double teamed
Economists dive into the economic impact of COVID-19, low oil prices on Houston
Houston's economy continues to suffer as a result of the coronavirus-fueled economic slide and the collapse in oil prices. But just how much are these twin crises injuring Bayou City?
Economic data and forecasts present an increasingly grim outlook for Houston.
A new Moody's Analytics analysis commissioned by the Wall Street Journal provides one measurement of the economic damage being inflicted on Houston. The analysis, published April 2, indicates business closures in Harris County — which represents two-thirds of the region's population — have caused a 27 percent drop in the county's daily economic output.
Ed Hirs, an economics lecturer at the University of Houston, says the 27 percent figure is likely lower than the actual number. He thinks it's closer to 50 percent.
"The reason is that we are talking about output — actual work getting done — and not including monetary transfers from the bailout bill or unemployment insurance," Hirs says.
The lingering daily decline undoubtedly will bring down the Houston area's total economic output for 2020. In 2018, the region's economic output (GDP) added up to nearly $478.8 billion. By comparison, the 2018 economic output for the nation of Austria totaled $455.3 billion, according to the World Bank.
Harris County ranks as the third largest county in the U.S., as measured by population. The Moody's Analytics study shows the country's two largest counties — Los Angeles County in California and Cook County in Illinois — have been hit with even bigger decreases in daily economic output. Los Angeles County's loss sits at 35 percent, with Cook County's at 30 percent.
Patrick Jankowski, senior vice president of research at the Greater Houston Partnership, says in a podcast interview published April 2 that it's difficult to accurately gauge how the economic climate is hurting Houston right now. That's because economic data lags present-day economic reality.
"The situation is changing daily," Jankowski says. "There's so many unknowns out there. This is unprecedented."
Economists predict the Houston area's workforce will see massive losses as a result of the coronavirus and energy downturns.
Economist Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston's Bauer College of Business, says a moderate recession could siphon as many as 44,000 jobs from the region's economy by the end of this year. A more dire forecast from The Perryman Group, a Waco-based economic analysis firm, envisions the Houston area losing nearly 256,000 jobs due to the COVID-19 shutdown and racking up $27 billion in coronavirus-related economic losses.
Jankowski anticipates the Houston area tallying job losses of at least 200,000, meaning losses would be less severe than the 1980s energy bust but more severe than the Great Recession.
"If we're still working from home after May, everyone's job is at risk," says Jankowski, adding that this would trigger more furloughs, layoffs, and pay cuts.
Aggravating Houston's situation is the coronavirus clampdown on restaurants and hotels.
According to survey data released March 30 by the Texas Restaurant Association, 2 percent of the state's more than 50,000 restaurants already had closed permanently, and another 32 percent had closed temporarily. An additional 12 percent of Texas restaurants anticipated shutting down within the next 30 days.
If you add the 2 percent of restaurants that have closed to the 12 percent that expect to close, that would equal roughly 7,000 shuttered restaurants.
"Restaurants are in a fight for survival. The statistics from this survey provide a mere snapshot of the extreme economic impact the COVID-19 crisis is having on one of the most important industries in Texas," Emily Williams Knight, president and CEO of the Texas Restaurant Association, says in a release.
In the lodging sector, Texas is projected to lose 44 percent of its jobs, or more than 64,000 positions, according to a mid-March forecast from the American Hotel & Lodging Association. Experts predict some Texas hotels won't survive the coronavirus crisis.
"COVID-19 has been especially devastating for the hotel industry. Every day, more hotels are closing, and more employees are out of a job," Chip Rogers, president and CEO of the hotel association, says in a March 26 release.
While the restaurant and hotel sectors face a shaky future, the energy industry is grappling with the oil war between Russia and Saudi Arabia as well as depressed demand for crude oil and gasoline. Jankowski says gas prices could stay low through mid-2020 or even the end of 2020 as the energy industry copes with a prolonged oil glut.
Relief funds coming from Washington, D.C., will help stabilize the energy sector and other industries, Jankowski says, but will not "juice" the economy and spark growth.
"We're going to need to move beyond the pandemic," he says, "and we're going to need for some consumer confidence and business confidence to come back before we start to see growth returning again."