Strong energy markets and a broadening economic base will drive the Houston economy ahead in 2014. WTI crude oil prices firmed to near $100 per barrel in mid-February. The extreme winter weather in much of the country has increased natural gas demand, supporting price gains. Gas futures were near $4.60 per mmBtu in mid-February, about a third higher than last November’s lows. Major oil companies are pushing for the repeal of crude oil export restrictions. If granted, this will be positive for the Houston economy, not only in terms of jobs in transportation and distribution industries, but also in terms of support for the price of crude oil. The southern leg of the Keystone XL pipeline opened in late January, increasing crude oil supply to Port Arthur refineries. A significant portion of the gasoline produced by Texas Gulf Coast refineries is exported, supporting the U.S. balance of trade. Los Angeles-based Occidental Petroleum is moving its headquarters to Houston by early 2015. As Mexico opens up its energy sector to international investment, Houston is poised to benefit.
Payroll job growth in the Houston metro area remains robust, at 3.0 percent year/year in December, well above the U.S. average rate of 1.7 percent. As expected, the positive performance gap between Houston job creation and the national average has narrowed, but we do not expect that gap to disappear anytime soon. At 5.8 percent in December, Houston’s unemployment rate was well below the U.S. average of 6.7 for that month.
The rapid economic and demographic growth of Houston is opening up opportunities outside of the energy sector. Mixed-use developments are underway in suburban communities, complimenting the single-family construction. McGuyer Homebuilders is planning a 1,000-acre master-planned community in Manvel. Retail vacancy rates for Houston are at historic lows. State officials are discussing high-speed rail, possibly running from Oklahoma City to Monterrey, Mexico, through Houston.
Click here for the complete Houston MSA Regional Economic Update: Houston 2013Q4.