Energy Sector Driving Positive Economic Outlook, Bauer Economist Bill Gilmer Says

Published on June 23, 2014

Houston’s Upstream Exploration Jobs Will Continue to Increase,
Institute for Regional Forecasting Director Projects

Institute for Regional Forecasting Director Bill Gilmer spoke recently to the Houston business community about what is on the horizon for Houston's economy.

Institute for Regional Forecasting Director Bill Gilmer spoke to the Houston business community about what is on the horizon for Houston’s economy during the IRF spring symposium in May.

The energy industry is likely to remain front and center when it comes to driving Houston’s economy, with upstream exploration jobs now totaling more than 100,000, according to projections from noted economist Robert W. “Bill” Gilmer, in his recent economic forecast for the city.

Gilmer outlined his forecast during the C. T. Bauer College of Business Institute for Regional Forecasting’s spring symposium in May, titled “While Upstream Oil Cools Down, What Drives Houston’s Economy Forward Now?” Gilmer addressed the impact for Houston with the slowdown in spending for oil exploration and production.

“Energy-related hiring has slowed to a stand-still by late last year, but showed an unexpected and very sharp acceleration early in the year,” Gilmer said.

He said there might be two ways to explain this.  One is a possible relocation of a large number of employees into the Houston area by Exxon, Chevron, Occidental, or other oil companies. Also, there was a surge in drilling as a result of the cold winter.  Higher energy bills for the United States translated into a bonus for Houston’s natural gas producers, and they have responded by accelerating drilling early in 2014.

Gilmer also said that Houston’s growth spurt is a result of a sudden push in construction. Perhaps 40 percent of the new construction early this year can be attributed to utilities, lot development and large infrastructure projects, all badly needed after several years of strong growth in jobs and population.  Also, he said, we have known for some time that a major expansion of refining and petrochemical facilities was coming to the Houston ship channel.  This construction is ramping up more quickly than anticipated as companies race to market to take advantage of strong profits, and to secure scarce skills in the construction trades.

“Historically, upstream has dominated Houston’s economy. Now we are a big integrated industry that’s going to have the benefits of both upstream and downstream,” Gilmer said. “Energy is continuing to move forward rapidly and whoever is the first one finished will see the biggest profit. No one wants to be last when you’re in this global market.”

Gilmer looked specifically at Chevron Phillips and ExxonMobil — companies that have proposed projects in Baytown that are each a $6 billion investment and expected to bring in 10,000 construction jobs by 2017.

Houston has other economic resources, he added, citing the Johnson Space Center (JSC) in Clear Lake and the Texas Medical Center. With oil booming, these organizations have been neglected as potential contributors to the city’s economy, Gilmer said. However, he said the worst is behind JSC and employment is now stable following the cancellation of the Constellation project that caused 7,000 jobs to be lost in 2011.

“Funding has been restored and a new project has been named that set goals to return to the moon and Mars in the next several years,” he said. “Those who were laid off were able to find jobs in engineering and technology.”

Prospects for Houston’s job growth remain very strong in 2014, and continuing into next year, Gilmer said.  He said that the outlook was so promising during the last four months of 2013 he increased his forecast to predict that 86,000 more jobs will be available in Houston through the end of the year.

A former senior economist and vice president of the Federal Reserve Bank of Dallas, Gilmer holds a master of arts and a Ph.D. in economics from the University of Texas at Austin. As director of Bauer College’s Institute for Regional Forecasting, he is charged with leading the institute’s twice-a-year symposia on the state of the regional economy.

By Danielle Ponder

Posted Under: Faculty and Staff

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