HOUSTON – (By Michelle Leigh Smith for Realty News Report) – Economic troubles around the globe will do damage to the Houston economy, according to Patrick Jankowski, Senior Vice President of Research for the Greater Houston Partnership,
Jankowski, presenting at the Partnership’s annual Global Economic outlook last week, citing the BBC’s economic summary: “World faces worst recession since the Great Depression.” The global GDP is down 9.7 percent, or $8.8 trillion. The U.S. GDP slumped 4.8 percent from the last quarter, ending the longest economic expansion on record.
The U.S. ranks third globally in job loss. In March and April, Houston suffered 330,000 job losses. From March 15 through May 9, 425,000 initial claims for unemployment were made, resulting in an unemployment rate of 14.2%.
Jankowski put the deficits in tangible terms, sharing totals on mixed beverage receipts, reflecting a drop from $107,199,928 (while the rodeo was still open) to $12,459 in April.
Many businesses are closed due to the pandemic lockdown. Skyscrapers lack hustle-and-bustle. As far as the number of downtown parking transactions, the total dropped from 49,000 the week of March 10-17 to under 10,000 every week since. As of this week, only 20 percent of downtown parking spaces are full during the work week.
Filings in Harris County for DBAs (“doing business as”), a proxy for new business formations, are down 75 percent compared to this time last year. Restaurant reservations in Houston remain 70 percent below their pre-COVID levels, according to OpenTable. And METRO bus ridership in late May is one-fifth the level it was in mid-March.
As of May 18th, 100 countries requested relief from the International Monetary Fund; 55 have been approved.
The Asian Development Bank estimates that worldwide, 158 to 242 million full-time payroll jobs could be lost during the pandemic. To put that in perspective, that’s roughly total U.S. payroll employment (160 million jobs) prior to the pandemic. The 242 million equates to all payroll jobs or a total of all U.S. jobs (160 million) and Japan (66 million) combined.
The US GDP slumped 4.8 percent in the first quarter, ending the longest, most vibrant run of economic expansion on record.
Even so, Jankowski says Houston is well positioned to rebound because of our strong international ties, with 1,700 foreign owned firms, 17 foreign banks, 91 countries with government offices here, and 56 international trade associations and chambers of commerce. “We have 183 trading partners, including those in 45 countries where the volume of bilateral trade surpasses $1B,” he says. Houston’s export total stands at $120.7B, three times that of Chicago and twice the volume leaving Los Angeles.
Even before COVID 19 hit, Forbes predicted a global trade outlook plunge on October 1, 2019, aggravated by the escalation of the US-China trade war. He noted the drop in exports from $7.6 billion in 2017 to $4.4 Billion in 2019.
“With 200 million people not working, you’ll see trade slowdown. You’ll see a drop in exports. Until we see growth return to the rest of the world, it’s going to put pressure on Houston’s exports. We won’t see a growth in demand for exports and that’s going to weigh on that part of Houston’s economy,” Jankowski said.
The rig count stands at a dismal 318, down from 1900 in 2015. The weekly rig count averaged 972 through the first ten months of 2019, 5 percent lower than the 1,023 average of 2018.
The Wall Street Journal reports that recovering air travel, hotel bookings and mortgage applications are among the early signs the U.S. economy is slowly creeping back to life. “We have 851 international flights per week, flying to every continent except Antarctica,” says Jankowski. “We rank fifth in the US in the number of international flights, leading the South. He quoted David Calhoun, CEO of Boeing saying it will take 3-5 years for the airline industry to return. The projection for domestic traffic to return to pre-COVID level is not until 2022, with international traffic returning by 2024.”
“Expect slower growth over the next two to three years, weaker demand for exports, fewer foreign visitors, reduction in foreign direct investmentthat translates to a game-changing economic environment. The dynamic new investments of the past – from Total, Linde, Mahindra, Nippon Express USA, Kaneka, Kuraray, Sasol, Tenaris, Ineos and Mitsubishi Heavy Industrial that infused new capital into our region also helped underpin jobs. Not only that, the newcomers facilitated a vital exchange of global ideas and increased trade that stimulated growth and added to our tax base.
An intangible Jankowski addressed losing touch with existing clients, the loss of that touchpoint of face to face interaction with foreign visitors. With the delay of the World Petroleum Congress, the international symposium knows as the “Olympics of the oil and gas sector” until Dec. 5-9, 2021 and the cancellation of the Offshore Technology Conference for 2020, those relationships will require reconnection down the line.
The U.S. is in a severe recession caused by the sudden shut-down due to the COVID-19 pandemic. Since the lockdown began, the nation has lost 21.4 million jobs. Employers cut 881,000 in March and another 20.5 million in April, the largest one-month loss in the nation’s history. Losses already exceed those of the Great Recession, in which 8.7 million Americans were laid off.
Data on claims for unemployment insurance (UI) through mid-May show the losses continue to mount. As of May 9, over 36.5 million Americans had filed for benefits. When the Bureau of Labor Statistics (BLS) releases its May jobs report (scheduled for June 5), losses will likely exceed 25.0 million jobs. That equates to roughly one in every six U.S. workers being laid off or furloughed.
Every sector has lost jobs, with hotels, restaurants, and bars; health services; and retail among the hardest hit. Nationwide, energy (exploration and production, support services for mining) has cut about 45,000 jobs since the downturn began. Those losses will accelerate in coming months.
Of the 150 sectors and subsectors for which Bureau of Labor Statistics reports data, only six recorded gains. Those included courier services, computer manufacturing, federal government, monetary authorities (i.e., the U.S. Federal Reserve), other information services (i.e., the internet), and general merchandise stores (e.g., Target, Wal-Mart). So, there are glints of sunshine on the horizon.