The shale boom and subsequent re-emergence of the U.S. as a global leader in petroleum production has placed Houston at the center of rapidly changing global energy markets. The Houston economy has expanded robustly as a result. Year-over-year payroll job growth peaked at 4.5 percent for the Houston metro area last February. It has since dialed down to 2.9 percent as of October, still well ahead of the U.S. average of 1.7 percent for the month. The Houston metro area unemployment rate declined to 6.0 percent in October, well below the U.S. average of 7.3 percent for the month.
We are seeing signs that the rapid acceleration of Houston’s energy sector is easing. That is not to say that it is soon to go into reverse, but we do expect economic growth in Houston to moderate from robust to “merely” strong in 2014. With the energy sector still very active we can expect to see Houston’s economy backfill, with infrastructure and non-energy businesses catching up to the leading edge of the economy. Signs that the energy wave is cresting include an easing drilling rig count, decreasing profit margins in energy-related companies and a less frenetic Houston office market. A positive signal comes from Exxon’s planned expansion in Houston, expected to create 1,430 new jobs by 2015. Also, Transcanada is increasing oil pipeline capacity to Houston area refineries.
Oil prices have ticked up at year-end after easing from an early September high of $106/barrel for West Texas intermediate crude to an early December low of $92/barrel. Prospects for a moderate improvement in global economic growth in 2014 have supported an increase in the price for WTI to about $97/barrel as of mid-December. Our outlook for WTI for 2014 calls for stable pricing in the vicinity of $95/barrel. An early cold snap this winter has boosted natural gas prices to over $4 per MMBTU for the first time since last Spring.
Click here for the complete Houston MSA Regional Economic Update: Houston 2013Q3.