The Houston metro area economy continues to be fueled by strong regional and international energy markets. With rising U.S. exports of petroleum products, the linkage between U.S. and international oil prices is strengthening, keeping the pressure on U.S. production and exploration. Payroll employment for the Houston MSA was up 3.0 percent in April from a year earlier, representing a total of 82,300 jobs gained. The area’s unemployment rate was down to 5.4 percent as of March, well below the U.S. average of 6.7 percent for that month. The Houston economy is growing so rapidly that construction workers are reported as being in tight supply.
Also, Houston-area energy companies stand to gain from the opening up of Mexico’s energy sector. Pemex, Mexico’s state-owned petroleum exploration and production company, will soon relinquish its monopoly position. Private bidding on Mexican oil and gas leases is expected to begin by mid-2015. M&A activity in the energy sector is still heating up after a strong finish to 2013. Many energy giants are divesting non-core assets, creating opportunities for more nimble, smaller firms.
The very strong growth in Houston must be weighed against Stein’s Law, which says that if something can’t go on forever, it won’t. We are seeing slower year-over-year job growth now than a year ago. In April 2013, payroll employment for Houston was up 4.0 percent over the previous 12 months. However, for now, all signs are pointing to ongoing robust growth for the remainder of this year. With upstream supply rapidly being developed, downstream applications are coming to Houston. BASF and Yara have recently announced plans to build a “world scale” ammonia plant in nearby Freeport. Downstream companies may look to become more integrated with upstream supply, adding to the M&A boom.
Click here for the complete Houston MSA Regional Economic Update: Houston 2014Q1.