Houston Economic Outlook

Presented by Larry Kellner

ChairmanGreater Houston Partnership

October 20, 2011

Four recessions

• March ’81 – January ’87– Oil price crash and local S&L debacle

• June ’91 – January ’92– First Gulf War, oil price spike, consumer pessimism

• June ’01 – June ’03– Dot.com bubble, Y2K, 911 and Enron

• December ’08 – January ’10– Global financial crisis

Three employment booms

• January ’80 – March ’82+ 235,300 net new jobs

• July ’96 – December ’98+ 250,600 jobs

• January ’05 – October ’08+ 324,000 jobs

Three employment busts

• April ’82 – August ’83– 163,800 lost jobs

• June ’85 – January ’87– 133,800 lost jobs

• December ’08 – January ’10– 156,800 lost jobs

Significant job creation

Jan-80 Jul-81 Jan-83 Jul-84 Jan-86 Jul-87 Jan-89 Jul-90 Jan-92 Jul-93 Jan-95 Jul-96 Jan-98 Jul-99 Jan-01 Jul-02 Jan-04 Jan-07 Jan-101400

1600

1800

2000

2200

2400

2600

2800

GREATER HOUSTON PARTNERSHIPHouston.org

Source: Texas Workforce Commission

Jan `801.478 M

Aug `112.595 M

Nonfarm Payroll EmploymentHouston Metro Area

Significant population growth as well

’80 ’90 ’00 ’10

3.1473.854

4.71499999999999

5.946

Metro Area Population(millions)

Source: U.S. Census Bureau

After 30 years

• The region has

• Added 2.8 million residents

• Created 1.0 million Jobs

• Built 760,000 single family homes

• Sold more than 6.7 million vehicles

After 30 years

• The region has

• Built 75 million square feet of office space

• Handled 4.7 billion tons of cargo

• Served more than 1 billion air passengers

A fairly decent performance by most standards

Onset of the recession

Apr

May Jun Jul Au

g Sep Oct Nov Dec Jan Feb Ma

r Apr May Jun Jul Au

g Sep Oct Nov Dec Jan

’08 ’09

Los AngelesMinneapolis

San DiegoRiverside

Miami

San Francisco

ChicagoBaltimore

AtlantaDallas

New YorkSeattle

St. Louis

Boston

Philadelphia

Washington

Houston

Detroit - May ’00

Tampa – Sep’06

U.S.

’07

Source: U.S. Bureau of Labor Statistics

Houston Jobs Lost in Recession

Metro Houston Employment

Unadjusted Seasonally Adjusted

Recession Began Jan ’09 Sep ’08

Jobs Lost 152,800 121,200

% Lost 5.8% 4.6%

Source: Texas Workforce Commission

Listed by Population Size

Metro Area Jobs Lost* Metro Area Jobs Lost *

New York -389,600 Detroit -480,900

Los Angeles -549,300 Phoenix -246,900

Chicago -340,800 San Francisco -169,300

Dallas -155,900 Riverside -172,500

Philadelphia -144,700 Seattle -141,500

Houston -121,200 Minneapolis -115,900

Miami -245,900 San Diego -101,600

Atlanta -224,800 St. Louis -83,900

Washington -95,800 Tampa -138,900

Boston -104,600 Baltimore -70,400* Seasonally adjustedSource: U.S. Bureau of Labor Statistics

Total jobs lost

-3.2%

-4.3%-4.5%-4.6%-5.1%-5.2%-5.3%

-6.1%-6.4%

-7.5%-7.7%-8.0%-8.3%-9.1%

-9.7%-10.2%

-11.1%

-12.8%-13.5%

* Excludes Detroit

% Jobs Lost During RecessionLargest U.S. Metro Areas*

Depth of Recession

Source: U.S. Bureau of Labor Statistics

-42

-38 -38 -37-35

-33 -32 -31 -30

-24 -24 -24 -23 -22 -22 -22 -21

-16 -16

Los A

nge

les

Ph

oe

nix

Rive

rside

San Fran

cisco

Atlan

ta

Tamp

a

San D

iego

Miam

i

Min

ne

apo

lis

Balti

mo

re

Ne

w Y

ork

Seatt

le

Ch

icago

Dallas

Ph

ilade

lph

ia

St. Lou

is

DC

Bo

ston

Ho

usto

n

* Excludes Detroit

Months from Peak EmploymentTo Employment UptickLargest U.S. Metro Areas*

Length of Recession

Source: U.S. Bureau of Labor Statistics

Jobs recovered through Aug ’11

Metro Houston Employment

Unadjusted Seasonally Adjusted

Recovery Began Jan ’10 Dec ’09

Jobs Recovered 120,100 110,100

% Recovered 76.6% 90.8%

Source: Texas Workforce Commission

Adjusted

Unadjusted

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Jobs Recouped Jobs Still Needed to Reach Previous Peak

120,100 Jobs, 76.6%

110,100 Jobs, 90.8% 11,100 Jobs 9.2%

32,700 Jobs23.4%

Halfway PointHouston Recovery

Source: Texas Employment Commission

Atlanta

Philadelphia

Los Angeles

Chicago

New York

Miami

DC

Dallas

Boston

Houston

-1.2%

4.1%

5.4%

10.0%

11.6%

13.9%

46.0%

52.0%

66.1%

90.8%

Percent of jobs recovered though Aug ’11Houston vs. Top 10 Metros

Source: U.S. Bureau of Labor Statistics

Riverside

Detroit

San Francisco

Phoenix

Tampa

Minneapolis

San Diego

Seattle

St. Louis

Baltimore

Houston

-0.3%

5.5%

11.4%

13.6%

14.1%

25.2%25.6%26.6%

31.5%

32.1%

90.8%

-0.3%

Percent of jobs recovered through Aug ’11Houston vs. Second 10 Metros

Source: U.S. Bureau of Labor Statistics

Information

TWU*

Real Estate

Finance

Construction

Professional Services

Retail Trade

Manufacturing

Arts, Entertainment

Oil & Gas

Wholesale Trade

Administrative Support

Education Services

Hotels & Food Srvcs

Health Care

Personal Services

0.0%

11.7%

23.0%

34.0%

34.7%

43.8%

48.6%

48.8%

63.8%

74.8%

79.2%

+100%

+100%

+100%

+100%

+100%

Midway Point

Houston MSA job recovery through Aug ’11

Source: Texas Workforce Commission* Transportation, Warehousing and Utilities

• Growing population– 125,000 people/year

• Infant population– 65,000 births/year

• In-Migration– 60,000 newcomers/year

• Aging population– 15,000 seniors (65+)/year

Population Growth

Source: U.S. Census Bureau

Purchasing Managers Index

30

35

40

45

50

55

60

65

70

1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12

Source: National Association of Purchasing Management - Houston, Inc.

Neu

tral

= 5

0

Sep `1160.8

PMI above 50 signals continued expansion

North American Rig Count (monthly average)

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12

Jun `09895

Sep `111,978

Source: Baker Hughes

Foreign trade

YTD Aug '10 YTD Aug '110

25

50

75

100

125

150

175

200

$60.2$77.3

$76.9

$98.8

ImportsExports

$137.1

$176.1

$ Value, Billions, Houston-Galveston Customs District

Source: U.S. Census Bureau

Total Appraised Value in BillionsMajor Texas Counties

$323.2

$187.4

$132.5$113.7 $106.6

$37.2$23.3

Source: Comptroller of Public Accounts- Property Tax Assessment Division, 2011

5.9386.526

7.160

7.842

8.573

9.355

2.6883.006 3.255 3.496 3.727 3.974

'10 '15 '20 '25 '30 '35

Houston-Sugar Land-Baytown MSA 2010-2035(Millions)

Population Employment

Population & Employment Projections

Source: The Perryman Group, Spring/Summer 2011

2010-2011 Economic DevelopmentGHP Contributions

Year Total Jobs Capital Investment

2010 22,989 $455 million

2011 YTD 15,428 $536 million

* Calculations using regional input-output modeling system (RIMSII) developed by the U.S. Bureau of Economic Analysis

Thus far in 2011, GHP has been involved in 21 announced projects in the region.

Employment

• Compound annual growth rate• 1.89 percent = 47,800 jobs• 2.65 percent = 67,100 jobs

• Forecasters growth rates• 66,000 jobs (Perryman)• 53,300 jobs (Woods & Poole)

Employment

• Compound annual growth rate• 1.89 percent = 47,800 jobs• 2.65 percent = 67,100 jobs

• Forecasters growth rates• 66,000 jobs (Perryman)• 53,300 jobs (Woods & Poole)

• Most recent TWC release• 65,600 jobs since Aug ’10

Houston Economic Outlook

Presented by Larry Kellner

ChairmanGreater Houston Partnership

October 20, 2011