Energy job growth keeping Houston economy healthy

Houston’s economy is growing, people are moving in, and construction cranes seem to be everywhere.

Energy jobs are a huge driver, but so is the city’s sprawling health care industry.

The lingering challenges include creating enough skilled talent to fill the engineering and other openings. Then there’s the traffic, as witnessed by all the out-of-state license plates that have popped up along local roadways.

To find out what’s ahead for Houston, we asked four experts: an economist, a banker, an energy consultant and a recruiter.

Here is what they said:

Q: What word would you use to describe the Houston economy?

A: “Vibrant,” said Edward Ogden, director of Spencer Ogden in Houston, a recruiting firm that specializes in project work for energy clients.

Ogden, who moved from London in 2011, points to the construction cranes that dot the Houston skyline, the influx of new companies and the talented workers from around the globe who are flocking to Houston for highly skilled, high-paying jobs.

Houston is thriving, said Kim Fraser, economist at BBVA Compass in Houston. Many people are moving here for job opportunities.

These new residents are buying new homes – and new electronics, furniture and household furnishings.

Houston is also resilient, said Patrick Jankowski, vice president of research for the Greater Houston Partnership.

“It seems that no matter what is thrown at Houston, it somehow seems to find a way to bounce back,” Jankowski said, pointing to the offshore drilling moratorium that could have put a serious crimp in the local economy.

“Lo and behold, we found new opportunities on-shore for shale drilling and the economy takes off again,” he said. Every 30 to 40 years Houston reinvents itself as it has gone from railroads to shipping to refining to chemicals to space to health care.

Q: What sectors are doing the best? Which sectors are lagging?

A: Exploration and production continue to be strong, said John England, vice chairman and U.S. oil and gas leader with Deloitte in Houston.

Houston is seeing a shift from exploration and production of natural gas to more oil and natural gas liquids, he said. That is providing a high level of activity in the oil field services and midstream markets.

Construction is another leading sector, Jankowski said.

“It’s what we’d expect at this stage of the recovery,” he said. Construction is always the last sector to enter a recession and the last to come out because of the long lead times on projects, he said, referring to the years it takes between start and finish.

Jankowski sees weakness in the public sector, stemming, in part, from the slow recovery in property values and sales tax revenues.

Property values were set Jan. 1, but local jurisdictions can’t set their own tax rates until the fall, he said. They won’t reap the rewards of increased property values until early 2014, which delays their ability to hire enough teachers and other employees to serve the population.

Sales tax receipts have returned to pre-recession levels. But during those four years the population has grown and infrastructure has deteriorated.

“It’s not enough to just hold steady,” he said. “We need to catch up.”

Houston is also seeing a slowdown in drilling for natural gas.

The price is so low that drilling isn’t economically viable, Ogden said. But that hasn’t hurt the massive energy-service companies in Houston. He’s looking for an improvement in natural gas drilling during the second half of 2013.

Q: Imagine you have a crystal ball. What will be the economic theme of Houston in 2013?

A: “I think Houston will continue to expand on a much faster pace than the U.S. on average,” Fraser said.

That could change if oil prices plummet and energy companies suffer, she said, but Houston is diversified enough that the local economy should be able to withstand a drop in one of its key sectors.

England predicted that by the end of 2013, the shale gas revolution will have a wide-ranging effect on the local economy. It’s creating jobs and making downstream energy more profitable.

Lower natural gas prices will make Houston more competitive in petrochemicals and basic manufacturing, he said.

“I think we’ve become much more where energy is a driver of our economy,” he said.

Q: Do you see signs of life in the home, apartment, office and commercial building industry?

A: “Yes,” said Ogden, who doesn’t have to look beyond his own backyard for signs of growth.

He moved into a new apartment building in Midtown in 2011. Between January and April, it went from empty to full.

“That’s impressive,” he said of the parade of new graduates and transplants. He also sees new restaurants, bars and personal-service providers popping up in the neighborhood. “I see a real change of pace that I think is quite exciting.”

There is construction everywhere and a lot of it is multifamily apartments, Fraser said. Mortgages for single-family homes are still tight and difficult to get.

The influx of new residents has pushed up rents substantially over the past three years, she said. Demand for housing is strong, which drives more multifamily construction.

Q: What effects on Houston have you seen as the region’s population has grown because of the influx of job seekers?

A: There seems to be a strong push for making areas of the city more pedestrian-friendly, Ogden said. Those “pedestrianized” pockets are popping up even in the outlying suburbs, he said.

There is an influx of well-paid, talented people moving to Houston to fill jobs in medicine and engineering, he said, much like London attracts the best and the brightest from around the world. Maybe the newcomers are crying out for those walkable pockets, he said.

Fraser cited increased traffic on the freeways.

She equates the number of construction cranes and half-built office towers, apartment buildings and single-family homes as signs of population growth. There is also greater demand for services such as education, health care and the need for expanded infrastructure such as rail.

Q: What is the biggest challenge facing Houston on both a short-term and long-term basis?

A: Having enough skilled and talented workers from engineers to machinists who can fill available job openings, Jankowski said.

“The dumbest thing we ever did was take the shop classes out of high schools so students could go out and learn to be welders, pipe fitters and electricians,” he said.

“You don’t have to go to college for a great job,” Jankowski said, pointing to the 15- to 18-month post-high-school programs that prepare Houstonians for well-paying technical careers.

That demand for workers is front and center for many employers interested in moving or expanding to Houston.

Potential employers now want to know how many engineers, mechanics or welders are available, he said. How many technical degrees are being granted? What is being taught in each of the classes? Who can provide training in the future?

These days, relocation discussions include representatives of community colleges along with real estate and infrastructure experts, Jankowski said.

“If we can solve that,” he said, referring to workforce development, “that is one thing that will set Houston apart.”

One challenge for Houston is to make energy an industry of choice for young professionals, England said. It should be viewed as a high-tech, dynamic industry poised to solve the world’s energy problems.