Skip to main content

Houston Economy to Face Major Job Losses, Recession from Coronavirus and Oil Plunge

Published Apr 01, 2020 by Kelsey Seeker

Houston is likely to see significant job losses and a prolonged drain on its economy from the COVID-19 coronavirus.  

That was one of the major takeaways from a virtual presentation by Patrick Jankowski, Partnership Senior Vice President of Research, on March 31. Jankowski discussed his latest analysis of COVID-19, collapsing oil prices, the imminent U.S. recession, and their impact on Houston’s economy. 

Jankowski stressed that because of the unprecedented and ongoing nature of the situation, predicting the economic impact is difficult at this time. “With the situation changing daily, we can’t really get a good read on what’s actually going on yet,” he said. 

Jankowski referenced the next Bureau of Labor Statistics’ jobs report, which will be based on the number of employees on payroll during the second week of March and won’t include the waves of layoffs that happened during the third and fourth weeks of March. It won’t be until the April report is released in early May when we will see the real impact on the job market.

Pandemic will determine recession’s length and severity 

“We are coming off a period of 113 consecutive months of job growth, the longest expansion in US history and a phenomenal jobs report,” Jankowski said. “Last week we saw 3.3 million claims for unemployment benefits, and I believe that number will only rise as more people are laid off, the system becomes less overloaded and people figure out how to apply for benefits.” 

Given the single week of job losses based on the initial claims for unemployment insurance in Texas and Houston’s share of Texas’ jobs, Jankowski estimates mid-March losses in the region will be around 37,945 jobs. 

Jankowski noted that measures to combat the coronavirus are also combating the economy. He referenced the U.S. GDP forecasts from major financial institutions that estimate a decline in GDP for the first quarter of the year that continues through the rest of the year.  

“From my perspective - yes, we are in a recession and the situation will worsen in Q2,” Jankowski said. “We hope to have some growth in Q3, but we will end of the year worse off than at the beginning.” 

Add that to the drop in oil prices and the Texas Railroad Commission being asked to regulate crude oil production for this first time since the 1970s, Jankowski believes the crude collapse will only add to Houston’s misery. 

Small businesses and other industries hurt the worst 

Jankowski mentioned the Partnership’s survey of its small business members and found that 29% were unable to deliver goods or services, 59% are operating below half capacity and the most concerning, that 41% can survive only 1 to 4 weeks. 

He also highlighted industry sectors that are most at risk during this initial period and the 777,000 jobs tied to those sectors. The sectors include those impacted by social distancing (like retail), those whose services can’t be delivered remotely (such as plumbers and other home services), those that aren’t considered essential (such as the arts), and most small businesses (that tend to operate on thin margins).  

“If this virus continues after May, every job is at risk, every sector is at risk,” Jankowski stressed.  “And even if you are working from home and able to provide services to some degree, you may be affected. We will see additional layoffs to what we’ve already experienced.” 

Houston predicted to lose at least 150,000 jobs 

There are two ways to predict how Houston will fare – looking at models based on assumption or based on history.  

The Institute for Regional Forecasting shows 18 different scenarios of how the virus and oil prices will play out, with the most likely scenario from their prediction showing Houston down by 44,000 jobs. On the other hand, The Perryman Group’s model is forecasting 256,000 jobs lost.  

“These are two very different forecasts and you’re really seeing that uncertainty play out in these models,” Jankowski said.  

By referencing the history of recessions Houston has experienced, Jankowski estimates Houston’s jobs loss will hover between 150,000 jobs and 350,000 jobs.  

“Given how Houston fairs when oil is faring badly and then when the US economy not doing well, we are likely to look like between 2008-09 recession and oil bust we had in the 1980s,” Jankowski said.  

With a job loss of 13.2% from 1982, that amounts to about 417,450 jobs today. Using the Great Recession benchmark of 4.5%, that loss is closer to 142,325 jobs. 

Collapsing oil prices on par with 1982 energy bust 

With the tensions between Saudi Arabia and Russia spilling onto the world stage and affecting the price of crude, Houston has already felt the effects.  

On March 30 of this year, the price of oil closed at $21.07 a barrel. During that same month in 1982, the price was $10.25 but adjusted for inflation, it closed at $24.37 a barrel.  

“We can expect crude to slowly climb back into the low $30s by mid-summer without a Russia-Saudi deal,” Jankowski said. “We’ll see any jobs we regained from the 2014 fracking bust disappear and a leaner, smaller industry in the next two years with more consolidations and bankruptcies taking place.” 

Houston in one word – resilient 

One of the biggest determining factors in an economic rebound will be the level of fear people still have around the virus, Jankowski said. Even on the downward slope people will practice at least a degree of social distancing. He reiterated the damaging shock to consumer confidence the virus has caused.  

“The economy really won’t be able to recover until people feel comfortable spending again. However, if there’s one word I would use to describe Houston, it would be resilient,” Jankowski said. “We've been through five downturns since the 1980s and yet the economy is larger now and more diverse than ever before.” 

Related News

Energy

S&P Global Moves Power Conference to Houston, Highlighting Energy Leadership

10/23/24
In a significant nod to Houston's leadership in the energy transition, S&P Global has moved its annual Financing US Power Conference to Houston after 25 years in New York. The shift is more than just geographical. It is symbolic of Houston's role as a unique collaborative hub for traditional energy and scalable technologies for a low carbon future.   The three-day conference this week is set to attract over 200 attendees, including executives and decision makers from more than 100 companies. These leaders will explore the future of power generation and the essential role finance plays in advancing the energy transition.  “We moved the Financing US Power Conference to Houston to better reflect the city’s growing leadership in energy financing and innovation,” Brian Speight, content program manager at S&P Global, said. “Houston has seen a significant increase in capital flows toward both traditional and renewable energy projects. At the same time, we wanted to engage directly with the energy community here while maintaining strong ties with the financial institutions in New York, ensuring that we’re bridging the conversation between these two critical hubs for energy investment.”  Houston-based energy transition startups, businesses, and companies secured more than $3.88 billion in venture capital and private equity funding in the last five years, with corporate and strategic merger & acquisition investments driving the majority of these deals.  This ability to attract significant capital is further bolstered by Houston’s unique ecosystem. A powerful combination of Fortune 500 energy companies, alongside a thriving network of startups, accelerators, incubators, and world-class education institutions like Rice University and the University of Houston, make Houston a hotbed for energy innovation.  Building on this momentum, the Greater Houston Partnership has led efforts over the last six years to ensure the region remains at the forefront of the energy transition. The launch of the Houston Energy Transition Initative (HETI) has catapulted these efforts, leveraging Houston's industry leadership to accelerate global solutions for an energy-abundant, low-carbon future.  The Financing US Power Conference in Houston will play a pivotal role in advancing conversations that drive progress toward a more sustainable global future.  Learn more about Houston’s Energy Transition Initiative. 
Read More
Energy

Houston's Collaborative Approach and Innovation Driving the Global Energy Transition

10/17/24
Houston is poised to lead the global energy transition, but collaboration is key to success. At the Greater Houston Partnership’s fourth annual Future of Global Energy Conference, industry leaders, innovators, and policymakers gathered to explore one central theme: how we can collectively create a low-carbon future that is resilient, reliable and sustainable while meeting growing energy demands. The discussions highlighted the critical role of partnerships, investment and innovation in driving Houston’s leadership on the global stage. The Power of Collaboration “What we have here in Houston that’s really unique…The importance of collaboration with industry is critical.” – Carmichael Roberts, Co-Founder and Managing Partner, Material Impact and Co-Lead, Investment Committee, Breakthrough Energy Ventures  Roberts stressed the importance of industry partnerships, noting that while Houston’s energy ecosystem has matured significantly, collaboration is more important than ever to move at the necessary pace. “Because of our industrial base and our infrastructure, we are uniquely positioned to help those early-stage projects get done. But that also requires risk-taking from capitol providers and incumbent companies.” – Bobby Tudor, CEO of Artemis Energy Partners      The President and CEO of the Federal Reserve Bank of Dallas, Lorie Logan, said transformative issues taking place in our economy provide Houston the ability to lead the energy transition, capitalizing on its robust infrastructure, innovation ecosystem and strategic role in shaping the future of energy. “Structural changes in the economy, like the energy transition and advances in artificial intelligence, are key drivers fueling strong investment demand and unlocking potential productivity gains.” Lorie Logan At the same time, the need to reduce carbon emissions has never been more urgent. With Houston's industrial infrastructure and emerging talent, the region is ready to meet these dual challenges. Ensuring the Talent of Tomorrow  This year’s conference also featured an Emerging Talent Program supported by Chevron, to bolster the energy sector’s reputation with students and early career professionals to bridge the generational divide on the challenges and opportunities created by the dual challenge.  Click to expand In addition to that program, Texas Exchange for Energy and Climate Entrepreneurship (TEX-E) hosted a poster competition featuring TEX-E fellows and local university students.  Chase Sellers, a fourth-year PhD student in the Chemical and Biomolecular Engineering department at Rice University, won the competition. Sellers’ presentation focused on improving the affordability and scalability of green hydrogen production via electrolysis. By fostering connections between experienced professionals and emerging leaders, the conference is helping to cultivate a workforce that is equipped to address the pressing issues facing the industry today. “As we look to the future, it’s clear that Houston’s role is not just to produce energy but to lead the way in developing and deploying the solutions needed to meet the dual challenge of energy security and climate action.” – Jane Stricker, Senior Vice President of Energy Transition, Greater Houston Partnership & Executive Director, Houston Energy Transition Initiative Learn how Houston is leading the global energy transition.
Read More

Related Events

Economic Development

State of the Port

What does the future hold for Port Houston and its role as a global commerce hub? Join us at the State of the Port on Friday, November 22 to uncover the exciting developments…

Learn More
Learn More
Executive Partners