Skip to main content

Research Update: Latest Analysis of COVID-19 Impact on Houston Economy

Published Mar 20, 2020 by Patrick Jankowski

Downtown for Fortune 500

As recently as early March, many economists believed (or perhaps hoped) that if the Federal Reserve cut interest rates and Congress enacted a large fiscal stimulus package, the U.S. could avoid a recession. Two weeks later, interest rates are near zero and Washington is working to inject $1 trillion into the U.S. economy. Unfortunately, that’s all too late. The U.S. is already in a recession, and so is Houston.

Conventional wisdom holds that the U.S. is in a recession when the nation has logged two or more consecutive quarters of declining gross domestic product (GDP). If we stuck with that definition, we’d have to wait until July or October to determine if the U.S. were in a recession. 

The Business Cycle Dating Committee (yes, there is such an organization) of the National Bureau for Economic Research (NBER) embraces a broader definition. The committee looks for a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, income, employment, industrial production, and wholesale-retail sales.” The official reports on those metrics have begun to trickle out, but one can surmise from media reports that a “significant decline” is already occurring. No need to wait for a committee of experts to pronounce the U.S. is in a recession. The Partnership recognizes that we’re in one.

But, what do the vast majority of economists say?

Every month, the Wall Street Journal asks a panel of 70 or more prominent economists when they expected the next recession. In January, only 10.8 percent of respondents expected one this year. In February, 58.5 percent expected a recession within the next nine months, with 41.5 percent expecting a recession to start in Q2. Those results were gathered before the coronavirus began shutting down restaurants, bars, sporting events and stores. Given the trajectory of recent events, the April survey will likely show the vast majority of the panel believes the U.S. is in a recession.

How bad will it get in 2020? 

•    Moody’s Analytics sees the U.S. economy contracting 1.6 percent in Q1 and 2.5 percent in Q2 before picking up in the second half of the year and exceeding three percent growth in 2021.
•    J.P. Morgan expects GDP to contract two percent in Q1 and three percent in Q2 before bouncing back in Q3.
•    Goldman Sachs sees the economy flat in Q1, contracting five percent in Q2, then growth exceeding three percent in the second half of the year.
•    Markit expects consumer spending to decline through June and the economy to remain in a slump through the end of the year. GDP will contact 5.4 percent in Q2 and 1.9 percent over Q3 and Q4.  IHS forecasts U.S. GDP to grow only 0.8 percent in ’21.

The Partnership is concerned that all the above forecasts, except for IHS market, may be overly optimistic.  Weak global growth, declines in the energy sector, shattered consumer confidence, and a wave of credit defaults and bankruptcies will weigh on the recovery.

What does this mean for Houston?

Any time the U.S. tumbles into a recession, Houston gets bruised and battered. This time Houston’s injuries will be more than superficial.  As noted in March’s Houston: the Economy at a Glance, Russia and Saudi Arabia are dueling over who will control global oil markets. Houston is caught in the crossfire. The collapse in oil prices (trading near $24 a barrel, less than half February’s level) will force another restructuring of Houston’s energy sector, the second in the past six years. Houstonians should anticipate a new round of layoffs and bankruptcies. These losses will be compounded by those brought on by the U.S. recession. 

Houstonians like to embrace the notion that their metro was among the last to enter the Great Recession and was among the first to exit. That’s not going to be the case this time. All three pillars of Houston’s economy—energy, global trade and the U.S. economy—are tottering. The next 12 to 18 months will likely be very rough for Houston.

Visit the Partnership's COVID-19 Resource page for updates, guidance for employers and more information. And sign up for daily email alerts from the Partnership as the situation develops. 

Related News

Economic Development

Greater Houston Partnership Receives 2024 Excellence in Economic Development Award

8/28/24
The Greater Houston Partnership received a 2024 Excellence in Economic Development Bronze Award from the International Economic Development Council (IEDC). The award was bestowed specifically for the Partnership’s work in the regional or cross-border partnership for regions with 500,000 or more residents.  The strategy formed in partnership with regional allies, as elaborated in the regional playbook, aims to enhance regional economic development in greater Houston by fostering collaboration and coordination among stakeholders. This involved creating a framework for the Houston Regional Economic Development Alliance (HREDA) to maximize engagement and support.  Formed in 2006, HREDA is comprised of economic development organizations and municipalities interested in creating jobs and investment to maintain a positive business environment. HREDA meets monthly at Partnership Tower, and often at other locations around the region. Hosted monthly at Partnership Tower and other regional sites, HREDA meetings include members from 98 economic development organizations, representing over 160 full-time economic development professionals.  The project's uniqueness and innovation reside in member involvement at every stage, ensuring ownership of the final playbook. It addressed previous collaboration deficits noted in studies, aiming to leverage regional resources for economic growth. The scale of marketing the region is no small feat. Covering 8,838 square miles, the 12-county Greater Houston region, with its centerpiece, the 10-county Houston-Pasadena-The Woodlands MSA, surpasses an area the size of New Jersey,  Despite this vast expanse, the region's stakeholders have rallied together as allies, streamlining processes to attract prospective companies. This collective effort reflects a shared commitment to securing victories for the region's economic growth. “I am proud to be a part of an organization, such as HREDA, that exemplifies how regionalism and collaboration can drive economic success and set high standards for regional development,” HREDA Chair and Chief Economic Development Officer at Partnership Lake Houston Stephanie Wiggins said. “By uniting various stakeholders under a common goal, HREDA leverages the strengths of the Houston region to create a prosperous and sustainable economic environment." Every year IEDC looks specifically for economic development organizations, government entities, initiatives, and programs that have demonstrated consistent, exemplary performance in the economic development profession, leading the execution of projects that have a significant impact on revitalizing communities, and playing a major role in shaping and improving the practice of economic development. “This group understands what it means to succeed together," Greater Houston Partnership President and CEO Steve Kean said. “When we work together as one to combine the expertise, assets and capabilities of our regional partners, the Houston region is unmatched in potential. Through this mindset of regionalism, we can create a more prosperous and inclusive future for all of our citizens.” Learn more about the 12-county region the Partnership represents.  
Read More
Economic Development

Chevron Relocates Headquarters to Houston

8/2/24
Chevron Corporation has announced plans to relocate its corporate headquarters to Houston from San Ramon, California.  The announcement follows the energy giant's recent efforts to consolidate its operations in Houston, which began in 2022, with the sale of its 92-acre headquarters in San Ramon.  This strategic move aims to enhance collaboration among senior leaders, executives and business partners, according to Chevron’s press release. Chevron currently employs 7,000 people in the Houston area and 2,000 in San Ramon. While the relocation will initially have minimal impact on San Ramon employees, all corporate functions are expected to migrate to Houston over the next five years. Positions supporting Chevron’s operations in California will remain in San Ramon. According to the company, this move aligns with its ongoing efforts to streamline its operations and improve performance. By consolidating its headquarters in Houston, Chevron can leverage the city's robust energy infrastructure and diverse talent pool to advance energy affordability, reliability and security globally. “This is just the final step that many industry observers were waiting to happen,” Ken Medlock, Senior Director of the Baker Institute’s Center for Energy Studies, explained in a recent release. “To start, Houston provides a world-class location for internationally focused energy companies, which is why there is such a massive international presence here. Texas is also the nation’s largest energy producer across multiple energy sources and is poised to lead in emerging opportunities such as hydrogen and carbon capture, so Houston is a great place for domestically focused activities as well. To top it off, Texas rates very favorably for business in general.” Chevron will become the 24th Fortune 500 company to establish its headquarters in Houston, joining the city's growing hub of major corporations. Among these is ExxonMobil, which announced its corporate headquarters relocation to Spring in 2022. “Chevron’s decision to relocate its headquarters underscores the compelling advantages that position Houston as the prime destination for leading energy companies today and for the future," said Partnership President and CEO Steve Kean. "With deep roots in our region, Chevron is a key player in establishing Houston as a global energy leader. This move will further enhance those efforts." Learn more about corporate headquarters in the Houston region.   
Read More

Related Events

Economy

Economy Series

The Greater Houston Partnership's Economy Series presents exclusive data and examines trends impacting our economy on a local and state level.  The Partnership's Chief Regional Economist Patrick Jankowski will…

Learn More
Learn More
Executive Partners