Non-farm employment for the Houston region was revised upward with this week’s release of the Bureau of Labor Statistics annual re-benchmarked data. The revisions go back as far as the first of 2005. Since the employment numbers throughout that time period were both revised upward and downward, the best way to look at the new employment numbers is in terms of what they now imply regarding growth in 2006. Previous numbers indicated job growth in Houston between December 2005 and December 2006 of 3.0%. The revised employment figures show job growth of 3.97%. Thus, during this time period, Houston is now estimated to have gained 96,000 jobs instead of the 73,000 job gain previously reported. While upward revision was slightly greater than the IRF expected, the pattern followed our expectations very closely. The vast majority of upward revisions were in upstream energy related sectors. The Texas Workforce Commission and the Bureau of Labor Statistics always have difficulties in estimating employment throughout the year for sectors undergoing major transitions (either on the upside or the downside). Job growth in mining (direct oil and gas exploration) was revised upward from 6.07% to 9.60%. Job growth in durable good manufacturing was revised upward from .89% to 8.23%, a huge revision, most of which is related to the production of various forms of oil field equipment. Other sectors with large upward revisions such as engineering services also have a strong tie to energy.

In many ways the newly revised employment estimates do not change the general economic picture of the Houston region for 2006. Last year Houston’s growth rate was substantially greater than the national average. The difference can be almost totally attributable to energy and the fact that construction has not slumped locally as it has in most other parts of the country. The new data also reveal that the secondary sectors of the Houston economy were not quite as anemic as previously depicted, but they reconfirm that the non-energy portion of Houston’s economic base performed only modestly better than what was observed elsewhere in the nation.

Perhaps the most interesting question is whether the new data still shows a modest slowdown in the regional economy over the past 6 months. The previous employment series indicated a very modest decline in employment growth beginning last summer, less than experienced nationally, but closely following the national pattern. The local slowdown is even more obscure in the new data. Rather than peaking during the first half of 2006, the revised data show job growth peaking in October of last year. But given the sizeable amount of statistical noise, it is just too early to determine whether there is any sign of a moderating trend in growth. It typically takes 4 to 6 months of employment data to determine a trend along with confirming supplemental data. We are hoping that we’ll be in a better position by this May’s symposium to tell whether the energy driven boom is continuing or whether the red hot Houston economy is beginning to cool down somewhat.

Dr. Barton Smith
Director
Institute for Regional Forecasting