Bauer Economist Gives Economic Forecast During Fall 2015 Symposium

Published on November 17, 2015

Institute for Regional Forecasting Director Bill Gilmer Predicts Stalled Growth, Slow Recovery for Houston

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Robert W. (Bill) Gilmer speaks during the Institute for Regional Forecasting’s Fall 2015 Symposium at the Hyatt Regency Hotel in downtown Houston. See more photos from the event on whereawesomehappens.com.

The Houston economy is in for a slow recovery in the energy industry, according to Robert W. (Bill) Gilmer, director of the Institute for Regional Forecasting at the C. T. Bauer College of Business.

Gilmer presented his forecast this month at the IRF’s Fall 2015 Symposium, which drew nearly 1,000 area professionals from sectors including development, homebuilding and banking. His talk, titled “Houston’s Job Growth Stumbles as Oil Markets Swoon: Where Now?,” analyzed how the waning oil industry will affect other markets in Houston.

Gilmer proposed four scenarios about Houston’s economic recovery, V-shaped recovery, U-shaped recovery, a check-mark recovery and damaged, with V-shaped being the best option left for Houston, but an option that is fading rapidly.  Normally, Houston’s response to a drilling downturn of the depth experienced would be a mild recession, but two major events are offsetting the recession.  One is continued strong growth in the U.S. economy, and the other is a major expansion of petrochemical plants in east Houston.

“This is a very serious downturn in the oil markets. This downturn has run faster and further in the drilling market than anything we saw in 2008 and 2009, and many of our options for quickly getting out of this downturn are receding quickly,” Gilmer added.

Although the key factor of Houston’s downturn is in energy, Gilmer states this will seep into other industries, causing a major halt in the city’s growth.  “This is a slowdown that is likely to persist through 2016. It has been largely, so far, concentrated in the energy business and manufacturing, and unfortunately this gives the stain time to spread,” Gilmer said. “We’ll see slow job growth and see population growth slip dramatically this year and when that happens, it will catch up to sectors that – so far – have felt immune.  Health care, leisure, education and government are examples of industries that will begin to feel some economic pain in 2016.

Although the Houston economy is going to take longer to recover than before, Gilmer is hopeful that Houston can remain strong with several external factors at play.

“This is not 1982. Oil markets have a differential between supply and demand of about four percent. In 1987, that was 20 percent differential that needed to be closed and so it is not the kind of crisis we went through in the 1980s,” Gilmer added. “Yes, this is a serious downturn, but we have a strong U.S. economy behind us. We do not have the kind of excesses that we had in the real estate market, and we’re not about to have a banking crisis.”

Overall, Gilmer predicts for the next year that Houston will gain 27,000 jobs and the population will grow by 47,500, leading into a strong recovery in 2017.

Gilmer will continue to monitor the situation before presenting his next set of projections at the IRF’s Spring 2015 Symposium on May 17 at the Hyatt Regency Hotel in downtown.

By Amanda Sebesta

Posted Under: Faculty and Staff

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