Category Archives: Houston economy

Houston economy showed steady growth in 2019

Jobs in Houston in 2019 grew by 1.6 percent (49,000 jobs).  This is according to the latest economic indicators published by the Federal Reserve of Dallas. That rate is actually below the metro’s historical average of 2.1 percent.The main sectors to change were:

  • Professional & business services (+21,400)
  • Education and health services (+10,800)
  • Construction (+8,600)
  • Trade transportation and utilities (-1,700)
  • Mining – meaning E&P (-1,000)



The Houston unemployment rate dropped slightly to 3.7 percent in December. That’s above the Texas and US rates (both 3.5 percent).

According to NAI Partners, the overall Houston office vacancy rate stood at 21.1 % at the end of December. That is down 0.7 per cent on the previous quarter, but up slightly year-on-year. The market actually absorbed 843,000 sq ft in 2019, the highest yearly figure since 2014. This was overshadowed by the 1.7 million sq ft of new office space coming onto the market. Currently, a further 3.3 million sq ft is under construction (38% spoken for).

Houston’s industrial vacancy rate at the end of December was 6.9% (41 million sq ft) , up 1.5% on a year ago. The rising vacancy rate was also caused by 9.6 million sq ft of new construction completed in 2019.

https://www.dallasfed.org/research/indicators/hou/2020/hou2002.aspx

NAI Partners – Houston office Q4 19 Market overview

NAI Partners – Houston Industrial Q4 19 Market overview

 

 

Judge rules Government must pay damages to upstream Harvey victims

Senior Judge Charles Lettow of the US Court of Federal Claims has ruled that the federal government is liable for damages incurred during Hurricane Harvey.

The ruling specifically applies to 13 test properties that were part of a two-week trial in May 2019. These properties were owned by private citizens and located in a (normally) dry reservoir upstream of the Addicks and Barker Cypress dams. However 10,000 homes in the neighborhood were affected.



History of the dams

After two major floods in 1929 and 1935 caused extensive damage to downtown Houston, the Addicks and Barker Cypress dams were built in the 1940’s to help protect downtown Houston. The dams (levees) were built about 18 miles west (upstream) of downtown. However certain aspects of the design, such as a levee on Cypress Creek (upstream of the dams) were never built.  Even then, the government calculated that the land liable to flood in extreme storms was greater than the area acquired by the government for flood control purposes.  At the time, the government didn’t consider this a big deal as the land behind the dams was used for ranching and rice farming. Land was purchased by the government for between five and ten dollars per acre.

Hurricane Harvey

During Hurricane Harvey in September 2017, the Army Corps of Engineers closed the gates at the dams to prevent flooding downtown. Over a four-day period, over 30 inches of rain fell in Harris County. This resulted in 154,000 homes being flooded in the county.  However the actions prevented an estimated $7 billion of damages in downtown Houston.

The judge ruled that these actions amounted to the ‘taking’ of personal property for the benefit of the federal government. This requires the government to compensate landowners under the US Constitution’s Fifth Amendment.

Next steps

The immediate next step is that the court proposes to adjudicate damages for five of the thirteen test properties. Each side will propose three properties for consideration for damages by January 21, 2020. The court will then select five properties from the six put forward.

Separate downstream case

There is a separate legal case concerning properties downstream of the Addicks and Barker dams that were flooded when the Army Corps intentionally let out water during Harvey that threatened to spill over the dams.  According to the Wall Street Journal the judge in that case recently ordered the government and plaintiffs’ lawyers to discuss a settlement.

Federal ruling – Upstream Addicks and Barker dams

 

 

Houston job growth slows as manufacturing jobs lost

Houston jobs grew 3.1 percent annualized over the three months ending in July. Construction increased by 6,500 jobs, transportation, wholesaling and utilities by 6,700 jobs, and Leisure and hospitality by 4,900. However the area lost 1,000 manufacturing jobs and education and health jobs fell by 800.



This is according to the latest research from the Federal Reserve of Dallas which publishes data on the Houston-Sugarland-The Woodlands metropolitan area on a monthly basis.

In the year to July 2019, Houston added 76,400 new jobs, slightly higher than the comparable prior year (68,400 jobs). This included 5,600 manufacturing jobs year-on-year. However manufacturing jobs have dropped by 1,579 since March.

First quarter job growth was revised downwards by 15,000 (wonder if the 2nd quarter will also be revised down later?). Through July, that means that Houston employment has grown at an annual pace of 1.9 percent for 2019. That’s slightly below the historical annual growth rate of 2.1 per cent.

The unemployment rate in Houston rose from 3.6 percent in June to 3.8 percent in July. It’s now back above the US national average of 3.7 percent. The rate in Texas is 3.4 percent.

The Bank use 11 indicators to produce a composite Houston leading index. Compared with the quarter ended April 2019, the index has turned negative. All the index components have declined. However the biggest decline was in new orders for manufacturing which went from an annual 9.9 percent growth rate in the three months to April to a 1.3 percent contraction over the three months ending July.

As a result, the Bank expects more moderate growth for the local economy through the end of the year.

https://www.dallasfed.org/research/indicators/hou/2019/hou1909.aspx

 

 

City of Houston settles with EPA over illegal sewer discharges

 

Dept of Justice

The City of Houston has reached a settlement agreement with the Environmental Protection Agency (EPA) and the Texas Commission on Environmental Quality.

The city will implement a comprehensive set of measures and improvements to the city’s sewer system to resolve sanitary sewer overflows and illegal discharges into the city’s waterways such as Buffalo Bayou and the Houston Ship Channel.



The Department of Justice originally filed the complaint on behalf of the EPA and the state of Texas in September 2018. The city has agreed to pay a civil penalty of $4.4 million.

The city of Houston operates one of the largest sewer systems in the nation, which serves nearly two million people. The system includes more than 6,000 miles of sewer lines, 390 lift stations, and more than 120,000 manholes.

The city will implement extensive measures to prevent sanitary sewer overflows and effluent violations. This will take over over 15 years at an estimated cost of $2 billion.

These include;

  • Increasing sewer capacity in certain areas where sewer overflows occur during major rain events.
  • Repairing at least 150 miles of sewer lines annually that are cracked or broken.
  • Implementing two major cleaning programs to reduce blockages caused by ‘fatbergs’
  • Improvements at wastewater treatment plants to reduce incidences of E.Coli, ammonia and other solid effluents.

https://www.justice.gov/opa/pr/houston-texas-agrees-implement-comprehensive-measures-aimed-eliminating-sanitary-sewer-0

Houston unemployment rate drops to 4.1%

The Federal Reserve Bank of Dallas published its monthly economic outlook for Houston. Highlights were;

  • Houston employment grew 3.9% over the three months ending in September. Biggest gains were in Construction (8,700 jobs), Manufacturing (6,200) and education and health services (4,900). Last month’s figure was 3.8%.
  • Year-over-year job growth increased to 3.9% in September (116,000). Last month the figures were 3.1% and 93,000 jobs. The September year-over-year figures are a little inflated as a result of some job losses post-Hurricane Harvey.
  • Houston unemployment rate dropped to 4.1% in September. The Texas and US unemployment rates were 3.9% and 3.8% respectively. Two years ago, the Houston unemployment rate was 5.6%.
  • Total new housing starts were up 7.2% year-over-year in the first half of 2018.
  • Office vacancy rates (22.9%) dropped for the first time since 2014. The industrial vacancy rate rose a little to 5.1% but the market remains tight. Apartment vacancies rose to 6.5% (the rate was almost 8% just prior to Harvey).

The Feds conclude that the overall outlook remains positive. Houston’s economy continues to grow at a healthy pace despite signs of a slowdown in its core energy-related sectors.

https://www.dallasfed.org/research/indicators/hou/2018/hou1811.aspx

 

 

Houston added 93,000 jobs in the past year

The Federal Reserve Bank of Dallas published its monthly economic outlook for Houston. Highlights were;

  • Houston employment grew 3.8% over the three months ending in August. Biggest gains were in Construction (13,600 jobs) and education and health services (5,600). Last month’s figure was 2.7%.
  • Year-over-year job growth increased to 3.1% in August (93,000). Last month the figure was 2.7%.
  • Houston unemployment rate dropped to 4.2% in August. The Texas and US unemployment rates were both 3.9%.
  • The outstanding value of loans at banks headquartered in Houston grew at 11.6% from the 2nd quarter of 2017 to the 2nd quarter of 2018. This is slightly lower than the 1st quarter figure of 13.6% but well ahead of the US lending growth of 4.3%.

The Feds conclude that the overall outlook remains positive. Houston’s economy continues to grow at a healthy pace despite signs of a slowdown in its core energy-related sectors.

Separately, JLL reported that the total office vacancy rate for Houston declined for the first time since Q4 2014. The vacancy rate dropped from 24.5% in Q2 to 24.2% in Q3, primarily due to new leasing activity in west Houston.

https://www.dallasfed.org/research/indicators/hou/2018/hou1810.aspx

http://houstonblog.jll.com/houston-office-vacancy-decreases-first-time/

Houston jobs growth accelerates but headwinds are ahead

The Federal Reserve Bank of Dallas recently published its monthly economic outlook for Houston. Highlights were

  • Houston jobs accelerated to an annualized rate of 5.5% over the three months ending in June (41,600 jobs). Biggest gains were in professional and business services (11,500), construction (6,800) and manufacturing (4,000). Last month’s figure was 4.8%. Construction jobs surged but the growth in manufacturing abated.
  • Year-over-year job growth increased to 2.9% in June (88,500). Last month the figure was 2.6%.
  • Houston unemployment rate dropped to 4.4% in June. The Texas rate also dropped slightly to 4.0%, while the overall rate in the USA rose to 4.0%.
  • Apartment vacancies declined sharply at the end of 2017 to 5.9%, as flooding forced many people out of their homes temporarily. In the first quarter the rate increased to 6.3%.
  • Vacancy rate for commercial office space is still increasing and now stands at 23.1%. Industrial vacancy rates remain low at 4.9%.

The Feds expect the expansion rate in Texas to slow in the second half of the year due to a tight labor market and a slowing in export growth. Additionally growth in Houston will moderate as Hurricane-Harvey induced activity dissipates in the second half of the year.

The Feds also report that ‘Numerous business contacts across a wide range of industries are expressing concern about the impact of the ongoing trade disputes on future growth and prices.’

https://www.dallasfed.org/research/indicators/hou/2018/hou1808.aspx

Houston economic growth accelerates

The Federal Reserve Bank of Dallas recently published its monthly economic outlook for Houston. Highlights were

  • Houston jobs grew at an annualized rate of 4.0% over the three months ending in May (30,500 jobs). Biggest gains were in professional and business services (11,200), manufacturing (4,800) and education and health services (3,000).
  • Year-over-year job growth accelerated to 2.6% in May (77,000).
  • Houston unemployment rate dropped to 4.5% in March (Texas 4.1%, USA 3.8%)
  • 2017 job gains were revised downwards slightly to 1.7% (51,100)
  • Exports of oil and gas, including LNG were up 67% from Jan-April, compared to the same period last year. Year-to-year growth in exports of chemicals through April slowed to 5.8% compared to 10.5% in 2017.

Last week, Gov Greg Abbott sent a letter to President Donald Trump in which he warned that tariffs on foreign steel, aluminum and other products risk slowing economic growth in Texas. Texas imported more than $8.3 billion in steel and aluminum last year, much of it pipe that cannot be manufactured in the US. In addition Gov Abbott pointed out that Texas exports $8 billion of tariff-eligible goods to China.

More tariffs between the US and China are set to take effect July 6.

If the tariffs go into effect, it will be interesting to see how long it takes for the effect to show up in the economic indicators for Houston.

https://www.dallasfed.org/research/indicators/hou/2018/hou1807.aspx

Houston economic outlook remains positive

The Federal Reserve Bank of Dallas recently published its monthly economic outlook for Houston. Highlights were

  • Houston jobs grew at an annualized rate of 3.9% in the first quarter (29,200 jobs). Biggest gains were in professional and business services (13,600), trade, transportation and utilities (3,300) and education and health services (3,300).
  • Year-over-year job growth was 2.1% (64,100).
  • Houston unemployment rate was 4.7% in March (Texas 4.0%, USA 4.1%)
  • Post Hurricane Harvey, construction employment grew at an annualized rate of 4.5% in the first quarter.
  • Total commercial office vacancy rate rose to 23.1%, following completion of new office space. Industrial vacancy rate is tight at 5%.
  • Median house prices dropped slightly to $232,200 but supply remains tight at 3.6 months of sales.

The Fed also published data on the Dallas/Fort Worth metro area. Job growth was 3.2% in the first quarter and the unemployment rate was 3.6%. Worryingly, net absorption of office space was negative for the first time since the second quarter of 2010. The office vacancy rate rose to 20.5% and is likely to rise further as there is 4.9 million square feet under construction, much of it speculative.

https://www.dallasfed.org/research/indicators/hou.aspx

Harvey’s economic impact on Houston will be lower than initially feared

The Greater Houston Partnership has published its initial estimates of the impact of Harvey on the Houston economy and they are lower than initially feared.

The main points are

  • In terms of 120+ entities represented on the Board of the Partnership, a quarter said that less than 6% of their employees were affected, half said that 6-10% were impacted, and a quarter said that over 15% of their employees were impacted.
  • According to the Texas Dept of Public Safety, 72,000 single family homes in the Houston metro area were damaged or destroyed (5% of Houston’s stock).
  • Only $6.5-$9.5 billion of the $25-$37 billion in residential damages will be covered by insurance.
  • About 300,000 vehicles with a value of $2.4 billion were damaged by Harvey.
  • FEMA has approved $202 million in disaster relief to residents in the Houston metro and the Small Business Administration has approved $104 million in small business loans.
  • September job losses in the Houston-Beaumont area are forecast to be between 42,000 and 74,000. By November, employment should exceed pre-Harvey levels.
  • At the peak, about 25% of US refinery capacity was shut down, it’s now less than 10%.
  • Construction contractors have complained of skilled labor shortages for some time, so
    the pace of rebuilding may be slower than hoped for.

UPDATE 9/16 : Apartment Data Services have surveyed 80% of the area complexes. Only 2% were damaged. That’s much lower, even in absolute terms, than from Tropical Storm Allison in 2001. Since Harvey average rents have risen by $12 (1.25%) to $966 a month. Those figures are before rental concessions. Prior to Harvey, many tenants were offered 3 months’ free rent. Those concessions have disappeared since Harvey.

Moody’s Analytics now estimates that Harvey’s total economic impact is $97 billion ($87 billion property damage and $10 billion in reduced output). This compares to Katrina which cost $175 billion ($144 billion property, $31 billion in reduced output).