

final agreement.

Job Growth Weak But Still Positive — Metro Houston created 82,500 jobs in the 12

months ending March ’14, a 2.9 percent increase.1 A look at the monthly data is more

telling. The region created 5,500 jobs in March, the second weakest March for job growth

in the past 15 years. If not for strong growth in May, September and October last year, the

1 Metro Houston includes Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller counties.

STEEPEST DROPS IN THE NORTH AMERICAN RIG COUNT - ’90 TO THE PRESENT

Time Frame Rigs Lost % Decline

Dec ’90 – Jun ’92 -583 -49.4

Sep ’97 – May ’99 -520 -51.2

Jul ’01 – Apr ’02 -555 -42.9

Sep ’08 – Jun ’09 -1,155 -56.9

Sep ’14 – Apr ’15 -922 -53.1

Source: Baker Hughes, Inc.



running 12-month total would be significantly lower. As Houston moves further into ’15,

when more layoffs are anticipated, the 12-month total undoubtedly will trend downward.

Layoffs announced to date in the energy industry have finally begun to appear in the em-

ployment data. In March, mining and logging (which in Houston is mainly oil and gas) lost

700 jobs. Wholesale trade, which is closely linked to oil and gas, lost 2,200. Business and

professional services, which includes engineering, was essentially flat. Employment ser-

vices, the sector responsible for temporary and contract workers, fell by 1,800 jobs in

March and by 10,500 since August ’14.

The crash in oil prices has impacted local employment in oil and gas, but not to the extent

one would imagine from commentary in the national media. The Wall Street Journal and

Bloomberg have reported industrywide layoffs of 100,000 and 140,000 respectively, their

figures likely derived from adding up all the announcements that have appeared their pub-

lications. To put those numbers in perspective, the U.S. Bureau of Labor Statistics reports

that U.S. employment in oil and gas extraction totaled 201,900 in December ’14. BLS also

reports the industry has lost 5,100 jobs since then. The discrepancy suggests layoffs have

been announced but not taken place yet, have taken place outside the U.S., or have been

overstated by the media.

The Greater Houston Partnership anticipates more layoff announcements in coming weeks,

and the monthly employment reports may turn negative. However, the Partnership doesn’t

expect a draconian downturn, and certainly not a drop of the magnitude the national media

have portrayed. In its April ’15 STEO, EIA actually forecasts drilling activity to increase

this autumn― even with lower prices for WTI―as companies take advantage of lower

costs for leasing acreage, drilling and well completion. Simmons & Co. notes that work-

force cuts already have reached the point where the industry would have difficulty handling

a sudden increase in demand. This situation suggests that late ’15 or early ’16 will see less

pressure to control costs by reducing payroll, and that employment growth may return.

Going Global — Houston’s ties to

the global economy extend beyond

crude, chemicals and oil field

equipment. The Partnership is cur-

rently analyzing the region’s ties to

the global economy―ties that will

offset the impacts of the downturn

in the oil and gas industry. On May

27 at the JW Marriott Galleria, the Partnership will present the results of that analysis.

Following the report, local experts in trade finance, global supply chains, third-party lo-

gistics and international marketing will share their insights on conducting global business

from the Texas Gulf Coast. Panelists participants are:



• Lori Vetters, Sr. VP and Regional Commercial Executive, HSBC Holdings

• John Magee, President and CEO, Crane Worldwide Logistics

• Sam Bikman, Sr. VP Global Supply Chain, Goodman Global Inc.

• David Peebles, Vice President, Business Development, Odebrecht Group

Attendees will receive a copy of the Partnership’s formal analysis, which will discuss the

number of firms here doing business abroad, their impact on the region’s economy, recent

trends in foreign direct investment in Houston, and potential demand for Houston’s ex-

ports. Attendees will receive both this document and a second study, a historical analysis

of Houston’s import/export flows.

More information about the May 27 event can be found by clicking here or visiting the

Events section under the Membership tab at www.houston.org.

http://events.houston.org/?id=247&eid=635&Mode=ViewDetails

http://www.houston.org/



SNAPSHOT — HOUSTON’S KEY ECONOMIC INDICATORS

Building Permits — City of Houston construction permits totaled $8.9 billion for the

12 months ending March ’15, up 40.3 percent from $6.3 billion for the 12 months ending

March ’14. According to the latest data released by the city’s Department of Public

Works & Engineering Planning & Development Services, residential permit values rose

32.4 percent from $2.4 billion to $3.2 billion, and nonresidential permits grew 45.2 per-

cent from $3.9 billion to $5.7 billion.

Inflation — The cost of consumer goods and services as measured by the Consumer

Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent nationwide from

March ’14 to March ’15, its third consecutive decline. According to data released today

by the U.S. Bureau of Labor Statistics, the decrease is a result of an 18.3 percent drop in

the energy index. Core inflation (all items less the volatile food and energy categories)

rose 1.8 percent over the past 12 months.

Home Sales — The Houston housing market rebounded strongly in March after a slow-

down in February. Total property sales, single-family home sales, total dollar volume

and pricing all posted over the year gains. Houston-area realtors sold 6,232 homes in

March ’15, up 3.8 percent from 6,005 sold the same time last year. Total dollar volume

increased 9.0 percent over the year to $2.0 billion in March. Home prices reached record

highs for a March with the average sales price of a single-family home increasing 6.5

percent to $276,837 and the median price of a single-family home rising 8.9 percent to

$208,000.

Purchasing Managers Index — The Houston Purchasing Managers Index (PMI), a

short-term leading indicator for regional production, registered 44.5 in March, a sharp

drop from 49.3 in February, according to the latest report from the Institute for Supply

Management-Houston (ISM-Houston). For the third consecutive month, the PMI is sig-

naling potential contraction in production in the near term.

Vehicle Sales — Houston-area auto dealers sold 30,119 vehicles in March ’15, a 20.2

percent decrease from the 37,733 sold March ’14, according to TexAuto Facts, published

by InfoNation, Inc. of Sugar Land. For the 12 months ending March ’15, vehicle sales

totaled 363,876, a 1.4 percent increase from the 358,861 sold in the 12 months ending

March ’14. The running total, however, has slipped from its most recent peak of 376,598

vehicles sold in the 12 months ending January ’15.

Patrick Jankowski and Jenny Philip

contributed to this issue of Houston: The Economy at a Glance

http://www.houston.org/pdf/research/narratives/COH_Building_Permits/COH_Building_Permits.pdf

http://www.houston.org/pdf/research/narratives/CPI/Consumer_Price_Index.pdf

http://www.houston.org/pdf/research/narratives/Multiple_Listing_Service/Multiple_Listing_Service_Activity.pdf

http://www.houston.org/pdf/research/narratives/PMI/Purchasing_Managers_Index.pdf

http://www.houston.org/pdf/research/narratives/Vehicles/Vehicle_Sales.pdf



Stay Up To Date!

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The Key Economic Indicators table is updated whenever any data change — typically, 11

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panied by commentary, please email your request for Key Economic Indicators to

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and Indicators in the same email.

http://www.houston.org/economy/archives/

mailto:[email protected]

mailto:[email protected]



HOUSTON MSA NONFARM PAYROLL EMPLOYMENT (000) Change from % Change from

Mar '15 Feb '15 Mar '14 Feb '15 Mar '14 Feb '15 Mar '14

Total Nonfarm Payroll Jobs 2,971.2 2,965.7 2,888.7 5.5 82.5 0.2 2.9

Total Private 2,585.0 2,579.6 2,509.2 5.4 75.8 0.2 3.0

Goods Producing 574.6 574.6 558.2 0.0 16.4 0.0 2.9

Service Providing 2,396.6 2,391.1 2,330.5 5.5 66.1 0.2 2.8

Private Service Providing 2,010.4 2,005.0 1,951.0 5.4 59.4 0.3 3.0

Mining and Logging 113.0 113.7 107.5 -0.7 5.5 -0.6 5.1

Oil & Gas Extraction 54.8 54.9 53.8 -0.1 1.0 -0.2 1.9

Support Activities for Mining 55.7 56.0 52.5 -0.3 3.2 -0.5 6.1

Construction 206.9 206.1 198.3 0.8 8.6 0.4 4.3

Manufacturing 254.7 254.8 252.4 -0.1 2.3 0.0 0.9

Durable Goods Manufacturing 173.3 174.0 172.5 -0.7 0.8 -0.4 0.5

Nondurable Goods Manufacturing 81.4 80.8 79.9 0.6 1.5 0.7 1.9

Wholesale Trade 169.3 171.5 165.6 -2.2 3.7 -1.3 2.2

Retail Trade 296.8 295.7 288.2 1.1 8.6 0.4 3.0

Transportation, Warehousing and Utilities 135.6 134.9 132.0 0.7 3.6 0.5 2.7

Utilities 16.0 16.0 15.7 0.0 0.3 0.0 1.9

Air Transportation 20.2 20.1 20.6 0.1 -0.4 0.5 -1.9

Truck Transportation 25.5 25.4 24.2 0.1 1.3 0.4 5.4

Pipeline Transportation 10.5 10.4 10.1 0.1 0.4 1.0 4.0

Information 33.2 33.2 33.1 0.0 0.1 0.0 0.3

Telecommunications 15.1 15.1 15.1 0.0 0.0 0.0 0.0

Finance & Insurance 94.4 93.6 92.7 0.8 1.7 0.9 1.8

Real Estate & Rental and Leasing 54.4 54.4 53.1 0.0 1.3 0.0 2.4

Professional & Business Services 466.1 466.2 455.4 -0.1 10.7 0.0 2.3

Professional, Scientific & Technical Services 223.0 222.5 214.4 0.5 8.6 0.2 4.0

Legal Services 25.3 25.5 23.5 -0.2 1.8 -0.8 7.7

Accounting, Tax Preparation, Bookkeeping 25.1 25.3 24.3 -0.2 0.8 -0.8 3.3

Architectural, Engineering & Related Services 75.8 76.1 72.2 -0.3 3.6 -0.4 5.0

Computer Systems Design & Related Services 33.2 32.8 31.6 0.4 1.6 1.2 5.1

Admin & Support/Waste Mgt & Remediation 209.5 210.3 207.1 -0.8 2.4 -0.4 1.2

Administrative & Support Services 199.6 200.0 196.7 -0.4 2.9 -0.2 1.5

Employment Services 72.9 74.7 77.8 -1.8 -4.9 -2.4 -6.3

Educational Services 54.8 55.0 52.1 -0.2 2.7 -0.4 5.2

Health Care & Social Assistance 307.3 306.5 293.5 0.8 13.8 0.3 4.7

Arts, Entertainment & Recreation 30.1 28.6 28.9 1.5 1.2 5.2 4.2

Accommodation & Food Services 265.0 261.8 253.3 3.2 11.7 1.2 4.6

Other Services 103.4 103.6 103.1 -0.2 0.3 -0.2 0.3

Government 386.2 386.1 379.5 0.1 6.7 0.0 1.8

Federal Government 27.8 27.7 27.6 0.1 0.2 0.4 0.7

State Government 73.4 73.0 73.1 0.4 0.3 0.5 0.4

State Government Educational Services 40.3 40.1 40.0 0.2 0.3 0.5 0.7

Local Government 285.0 285.4 278.8 -0.4 6.2 -0.1 2.2

Local Government Educational Services 199.6 200.0 194.9 -0.4 4.7 -0.2 2.4

SOURCE: Texas Workforce Commission



Houston Economic Indicators

A Service of the Greater Houston Partnership

Most Year % Most Year %

Month Recent Earlier Change Recent Earlier Change

ENERGY

U.S. Active Rotary Rigs Apr '15 976 1,835 -46.8 1,302 * 1,793 * -27.4

Spot Crude Oil Price ($/bbl, West Texas Intermediate) Apr '15 52.56 102.50 -48.7 49.91 * 99.63 * -49.9

Spot Natural Gas ($/MMBtu, Henry Hub) Apr '15 2.67 4.66 -42.7 2.82 * 4.83 * -41.6

UTILITIES AND PRODUCTION

Houston Purchasing Managers Index Mar '15 44.5 57.1 -22.1 47.6 * 57.6 * -17.4

Nonresidential Electric Current Sales (Mwh, CNP Service Area) Mar '15 4,291,555 4,006,924 7.1 12,601,981 12,466,019 1.1

CONSTRUCTION

Total Building Contracts ($, Houston MSA) Mar '15 1,237,630,000 2,115,385,000 -41.5 4,516,399,000 5,324,440,000 -15.2

Nonresidential Mar '15 317,448,000 1,294,257,000 -75.5 1,816,808,000 3,132,159,000 -42.0

Residential Mar '15 920,182,000 821,128,000 12.1 2,699,591,000 2,192,281,000 23.1

Building Permits ($, City of Houston) Mar '15 626,751,768 630,151,045 -0.5 1,878,985,666 1,695,355,325 10.8

Nonresidential Mar '15 480,005,443 422,557,697 13.6 1,168,029,228 1,146,101,442 1.9

New Nonresidential Mar '15 250,708,550 241,994,592 3.6 576,029,396 600,190,018 -4.0

Nonresidential Additions/Alterations/Conversions Mar '15 229,296,893 180,563,105 27.0 591,999,832 545,911,424 8.4

Residential Mar '15 146,746,325 207,593,348 -29.3 710,956,438 549,253,883 29.4

New Residential Mar '15 124,042,056 188,135,844 -34.1 649,130,852 490,869,079 32.2

Residential Additions/Alterations/Conversions Mar '15 22,704,269 19,457,504 16.7 61,825,586 58,384,804 5.9

Multiple Listing Service (MLS) Activity

Property Sales Mar '15 7,564 7,298 3.6 17,942 18,038 -0.5

Median Sales Price - SF Detached Mar '15 208,000 191,000 8.9 199,333 * 184,247 * 8.2

Active Listings Mar '15 28,507 28,085 1.5 27,684 * 28,031 * -1.2

EMPLOYMENT (Houston-Sugar Land-Baytown MSA)

Nonfarm Payroll Employment Mar '15 2,971,200 2,888,700 2.9 2,960,833 * 2,876,033 * 2.9

Goods Producing (Natural Resources/Mining/Const/Mfg) Mar '15 574,600 558,200 2.9 574,433 0 557,000 * 3.1

Service Providing Mar '15 2,396,600 2,330,500 2.8 2,386,400 0 2,319,033 * 2.9

Unemployment Rate (%) - Not Seasonally Adjusted

Houston-Sugar Land-Baytown MSA Mar '15 4.2 5.2 4.3 * 5.5 *

Texas Mar '15 4.2 5.4 4.4 * 5.7 *

U.S. Mar '15 5.6 6.8 5.8 * 6.9 *

TRANSPORTATION

Port of Houston Authority Shipments (Short Tons) Mar '15 4,062,416 3,739,892 8.6 11,698,392 10,805,022 8.3

Air Passengers (Houston Airport System) Mar '15 4,652,692 4,589,282 1.4 12,633,395 12,393,293 1.9

Domestic Passengers Mar '15 3,748,267 3,730,805 0.5 10,178,283 10,055,529 1.2

International Passengers Mar '15 904,425 858,477 5.4 2,455,112 2,337,764 5.0

Landings and Takeoffs Mar '15 68,261 70,867 -3.7 193,506 200,259 -3.4

Air Freight (metric tons) Mar '15 37,703 36,774 2.5 112,267 104,015 7.9

Enplaned Mar '15 19,463 19,270 1.0 60,688 55,455 9.4

Deplaned Mar '15 18,240 17,504 4.2 51,579 48,560 6.2

CONSUMERS

New Car and Truck Sales (Units, Houston MSA) Mar '15 30,119 37,733 -20.2 85,587 95,709 -10.6

Cars Mar '15 12,585 16,214 -22.4 35,538 41,198 -13.7

Trucks, SUVs and Commercials Mar '15 17,534 21,519 -18.5 50,049 54,511 -8.2

Total Retail Sales ($000,000, Houston MSA, NAICS Basis) 3Q14 31,494 23,423 34.5 88,671 78,749 12.6

Consumer Price Index for All Urban Consumers ('82-'84=100)

Houston-Galveston-Brazoria CMSA Mar '15 210.283 211.745 -0.7 210.755 * 211.262 * -0.2

United States Mar '15 236.119 236.293 -0.1 234.849 * 234.997 * -0.1

Hotel Performance (Houston MSA)

Occupancy (%) 4Q14 68.1 65.9 71.8 * 69.1 *

Average Room Rate ($) 4Q14 106.52 101.26 5.2 106.87 * 101.19 * 5.6

Revenue Per Available Room ($) 4Q14 72.49 66.77 8.6 76.76 * 69.92 * 9.8

YEAR-TO-DATE TOTAL or

YTD AVERAGE*MONTHLY DATA



Sources Rig Count Baker Hughes Incorporated Spot WTI, Spot Natural Gas U.S. Energy Information Admin. Houston Purchasing Managers National Association of Index Purchasing Management – Houston, Inc. Electricity CenterPoint Energy Building Construction Contracts McGraw-Hill Construction City of Houston Building Permits Building Permit Department, City of Houston

MLS Data Houston Association of Realtors Employment, Unemployment Texas Workforce Commission

Port Shipments Port of Houston Authority Aviation Aviation Department, City of Houston Car and Truck Sales TexAuto Facts Report, InfoNation, Inc.,

Sugar Land TX Retail Sales Texas Comptroller’s Office Consumer Price Index U.S. Bureau of Labor Statistics Hotels PKF Consulting/HospitalityAsset Advisors International Postings, Foreclosures Foreclosure Information &Listing Service



-150

-120

-90

-60

-30

0

30

60

90

120

150

2,000

2,100

2,200

2,300

2,400

2,500

2,600

2,700

2,800

2,900

3,000

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

12

-Mo

nth

Ch

ange

(0

00

)

No

nfa

rm P

ayro

ll Em

plo

yme

nt

(00

0)

Source: Texas Workforce Commission

Nonfarm Payroll Employment, Houston MSA

12-Month Change Total Payroll Employment

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500

420

460

500

540

580

620

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Serv

ice

-Pro

vid

ing

Job

s (0

00

s)

Go

od

s-P

rod

uci

ng

Job

s (0

00

s)


Goods-Producing and Service-Providing EmploymentHouston MSA

Goods-Producing Jobs Service-Providing Jobs



3

4

5

6

7

8

9

10

11

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

% C

ivili

an L

abo

r Fo

rce


Unemployment Rate - Houston, Texas and U.S.

Houston Texas U.S.

0

2

4

6

8

10

12

14

16

0

20

40

60

80

100

120

140

160

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Nat

ura

l Gas

, $ /

mcf

WTI

, $ b

arre

l

Source: U.S. Energy Information Administration

Spot Crude and Natural Gas PricesMonthly Averages

WTI Natural Gas