A publication of the Greater Houston Partnership Volume 20, Number 5 • May 2011
Testing a Strongly Held Belief — There’s a popular conviction that Houston lags the nation going into a recession, leads the nation coming out, and sustains a shorter and shallower period of job loss in between. The nation is now far enough into the recovery to test that belief. So was Houston one of the best metros to ride out the recession or was that just wishful thinking? This article answers that question.
The Great Recession began in December ’07 and lasted 18 months, making it the longest recession since World War II. The recovery began in June ’09. The U.S. economy, in fits and starts, has been in recovery for almost two years now. The dates of the recession were set by the National Bureau for Economic Research (NBER), the group that determines peaks and troughs of all U.S. business cycles. NBER examined national trends in gross domestic product, industrial production, income, employment and wholesale and retail trade before setting the dates of the recession. Unfortunately, comparable data are not available on a monthly basis at the metro level. To measure local business cycles, analysts rely on trends in employment, an indicator most people readily grasp. In this analysis, employment is the primary indicator used to measure the onset, depth and end of the recession in each metro area.
Onset of the Recession — The Great Recession began in December’07, but job losses began much earlier in many metro areas. Tampa began losing jobs in April ’06. Los Angeles first reported job losses in April ’07, Miami in September of that year. Houston, however, did not report job losses until September ’08, nine months into the recession. It was an unfortunate coincidence that the recession and Hurricane Ike arrived in Houston the same month. Given the magnitude of the nation’s financial problems, it was inevitable Houston would be impacted. As the chart at the top of the next page shows, Houston was the last of the nation’s 20 largest metro to report job losses1.
1 There are 366 metropolitan statistical areas in the United States. For the purpose of this analysis, only the 20 most populous are reviewed. Detroit ranks among the nation’s 20 most populous metro areas, but because job losses in the Detroit metro date back more than 10 years, it has been excluded from several of the top 20 metro comparisons in this article.
Depth of the Recession — All things being equal, one would expect the largest metros to suffer the greatest jobs losses. But not all things were equal, and some of the smaller metros sustained job losses disproportionate to their sizes. For instance, Phoenix, the nation’s 12th most populous metro area, lost approximately 246,900 jobs, 90,000 more jobs than Dallas, the nation’s fourth most populous metro. Houston, the nation’s sixth most populous metro, lost 121,200 jobs while Miami, Atlanta, Detroit, Phoenix, Riverside, San Francisco, Seattle and Tampa—all with fewer residents than Houston—lost more jobs than Houston.
Total jobs lost during the recession in each metro area are shown in the table at the top of the following page. Job losses are calculated from the month of peak employment in each metro area to the month in which the employment declines stopped in each metro. Calculations are based on seasonally adjusted data.
Another measure of the depth the recession in each metro area is the percentage jobs lost during the downturn—the larger the percentage, the deeper the recession. Among the nation’s largest metros, job losses ranged from 3.2 percent in Washington, D.C. to 13.5 percent in Riverside, with the average being 7.5 percent2. Houston’s job loss was 4.6 percent.
Only three metro areas—Washington, D.C., Boston, and New York—lost a smaller share of employment than did Houston. Job losses for Boston, Houston and New York differed by no more than 0.2 percent, an insignificant margin. Washington’s role as the seat of U.S. government mitigated its job losses during the recent recession. Metros that suffered major collapses in their housing markets (e.g. Las Vegas, Los Angeles, Miami, Phoenix, Riverside and Tampa) suffered disproportionately large job losses.
A table showing the percent jobs lost in each metro area is shown at the top of the next page.
2 Job losses for Detroit excluded from the calculation because they would skew the average.
Job Losses in the 20 Most Populous U.S. Metro Areas During the Great Recession
Pop. Rank Metro Area Jobs Lost* Pop. Rank Metro Area Jobs Lost *
1 New York -389,600 11 Detroit -480,900
2 Los Angeles -519,500 12 Phoenix -246,900
3 Chicago -295,900 13 San Francisco -169,300
4 Dallas -155,900 14 Riverside -172,500
5 Philadelphia -144,700 15 Seattle -141,500
6 Houston -121,200 16 Minneapolis -115,900
7 Miami -245,900 17 San Diego -101,600
8 Atlanta -223,700 18 St. Louis -83,900
9 Washington -95,800 19 Tampa -138,900
10 Boston -104,600 20 Baltimore -70,400
* Based on seasonally adjusted data and calculated from the month of peak employment to the month in which the employment declines stopped in each metro
Source: U.S. Bureau of Labor Statistics
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Extent of Recovery — The latest employment report from the U.S. Bureau of Labor Statistics indicates that all of the nation’s 20 largest metro areas (including Detroit) have begun to add jobs. Job growth is at a snail’s pace in some metros and a rabbit’s race in others. Four metros—Boston, Dallas-Ft. Worth, Houston and Washington, D.C.—have recouped more than half of the jobs lost in the recession. Five metros—New York, Philadelphia, St. Louis, San Diego, Seattle—have established some momentum in their recoveries, having recouped close to one-fifth the jobs lost. The remaining metros—Atlanta, Baltimore, Chicago, Detroit, Los Angeles, Miami, Minneapolis, Phoenix, Riverside, San Francisco and Tampa—have barely begun to replace their lost jobs. A table showing the extent of the recovery in the top 20 metro areas appears at the top of the next page.
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Los AngelesPhoenixRiversideSan FranciscoAtlantaBaltimoreTampaBaltimoreSan DiegoMiamiMinneapolisNew YorkSeattleChicagoDallasPhiladelphiaSt. LouisDCBostonHouston
Note: Excludes Detroit
Source: U.S. Bureau of Labor Statistics
Months from Peak Employment to Employment Uptick, 20 Largest U.S. Metro Areas
New York 76,100 19.5% 313,500 Detroit 13,900 2.9% 467,000 Los Angeles 36,200 6.6% 513,100 Phoenix 21,100 8.5% 225,800 Chicago 50,800 14.9% 290,000 San Francisco 1,700 1.0% 68,200 Dallas 84,600 54.3% 71,300 Riverside 4,200 2.4% 168,300 Philadelphia 25,200 17.4% 119,500 Seattle 26,400 18.7% 115,100 Houston 65,700 54.2% 55,500 Minneapolis 17,300 14.9% 98,600 Miami 27,200 11.1% 218,700 San Diego 23,200 22.8% 78,400 DC 64,200 67.0% 31,600 St. Louis 21,900 26.1% 62,000 Atlanta 11,000 4.9% 213,800 Tampa 2,900 2.1% 135,500 Boston 55,500 53.1% 49,100 Baltimore 6,400 12.2% 46,000
* Additional jobs needed to reach pre-recession employment levels.
Source: U.S. Bureau of Labor Statistics
The Original Premise — This article set out to test the popular conviction that Houston lags the nation going into a recession, leads the nation coming out, and the period of job loss in between is short and shallow. To summarize the analysis: • Houston was the last major metro area to enter the recession, not reporting job
losses until September ’08 though the nation had entered the recession 10 months earlier.
• The region lost a small share of total jobs—4.6 percent—compared to an average loss of 7.5 percent for the other major metros.
• Job losses occurred over a shorter time frame—16 months— compared to an average of 30 months among the large metros,
• And Houston has recouped a larger share of its lost jobs—54.2 percent— making it one of only four major metros to reach the half way point in the recovery.
There seems to be little doubt that that Houston was one of the best metros in which to ride out the recession—and that wasn’t just wishful thinking. But that poses another question, why was Houston impacted less than the other metros? That question will be answered in a future issue of Houston—The Economy at a Glance.
International Trade Rises — The Houston-Galveston Customs District recorded trade valued at $38.1 billion for the first two months of ’11, up 29.4 percent from $29.5 billion during the same period last year. In addition to the growth in the dollar
GDP Growth ComparisonWorld vs. Houston's Top 5 Trade Partners
World
Avg of Houston's Top 5 Partners
value of trade, the movement of commodities also increased. 47.5 million short tons have passed through the district so far this year, an 11.3 percent increase from the 42.7 short tons processed during the same period in ’10.
Exports totaled $17.4 billion, up 32.7 percent from last year; and imports totaled $20.7 billion, up 26.6 percent from ’10. Houston’s five leading exports to date are: mineral fuel and oil ($5.7 billion), industrial machinery ($2.6 billion), organic chemicals ($2.4 billion), plastics ($1.1 billion) and cereals ($755.6 million). The five largest imports so far this year are: mineral fuel and oil ($13.5 billion), industrial machinery ($1.5 billion), iron and steel ($1.1 billion), electric machinery ($837.2 million) and organic chemicals ($661.1 million).
Houston’s top five trade partners for the first two months of ’11 remained the same as ’10: Mexico, Venezuela, Brazil, China and Nigeria. The average annual GDP growth rate of these five countries typically remains around three percentage points greater than that of the world’s GDP growth. However, this spread is expected to decrease in ’11. The International Monetary Fund (IMF) predicts that the GDP growth rate for these five countries will average 5.5 percent in ’11 while the global GDP growth rate is predicted to be 4.5 percent.
Houston Airport System Passenger Travel Up — The Houston Airport System (HAS) handled 3,448,422 passengers in March, up 0.7 percent from the 3,423,686 handled in March last year. International passenger traffic rose 3.2 percent, from 730,954 passengers in March ’10 to 754,073 in March this year. Domestic passenger traffic rose 2.1 percent, from 3,464,515 in March ’10 to 3,537,743 in March this year.
While domestic travel accounted for 78.1 percent of all passengers in March ’11, air freight was more evenly divided among domestic and international markets. 47.4 percent of air freight shipped within the U.S. and 52.6 percent shipped internationally. Mexico remains Houston’s largest international destination for passengers, but Europe continues to dominate Houston’s air cargo market share.
Regional Share of Passenger Travel and Air Cargo March 2011
Passenger Market Share (%) Air Cargo Market Share (%) Domestic 78.1 47.4 Mexico 7.8 0.7 Middle East 0.9 7.6 Central/South America 7.0 4.6 Europe 3.4 31.3 Asia/Africa/Australia 0.6 8.3 Canada 2.1 0.1
Source: Houston Airport System
Office Market Shows Signs of Recovery — CB Richard Ellis reports that in Q1/11, Houston’s office market saw net absorption of 357,911 square feet (sf), mostly Class A space. From Q4/10 to Q1/11, vacancy decreased slightly to 16.0 percent. The vacancy rate for Class A space was 12.4 percent, while Class B vacancy was 19.1 percent. Overall rental rates rose slightly to $23.17 in Q1/11 from $22.82 in Q4/10. The increased transaction activity in the market has encouraged landlords, and they’ve recently begun to raise rates and reduce concessions.
The Houston industrial market remains one of the top five markets in the U.S, says CBRE research manager Lynn Cirillo. However, the market is not experiencing much speculative construction, and potential tenants are struggling to find the right property. Lease rates have remained flat, but may increase as the amount of quality space decreases. Rental rates averaged $0.48 in Q1/11. Vacancy also remained flat in Q1/11 at 6.5 percent. Houston’s industrial market saw slightly negative absorption of 26,879 sf in Q1/11.
Over 48,000 Asian-Owned Firms in Houston Region — The number of Asian firms in the Houston region rose by more than 50 percent from ’02 to ’07, according to data recently released by the U.S. Census Bureau. In ’02, Asians owned 31,939 businesses
and represented 7.6 percent of all firms in the region; while in ’07, there were 48,740 Asian-owned firms, accounting for 9.3 percent of all firms.
The share of Asian-owned businesses is larger than would be expected given their share of population. Asians represent 6.1 percent of the region’s population, but own 9.3 percent of the region’s businesses.
The majority of Asian-owned firms are small. The Census distinguishes between “em-ployer” and “non-employer” firms. Employer firms have payrolls and paid employees, while non-employer firms consist of self-employed individuals operating very small unincorporated businesses. Non-employer firms account for 76.5 percent of Houston’s Asian-owned firms, and employer firms represent 23.5 percent.
Asian-owned firms in Houston reported $17.4 billion in revenue in ’07, 2.0 percent of the region’s total revenue.
Patrick Jankowski, Marycruz García and
Jenny Hsu contributed to this issue of The Economy at a Glance.
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The Greater Houston Partnership is the primary advocate of Houston’s business community
and is dedicated to building regional economic prosperity.
Visit the Greater Houston Partnership on the World Wide Web at www.houston.org. Contact us by phone at 713-844-3600.
Houston Economic IndicatorsA Service of the Greater Houston Partnership
Most Year % Most Year %Month Recent Earlier Change Recent Earlier Change
ENERGYU.S. Active Rotary Rigs Mar '11 1,720 1,419 21.3 1,716 * 1,345 * 27.6Spot Crude Oil Price ($/bbl, West Texas Intermediate) Mar '11 102.86 80.77 27.3 93.43 * 77.97 * 19.8Spot Natural Gas ($/MMBtu, Henry Hub) Mar '11 3.90 4.21 -7.3 4.12 * 5.08 * -18.9
UTILITIES AND PRODUCTIONHouston Purchasing Managers Index Mar '11 59.9 55.3 8.3 59.2 * 53.9 * 9.8Nonresidential Electric Current Sales (Mwh, CNP Service Area) Mar '11 3,727,237 3,750,034 -0.6 11,617,574 11,384,882 2.0
CONSTRUCTIONTotal Building Contracts ($, Houston MSA) Mar '11 688,443,000 748,102,000 -8.0 1,926,375,000 2,057,432,000 -6.4Nonresidential Mar '11 234,935,000 186,745,000 25.8 788,965,000 649,476,000 21.5Residential Mar '11 453,508,000 561,357,000 -19.2 1,137,410,000 1,407,956,000 -19.2Building Permits ($, City of Houston) Mar '11 274,484,095 275,197,938 -0.3 687,460,330 702,192,708 -2.1Nonresidential Mar '11 179,976,438 173,635,497 3.7 457,186,489 438,207,363 4.3New Nonresidential Mar '11 61,755,131 75,841,546 -18.6 154,978,284 172,023,300 -9.9Nonresidential Additions/Alterations/Conversions Mar '11 118,221,307 97,793,951 20.9 302,208,205 266,184,063 13.5Residential Mar '11 94,507,657 101,562,441 -6.9 230,273,841 263,985,345 -12.8New Residential Mar '11 74,348,501 83,994,493 -11.5 182,565,871 200,944,871 -9.1Residential Additions/Alterations/Conversions Mar '11 20,159,156 17,567,948 14.7 47,707,970 63,040,474 -24.3Multiple Listing Service (MLS) ActivityClosings Mar '11 5,509 5,800 -5.0 12,854 12,841 0.1Median Sales Price - SF Detached Mar '11 150,900 153,500 -1.7 146,967 * 147,753 * -0.5Active Listings Mar '11 51,091 49,030 4.2 50,151 * 46,966 * 6.8
Sources Rig Count Baker Hughes Incorporated Spot WTI, Spot Natural Gas U.S. Energy Information Agency Houston Purchasing Managers National Association of Index Purchasing Management – Houston, Inc. Electricity CenterPoint Energy Building Construction Contracts McGraw-Hill Construction City of Houston Building Permits Building Permit Department, City of Houston MLS Data Houston Association of Realtors® Employment, Unemployment Texas Workforce Commission
Port Shipments Port of Houston Authority Aviation Aviation Department, City of Houston Car and Truck Sales TexAuto Facts Report, InfoNation,
Inc., Sugar Land TX Retail Sales Texas Comptroller’s Office Consumer Price Index U.S. Bureau of Labor Statistics Hotels PKF Consulting/Hospitality Asset Advisors International Postings, Foreclosures Foreclosure Information & Listing Service
STAY UP TO DATE! If you would like to receive this electronic publication on the first working day of each month, please e-mail your request for Economy at a Glance to [email protected]. Include your name, title and phone number and your company’s name and address. Archived copies are available to Partnership Members in the Members Only section at www.houston.org. For information about joining the Greater Houston Partnership and gaining access to this powerful resource, call Member Services at 713-844-3683. The foregoing table is updated whenever any data change — typically, 11 or so times per month. If you would like to receive those updates by e-mail, usually accompanied by commentary, please e-mail your request for Key Economic Indicators to [email protected] with the same identifying infor-mation. You may request Glance and Indicators in the same e-mail.
