Economic Outlook for Houston 2-10-10 Ppt

8/8/2019 Economic Outlook for Houston 2-10-10 Ppt

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2/35

The Big Question

Has the

recession

ended?


3/35

The Big Answer

Yes, probably

around the thirdquarter of last

year.


4/35

How bad did it get?

How long is the road torecovery?

What will Houston look likethen?

Three little questions


5/35


6/35

How long is the road torecovery?

10 to remain weak

11 expect improvement

Three little answers


7/35

What will Houston look likeafter recovery?

Not like 07 or 08

More like 05 and 06

Three little answers


8/35

Houstons Gross Metro Product growing 1.8 percent in Q3/09 Source: The Brookings Institute

Local job losses tapering off 1,500 month now versus 13,000 month Q1/09 Source: Federal Reserve Bank of Dallas

Drilling rig count up

Up 36% from Jun 09 trough of 876 Source: Baker Hughes

Evidence of recovery


9/35

Purchasing Managers Index above 50 Up from a record low of 39.0 in March Source: Institute for Supply Management-Houston Chapter

More people flying Four consecutive months of passenger gains Source: Houston Airport System

Single-family home median prices up 8.7%

Seventh straight monthly increase in median price Source: Houston Association of Realtors

Evidence of recovery


10/35

Auto sales down 31% Cash for clunkers had minimal impact Source: TexAuto Facts Report

Foreign trade down 39% Weak commodity prices exacerbated the decline Source: WiserTrade

Hotel occupancy down 10%

Revenue per available room down 20% Source: PKF Consulting

Construction off nearly 40% Industry performing at 03 levels

Source: McGraw Hill

Still some pain


11/35

Job Losses


12/35

Job Losses

Houston lost most in 2009

Dec 2008 through Dec 2009 25,500

AGC reports const spending lowest in 6 yrs

Const spending fell by $100B in December,to a six-year low of $903 billion.


13/35

As bad things were,Houston stood fast

as one of the bestplaces to ride out

the storm.


14/35

Recessions Arrival

MSA

Employment

Peak MSA

Employment

Peak

Detroit Jun 00 Chicago Jan 08

Tampa Sep 06 New York

Feb 08

Minneapolis Jun 07 Seattle

San Diego

Jul 07

St. Louis

Riverside Baltimore

Los Angeles Boston Mar 08

Phoenix Aug 07 Philadelphia Apr 08

Miami Dallas May 08

Atlanta Sep 07 Washington Jun 08

San Francisco Dec 07 Houston Aug 08


15/35

Length of Recession

Months Since Peak EmploymentLargest U.S. Metro Areas


16/35

Depth of Recession

* Excludes Detroit

Source: U.S. Bureau of Labor Statistics

% Jobs Lost Since Peak EmploymentLargest U.S. Metro Areas*


17/35

How long

will the

recoverytake?


18/35

Output recovers quickly

U.S. Post-War Recessions

DateDuration(Months)

Return to PreviousLevel of GDP

(Months)

Nov 48 Oct 49 11 12

Jul 53 May 54 10 15

Aug 57 Apr 58 8 12

Apr 60 Feb 61 10 12

Dec 69 Nov 70 11 15

Nov 73 Mar 75 16 21

Jan 80 Jul 80 6 9

Jul 81 Nov 82 16 12

Jul 90 Mar 91 8 15

Mar 01 Nov 01 8 3

Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis


19/35

But employment will lag

U.S. Post-War Recessions

Date Duration(Months)

EmploymentRecovery

(months)

Nov 48 Oct 49 11 22

Jul 53 May 54 10 23

Aug 57 Apr 58 8 24

Apr 60 Feb 61 10 19

Dec 69 Nov 70 11 17

Nov 73 Mar 75 16 19

Jan 80 Jul 80 6 9

Jul 81 Nov 82 16 28

Jul 90 Mar 91 8 32

Mar 01 Nov 01 8 48

Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis


20/35

Employment recovery taking

longer with each recession

Post-War Recessions


EmploymentRecovery

(months)

Nov 48 Oct 49 11 22

Jul 53 May 54 10 23

Aug 57 Apr 58 8 24

Apr 60 Feb 61 10 19

Dec 69 Nov 70 11 17

Nov 73 Mar 75 16 19

Jan 80 Jul 80 6 9

Jul 81 Nov 82 16 28

Jul 90 Mar 91 8 32

Mar 01 Nov 01 8 48Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis

This is a real concern.


21/35

Employment recovery taking

longer with each recession

Post-War Recessions


EmploymentRecovery

(months)

Nov 48 Oct 49 11 22

Jul 53 May 54 10 23

Aug 57 Apr 58 8 24

Apr 60 Feb 61 10 19

Dec 69 Nov 70 11 17

Nov 73 Mar 75 16 19

Jan 80 Jul 80 6 9

Jul 81 Nov 82 16 28

Jul 90 Mar 91 8 32

Mar 01 Nov 01 8 48Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis

After the 01-02 recession, ittook Houston 34 months toreach the previous employmentpeak.


22/35

Nationwide

Jobs Lost This Recession . . . . . . . . . . . . . . . . . . 8 million

Avg Monthly Job Growth Aug 03 Dec 07. . . . . . 160,000

Months to Replace Lost Jobs. . . . . . . . . . . . . . . . . . . . . .50 months

A back of envelopecalculation


23/35

Houston

Jobs Lost This Recession . . . . . . . . . . . . . . . . . . 100,000

Avg Monthly Job Growth July 03 June 08. . . . . . 8,000

Months to Replace Lost Jobs. . . . . . . . . . . . . . . . . . . . . .12.5

But this includes the red hot job creation of 2007, which wont berepeated again.

A back of envelopecalculation


24/35

It depends on what happens to Oil and gas prices

Global growth

The U.S. economy

How soon will Houston

recover?


25/35

Energy

1 in 7 Houston-area jobs

27% of Gross Metro Product

Global Trade

4th busiest Customs District

3,000+ Houston companies doing business globally

U.S. Economy Drives demand for energy, chemicals, plastics,engineering services, manufactured goods allproduced in Houston

In a nutshell . . .


26/35

Oil Prices (WTI Barrel)

Trough

$33.17 (12/19/08)

Recent

$79.39 (12/31/09)

Next Year

$78.67 (2010 avg.)

Source: U.S. Energy Information Administration


27/35

Gas Prices (Henry Hub mcf)

Trough

$1.84 (9/4/09)

Recent

$5.21(12/11/09)

Next Year

$4.62 (2010 avg.)

Source: U.S. Energy Information Administration


28/35

Annual Gross Domestic Product Growth RatesHoustons 20 Largest Trading Partners

Country 08 10 Country 08 10

Argentina 6.8 1.5 Japan -0.7 1.7

Belgium 1.0 0.0 Korea 2.2 3.5

Brazil 5.0 3.5 Mexico 1.4 3.3

Chile 3.2 4.0 Netherlands 1.9 0.7

China 9.0 9.0 Nigeria 5.9 4.9

Colombia 2.5 2.5 Russia 5.6 1.5

France 0.3 0.9 Saudi Arabia 4.5 4.0

Germany 1.2 0.3 Singapore 1.1 4.1

India 7.3 6.4 U.K. 0.7 0.9

Italy -1.0 0.2 Venezuela 4.8 -0.4

Weak Global Economy Limits

Demand for Houston Exports

Source: International Monetary Fund


29/35

U.S. Outlook

Road to recovery will be long

4+ years to replace jobs lost since Dec 07

Indicators pointing to growth

Industries need to replenish inventories Consumers still stressed

Reduced wealth, debt loads, tight credit

Housing to stabilize, maybe

Lower home prices and low mortgage rates


30/35

U.S. Outlook

Commercial real estate still a problem

Too much surplus space, loans coming due

State and local budgets strapped

Lower property, sales and income taxes Great unknowns

National healthcare, carbon regs, new

financial regs


31/35


32/35

07 08 was not the norm

$147 barrel oil

Price more than doubling in 12 months

100,000 jobs per year Almost double historical pace

$240 billion in foreign trade

Up nearly 50 percent from three years earlier 50,000 single family starts

Up nearly 50 percent from three years earlier

What will recovery look

like?


33/35

05 and 06 are more like the norm

$70 $80 barrel oil

Slightly above trend

50,000 60,000 jobs per year Significantly less in 10, returning to trend in 11

$170 - $190 billion in foreign trade

Growth as global economy rebounds but withoutthe distortion of inflated commodity prices

20,000 25,000 single family starts

Tighter lending standards = fewer new homes

What will recovery look

like?


34/35

If you work hard in this city, eventually you willsucceed.

Nationally, 58-63 percent agree with the statement.

In Houston, 79-90 percent agree

As Dr. Klineberg says, Houstonians have an

inherent belief that hard work pays off.

Thats the norm for Houston.

Houston Area Survey


35/35

Houston Economic OverviewPresented to

Associated General ContractorsPresented by

Dan Bellow

President HoustonJones Lang LaSalle

February 10, 2010

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Economic Outlook for Houston 2-10-10 Ppt

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