Early Returns Are In — Metro Houston added 14,800 jobs in ’16, according to the Texas Workforce Commission (TWC). Job growth fell below the Partnership’s forecast of 21,900, but still reflects a net gain. At the beginning of ’16, the prospect for any increase was doubtful given the extensive layoffs that occurred earlier in the year.
One should embrace the report with caution, however. As it does every year, TWC is currently reviewing employment records for the past 30 months and will release revisions to the jobs data in early March. The revisions will include gains and losses not captured in the original monthly reports. The initial reports are based on surveys of companies and agencies that are representative of industries and employers across the state. As with any survey, the results are subject to error. The March revisions are based on employment insurance records covering 96 percent of all workers in Texas and will reflect a more accurate reading of job trends.
Since ’06, TWC’s annual benchmark revisions have resulted in employment growth being revised upward by as many as 36,700 jobs in boom years and downward by as many as 35,700 jobs in recession years. The revisions to ’16 may be significant, the revisions to ’15 and ’14 less so.
The Federal Reserve Bank of Dallas developed its own revisions based on employment records for the first nine months of ’16 then forecasted growth for the final quarter. The Fed estimates that Houston lost l6,500 jobs January through June, created 13,600 jobs July through December, and finished ’16 with a loss of 2,900 jobs. If the Fed’s estimates prove accurate, that would be a 0.1 percent job loss. In an economy with 3.0 million jobs, that’s the equivalent to a rounding error.
Even with revisions pending, several trends in the data stand out. Mining and logging, manufacturing, construction, wholesale trade and professional services lost significant employment in ’16. Retail, finance, real estate, education, health care, leisure and hospitality and government finished with net job gains. The low point of the recent downturn likely occurred May or June of last year.
Houston’s unemployment rate rose from 4.9 in November ’16 to 5.3 percent in December ’16. The unemployment rate, like the jobs data, is based on a survey, this one is of households. When the economy softens, workers who have been laid off often withdraw from the labor market until they perceive their employment outlook has improved. If they’re not looking for work, TWC doesn’t count them as unemployed. Thus, the unemployment rate may decline in a weak economy.
When workers on the sidelines feel their odds of finding a job have improved, they re-enter the workforce, initially driving up the unemployment rate. Such was the case with the Great Recession, when the unemployment rate rose through the summer of ’10 even though the region had been creating jobs since January of that year.
Energy, The Short View —
The spot price for West Texas Intermediate, the U.S. benchmark for light, sweet crude, averaged $52.50 in January, up from $31.68 in January of ’15. Except for one day, WTI has traded above $50 since December 1, ’16. In its January ’17 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration forecasts WTI to average $53.46 in ’17 and $56.18 in ’18. Many consider $60 the threshold at which the industry returns to profitability.
The U.S. rig count hit 729 in early February, compared to 571 the same time in ’16 and up from the recession trough of 404 in late May. That’s well below the peak of 1,931 reached in September’14. The industry is unlikely ever to return to its previous peak. In a Q2/16 earnings call, Halliburton president Jeff Miller told investors 900 may be the new 2,000, given all the drilling technology advances of the past two years.
U.S. crude oil production averaged an estimated 8.9 million barrels per day (bbl/d) in ’16 and is forecast to average 9.0 million bbl/d in ’17 and 9.5 million bbl/d in ’18, according to the STEO. The expected boost in production reflects increases in federal offshore Gulf of Mexico production. Rising tight oil production, which results from increases in drilling activity, rig efficiency, and well-level productivity, also contributes to forecast U.S. production growth
Energy, The Long View —
BP recently released its 2017 Energy Outlook, outlining what it considers the most likely path for global energy markets through ’35. The outlook attempts to account for future changes in policy, technology and economic growth.
- BP expects the size of the world’s economy to nearly double over the next two decades. The world’s population is projected to increase by around 1.5 billion people and reach nearly 8.8 billion. Growth in population and the economy will require growth in energy consumption, but not at the same pace as economic growth. Global GDP doubles over the period whereas energy demand increases by only 30 percent.
- Virtually all the growth comes from emerging economies, with China and India accounting for more than half the increase. Energy demand in North America and Europe barely grows.
- Renewables, along with nuclear and hydroelectric, account for half of the growth in energy supply. Even so, oil, gas and coal remain the dominant sources of energy, accounting for more than 75 percent of energy supplies in ’35, down from 85 percent today.
- Oil use grows at 0.7 percent per year. Natural gas use is expected to grow faster than oil or coal, with consumption increasing 1.6 percent per year between ’15 and ’35.
- Increases in the supply of liquids are driven by holders of large-scale, low-cost resources, especially in the Middle East, U.S. and Russia. OPEC is expected to account for nearly 70 percent of global supply growth, increasing by 9 million barrels per day (MMbbl/d), while non-OPEC supply grows by just over 4 MMbbl/d by ’35, led by the U.S.
- Renewables in power are set to be the fastest growing source of energy at 7.6 percent per year, more than quadrupling over the outlook period. Renewables account for 40 percent of the growth in power generation, causing their share of global power to increase from 7 percent in ’15 to nearly 20 percent by ’35.
- Carbon emissions are projected to grow at 0.6 percent per year, less than a third of the rate seen in the past two decades (2.1 percent per year). This scenario would see the slowest rate of emissions growth since record keeping began in ’65. 0