Despite claims of economic diversity, it’s still about oil in Houston
In another life, in another time, for another newspaper, I wrote about the regional economies of the western United States. Up in Seattle, Microsoft was minting millionaires and Amazon.com, having decimated book stores, was turning its attention to other markets.
These new-economy companies, not to mention a long-list of dot-coms, were grabbing the attention of investors, analysts and journalists, who hailed them as transforming a Northwest economy long based on timber, trade and manufacturing. But one regional economist told me, “Not so fast.”
The Seattle metropolitan economy, he said, was still about Boeing, founded there in 1916. It wasn’t only about the number of people who worked for the aerospace company — Boeing was the largest private employer — but also what Boeing paid. All Boeing had to do was hold employment steady, and the local economy would grow a steady clip because of the company’s high wages and salaries, which bought homes, cars, appliances and a raft of goods and services.
Boeing paid so much that laid-off machinists who had moved onto other companies would quit immediately if Boeing called them back — even after more than two years.
What called this to mind was the recent economic forecast from Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business. Gilmer, in predicting moderate growth in the years ahead, reminded us, again, that for Houston, it’s about oil.
Despite all the talk and effort about diversifying the economy, oil — and oil prices — make Houston go. The industry employs more than 250,000 people, according to Gilmer’s figures, and its impact is amplified by the high wages and salaries that energy companies pay.
On HoustonChronicle.com: Houston to see moderate growth as economy returns to oil basics
Much has been made here of how the Houston economy seemed to skate through the recent oil bust, a feat attributed to a 30-year effort to diversify the region’s industrial mix. But Gilmer noted that’s not quite the story. The last oil boom, which peaked in 2014, boomed so far and so fast that sectors that support the energy industry and its workers — retail, restaurants, health care and financial services — couldn’t keep up.
When the bust hit, these sectors were still trying to catch up with the growth of the previous years, Gilmer said, a process that kept them hiring during the two-year energy downturn. Retail, for example, added more than 14,000 jobs from the end of 2014 to the end of 2016; restaurants and bars added more than 16,000, according to the Texas Workforce Commission.
The energy industry, of course, didn’t fare so well. Gilmer estimates that Houston lost some 75,000 oil jobs in 2015 and 2016. During those hard times, prognosticators worried that the industry would lose skilled workers for good as the downturn and weak recovery dragged on, forcing them into other industries.
But experience, again, is showing otherwise. Even two years after layoffs, Gilmer said, local oil workers were willing to come back to the industry.
In Houston, as in Seattle, economic developers seeking the next big thing can sometimes overlook the old big thing. But the technical skills and expertise built up by Boeing over the decades almost certainly contributed to the talent pool that allowed Microsoft and Amazon to happen.
If Houston is to succeed in diversifying its economy, its energy industry will have to play a role. For example, oil and gas companies, whose businesses increasingly depend on digital technologies, have the size and scale to attract the technical talent on which a local tech sector could be built.
Fuel Fix: Get energy news sent directly to your inbox
If the future is renewables, Houston oil and gas companies will need to invest in developing new technologies here, instead of Silicon Valley or Boston. And if health care, finance and professional services are to continue to thrive, they almost certainly will need a healthy energy industry.
In other words, it’s still about oil.