As oil prices dropped in mid-2014, hiring activity in Houston followed. As oil prices remained low, employers in this energy-dependent metro scaled back, resulting in net job loss as recently as last summer. However, the situation has shifted for the better, with the metro adding a surprising number of jobs recently, despite oil prices remaining at less than half of the pre-bust peak.
Houston gained 41,900 jobs, on net, in the year ending April 2017, the metro’s best annual performance since mid-2015. Those new jobs grew the employment base 1.4%, a rate that matched the national average. By comparison, Houston’s job base growth has trailed the national average since May 2015.
With the energy sector still soft, where are the new jobs in Houston coming from? The bulk of Houston’s job creation over the past year came in four major employment sectors: Education/Health Services (12,700 jobs), Government (12,300 jobs), Professional/Business Services (11,800 jobs) and Leisure/Hospitality Services (11,100 jobs). It’s a little surprising that Professional/Business Services added so many new jobs over the past year, given that sector was shedding jobs throughout 2016. Many of those cuts, however, likely stemmed from energy corporations downsizing business operations as oil prices dropped.
Growth in Government, Education/Health Services and Leisure/Hospitality Services continues to diversify Houston’s economy. Those three sectors have benefited the Houston economy for years. Education/Health Services has been gaining jobs on a year-over-year basis for the past 27 years. Leisure/Hospitality Services has seen job gains for the past seven years, while the Government segment has recorded annual job growth for the past five years.
By comparison, the energy-driven slowdown that began in 2015 led to sizable job loss in the Mining/Logging/Construction and Manufacturing sectors, with significant cuts or hiring slowdowns in Wholesale Trade, Architectural/Engineering Services and other business services. Oil/Gas Extraction has shed jobs for the past two years, with a loss of 5,500 jobs recorded specifically in the year-ending April 2017. Construction lost 7,600 jobs over the past year and Wholesale Trade was down 2,900 jobs. On the other hand, after losing jobs for the past two years, the Manufacturing industry added 5,100 jobs in the year-ending April 2017.
However, the energy sector appears to be stabilizing. West Texas Intermediate (WTI) crude oil prices have risen to $49.33 a barrel as of April 2017, up from a recent low of $29.38 a barrel in January 2016. Still, current prices are well below the highs of around $100 a barrel throughout much of 2011 through 2014, when Houston was a national leader for job creation. And rig counts are on the rise, more than doubling over the past year.
While the pickup in Houston’s job count should benefit the apartment market, the metro has a long way to go to return to the nation’s job growth leaderboard. Although the energy sector in Houston is expected to continue cutting jobs this year, the losses shouldn’t be as severe as seen over the past two years. Due to the changes in the energy sector and diversification of Houston’s labor base, the job growth outlook for the metro is cautiously optimistic.