Ryan Holeywell | @RyanHoleywell | May 1, 2017
For Houstonians, 2014 was an easier time. While the rest of the country was still slowly recovering from the Great Recession, residents here were riding a wave of black oil that was selling for more than $100 per barrel.
Technological innovations made previously inaccessible energy sources easy to tap; meanwhile, those sky-high oil prices sent the industry scurrying to reach the next big find.
Downtown, engineers and geologists were hired like crazy to help oil companies plan their next moves. In the suburbs, manufacturing plants were operating non-stop, trying to keep up with the demand for heavy-duty machinery the industry needed. And across the city, a bevy of industries were flourishing, thanks to the deep pockets of oil industry personnel.
Then, the bottom fell out. In the summer of 2014, the price of oil started falling, eventually bottoming out at $30 per barrel. Today, it’s back up, but it never fully recovered, currently hovering around $50 per barrel. Few observers expect any dramatic rise any time soon. JPMorgan Chase & Co., for example, projects prices to rise by a couple of dollars later this year before dipping again in 2018.
That situation has resulted in an intriguing turn of events. While Houston weathered the post-recession fallout better than almost any other U.S. city, today, the roles are reversed. The U.S. economy is finally thriving. Yet in Houston – for years considered the country’s economic juggernaut in the face of the slowdown – unemployment is a full percentage point higher than it is for the rest of the country. “Texas, Once a Star, Becomes a Drag on the U.S. Economy,” the Wall Street Journal declared in a headline last fall.
Despite the doom and gloom, Houstonians don’t appear fazed.
Today, 64 percent of Houston-area residents say job opportunities here are “good” or “excellent,” according to the Kinder Houston Area Survey. The number is actually up slightly from a year ago, and it’s the second-highest rating of job opportunities here in the last 15 years. In 2015, 69 percent of Houstonians gave high marks to local job opportunities here. Article continues below chart.
It’s a remarkable figure, given the state of the local economy relative to the rest of the country. As of February, the only major metropolitan area with a higher unemployment rate than Houston is Cleveland, according to Bureau of Labor Statistics data.
“There’s a basic resistance to pessimism in Houston,” said Stephen Klineberg, founding director of the Kinder Institute for Urban Research, which runs the survey.
Meanwhile, when asked to identify the biggest problem facing people in Houston today, just 16 percent of residents named the economy, even though its unemployment rate has been ticking upwards since 2015. In fact, fewer Houstonians labeled the economy the region’s biggest problem today than they did during the entirety of the shale oil boom. Instead, they’re more worried about traffic. Article continues below chart.
Klineberg said Houstonians’ optimism in the face of falling oil prices could be attributed to a couple of related factors. First, Houston has suffered from oil busts in the past. In a city that’s well acquainted with the cyclical nature of an oil economy, today’s depressed prices might not seem abnormal. In other words, the occasional oil bust is just something to be expected here. And compared to the oil-related recessions the region suffered in the 1980s, today’s situation has had much less dramatic impacts.
But Klineberg and other experts also say Houston’s economy today is dramatically different from its economy of the 1980s. Oil is still king in Houston, but not the way it has been historically. Its economy is more diverse, and the impact of the drop in oil prices hasn’t been so devastating because of other industries that have served as buffers.
From the Texas Medical Center, to the Port of Houston, to the bevy of refineries and chemical plants on the east side of town, there are plenty of other sectors to keep Houston afloat.
Another factor contributing to the relatively positive outlook may have been the Super Bowl, said Patrick Jankowski, senior vice president for research at the Greater Houston Partnership. The annual survey is conducted in February, which would have been just after Houston hosted the annual contest and enjoyed weeks of positive press, both locally and nationally.
“The question was asked right after we had this major event that everyone took pride in,” Jankowski said. “There may be some of that coloring the remarks.”
Jankowski said his research indicates that the worst of Houston’s economic downturn is likely over, and survey respondents may feel that way too. Statistically, Houston’s economy was at its worst in summer 2016, he said.
Jankowski also noted that while 81,000 Houston-area energy industry jobs were lost in the latest oil downturn, that’s a relative small proportion of the region’s 3 million jobs. “People may be thinking, ‘the worst is over, and it really didn’t affect me that much,’” he said.
He noted that Houston’s 5.9 percent unemployment rate today – though higher than the national average – is still better than Houston’s unemployment rate during the Great Recession, which peaked at around 8.7 percent in 2010. So while things aren’t great for Houston’s economy, they are still much better than they were just a few years ago.
Jankowski said some layoffs are continuing in the oil sector, but the doom-and-gloom headlines announcing massive layoffs every week appears over – for now.
But Klineberg said there’s a limit to how long Houstonians will stay optimistic in the face of low oil prices and job cuts in that sector. “If oil doesn’t recover,” he said, “it’s eventually going to penetrate the public’s consciousness.”
Still, it’s important to know that while the majority of Houstonians are confident in their job opportunities are, that’s not the case for large portions of its population.
Just 45 percent of black residents give Houston’s job opportunities a positive rating, compared to 74 percent of white residents. Meanwhile, those with relatively low incomes – earning $12,5000 to $25,000 per year – aren’t very optimistic either. Only 51 percent of them give the area a good or excellent rating for jobs.