The Greater Houston Partnership is forecasting that the Houston area will experience robust job growth next year despite the looming economic uncertainty.
“The Houston region will see significant job growth in the year ahead, but just how much growth and in what sectors are heavily dependent on whether the U.S. slips into a recession in 2023 and the subsequent depth and longevity of that downturn,” wrote A.J. Mistretta, vice president of marketing and communications for the Partnership.
Houston Region Economic Outlook: 60,000+ New Jobs
The Houston Region Economic Outlook released on Dec. 8, 2022, estimates a net gain of approximately 60,800 jobs in 2023, assuming that Houston experiences a short and shallow recession in the first half of the year.
“If Houston manages to avoid a recession entirely, the Partnership’s “best case” scenario, the region could see as many as 79,200 new jobs in 2023,” wrote Mistretta.
On the flip side, if a recession next year is prolonged, then job growth in Houston could be limited to just 30,400 jobs.
“While business leaders are anticipating a recession, they aren’t letting it derail their plans,” Partnership chief economist Patrick Jankowski said. In a recent CEO survey, The Conference Board found that 98 percent of respondents expect a recession in 12-18 months, but 86 percent plan to maintain or increase their capital budgets, and 44 percent plan to continue hiring during the downturn. “That tells us that business is prepared for what’s coming, but more importantly looking beyond it.”
Houston Carries Job Growth Momentum into 2023
Houston will carry a strong job growth momentum into 2023 with the Texas Workforce Commission saying that the area added an amazing 144,000 new jobs in the first 10 months of 2022.
Partnership President and CEO Bob Harvey said he’s pleased with the region’s economic momentum. “As we look ahead to 2023 and what the future has in store, I’m incredibly optimistic about Houston’s prospects, despite a possible recession. We have our challenges—from ensuring we lead on the energy transition to effectively competing for top talent—but each time Houston has been underestimated, we’ve come out on top. I believe that will be the case once again.”
Houston’s strong economic position moving into 2023 includes the fact that initial claims for unemployment benefits, a proxy for layoffs, remain well below pre-pandemic levels.
“Next year’s downturn will likely be a glancing blow for Houston, not a head-on collision. Jobs will be lost in a few sectors while others expand,” said the Houston Region Economic Outlook.
Houston Region Economic Outlook: Sector-by-Sector
Here is a sector-by-sector breakdown from the Houston Region Economic Outlook:
- Energy (Exploration, Oil Field Services): If the U.S. skirts a recession, the energy industry will, too. Only if the world sinks into a deep recession would the industry face significant job losses. But then so would every other industry in Houston. In the baseline scenario, the forecast calls for a gain of 4,500 jobs; in the best case, a gain of 5,500; in the worst case, 2,000.
- Manufacturing: Houston’s manufacturing sector faces multiple challenges in ’23. A U.S. recession would lead to a drop in energy consumption; demand for oil field equipment would fall. A broader recession would lead to a drop in global manufacturing; demand for chemicals and plastics would fall. The U.S. housing slump has already cut into the demand for piping, insulation, flooring, and building components. A recession would also lead to reduced business and leisure travel, curbing the demand for gasoline, diesel, and aviation fuels. In the baseline scenario, the forecast calls for a gain of 4,600 jobs; in the best case, a gain of 6,100; in the worst case, 1,500.
- Construction: Given the current backlog, construction employment should hold steady for some time, hopefully until interest rates decline and a host of new projects are financed. In the baseline scenario, the forecast calls for a gain of 6,300 jobs; in the best case, a gain of 7,500; in the worst case, 3,800.
- Wholesale Trade: In the best case, job growth maintains a steady pace throughout the year. In a short, shallow downturn, job growth would flatten early on, turn negative mid-year, and resume in the fall. If a sharp, deep recession hits, wholesale like most other sectors would suffer serious job losses. In the baseline scenario, the forecast calls for a gain of 3,800 jobs; in the best case, a gain of 5,000; in the worst case, 2,500.
- Retail Trade: There’s a real estate adage that “retail follows rooftops.” As families move to the suburbs, store operators follow. Houston’s housing boom has supported much of the sector’s growth over the past two years. It will continue to do so in ’23 but at a slower pace. In the baseline scenario, the forecast calls for a gain of 3,800 jobs; in the best case, a gain of 4,900; in the worst case, 2,500.
- Transportation, Warehousing, and Utilities: Given the labor shortages, the sector is unlikely to shed workers in ’23, even in the direst of situations. In the baseline scenario, the forecast calls for a gain of 3,700 jobs; in the best case, a gain of 4,900; in the worst case, 2,500.
- Information: Job growth, when it does occur, is meager, and only happens when the rest of Houston’s economy is booming. The sector may add a few hundred jobs if consumers return to the cinema, otherwise, losses are more likely. In the baseline scenario, the forecast calls for a gain of 300 jobs; in the best case, a gain of 600; in the worst case, a loss of 800.
- Finance and Insurance: The sector has added jobs in nine of the past 10 years. In the baseline scenario, the forecast calls for a gain of 1,000 jobs; in the best case, a gain of 1,600; in the worst case, a gain of 800.
- Real Estate and Equipment Rentals: Inflation tends to hit low-income households the hardest, the typical market for furniture, appliance, and electronics rentals. The sub-sector will likely see a drop in business next year. In the baseline scenario, the forecast calls for a gain of 1,300 jobs; in the best case, a gain of 1,700; in the worst case, a gain of 900.
- Professional, Scientific, and Tech Services: In boom times, billable hours soar. In lean times, clients slash their consulting budgets. The sector will find itself in the middle of those two extremes next year. Work to reduce carbon footprints, develop transition strategies, and prevent cyber-attacks will continue even in a prolonged downturn, but marketing, public relations, and social media campaigns will be scaled back. In the baseline scenario, the forecast calls for a net gain of 5,900 jobs; in the best case, a gain of 7,900; in the worst case, a gain of 2,500.
- Administrative Support, Waste Management: Employment in the sector trended up most of ’22, reinforcing the premise that Houston has considerable momentum going into ’23. However, if the downturn proves worse than anticipated, layoffs will occur. In the baseline scenario, the forecast calls for a gain of 4,700 jobs; in the best case, a gain of 6,300; in the worst case, a loss of 3,500.
- Arts, Entertainment, and Recreation: Timing will be critical in ’23. Employment in recreational activities spikes in the summer and trails off in the fall. Employment in the arts climbs in the fall and trails off in the spring. If the recession ends by mid-year, the downturn’s impact will be negligible. If the downturn drags into summer, recreation will suffer. If it lingers into the fall, the arts will as well. In the baseline scenario, the forecast calls for a gain of 600 jobs; in the best case, 1,200 jobs; in the worst case, a loss of 400.
- Educational Services: Even in a weak economy, the sector is more apt to grow than not. Educational services have added jobs in 26 of the last 30 years. In the baseline scenario, the forecast calls for a gain of 2,300 jobs; in the best case, 2,900 jobs; in the worst case, 1,200.
- Food Services and Drinking Places: The first half of the year will be a difficult time to open and operate a restaurant, and the second half less so because by then the recovery should be underway. In the baseline scenario, the forecast calls for a gain of 4,800 jobs; in the best case, 6,400 jobs; in the worst case, 1,500.
- Health Care and Social Assistance: The outlook for health care is strong regardless of the recession’s depth and duration. In the baseline scenario, the forecast calls for the sector to add 7,400 jobs next year; in the best case, 9,100; in the worst-case, 6,100.
- Hotels: Inflation will cut into leisure travel. Any loss in leisure will be partially offset by increased business travel. In the baseline scenario, the sector adds 1,000 jobs next year; in its best case, 1,300 jobs; in its worst-case, 700.
- Other Services: Small businesses always struggle in a recession. Persistent inflation will magnify the impact. Congress is unlikely to offer another round of Payroll Protection Program loans to help them out. In the baseline scenario, the sector loses 1,500 jobs, in its best case, the loss is limited to 1,000, and in the worst-case losses exceed 2,500.
- Government: Typically, recessions don’t impact property tax rolls until well after the initial downturn. In the baseline scenario, the forecast calls for the public sector to add 6,400 jobs, in its best case, 7,500. There is no worst-case scenario for this sector.
The Partnership concludes that Houston has always bounced back from the six recessions over the past 40 years: “That will be the case again in ’23. The Partnership expects the next recession to be short and shallow, with minimal impact on the local economy. Momentum from ’22 and the region’s remarkable resilience will set the tone over the next 12 months. By the time ’24 arrives, job growth will again be robust, and Houston will be seven-for-seven in recessions and recoveries.
The recommendation(s), advice and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential or exception to good practice. Dean & Draper Insurance Agency specifically disclaims any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with Dean & Draper Insurance Agency. By providing this information to you, Dean & Draper Insurance Agency does not assume (and specifically disclaims) any duty, undertaking or responsibility to you. The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.