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Local job growth continues to slip

Numbers lowest since spring 2000

Local job growth continues to slip
  • October 19, 2001

The Houston area's job growth continues to slide as the national economy struggles to cope with what is increasingly looking like a recession.

Energy is slowing, construction is slowing, everything is slowing, said Barton Smith, director of the Institute for Regional Forecasting at the University of Houston.

Houston-area employers added 48,900 jobs during the past 12 months, a 2.3 percent increase, the Texas Workforce Commission reported Thursday. The survey shows the lowest year-over-year job growth since April 2000. And the survey, completed during the week of the Sept. 11 attacks, doesn't reflect the thousands of jobs that Houston has lost since the terrorist attacks.

While the September report showed the growth in new jobs is slowing, the Houston unemployment rate actually dropped 0.1 percentage point to 4.5 percent in September because fewer people were looking for jobs, according to the Texas Workforce Commission.

Job growth in Houston's economic base -- the jobs that bring new money to town, such as oil and gas extraction and manufacturing -- is close to zero, Smith said. The growth rate is supported by the industries such as services and retail trade that circulate money around the economy.

But they're not going to be able to do that forever.

If the energy industry and the national economy don't start to grow, the secondary market will dip, Smith said.

By early 2002, Smith expects to see construction employment decline. New projects are being put on hold or getting canceled altogether.

The drop-off in employment won't be immediate, because it takes a while for builders to finish off projects.

Houston's manufacturing sector, one of the driver's of the area's economy, is also showing signs of a rapid slowdown. Smith expect it to deteriorate in 2002.

Houston's manufacturing, which had been strong until the end of the first quarter, began stumbling in August when manufacturers cut 600 jobs. Last month they cut 700 jobs.

The printing and publishing industry is suffering because advertising is down, said Joel Wagher, labor market analyst for the WorkSource in Houston.

Paper companies also cut jobs in September because there is less need for shipping containers, cardboard boxes and packaging materials, Wagher said. And industrial machinery and equipment makers, which includes computer manufacturers, trimmed their payrolls to respond to slower demand for computers.

Business services, long a vibrant job producer in Houston, also have scaled back dramatically. At the beginning of year, these firms -- which include temporary services and computer data processors -- were adding 11,700 jobs a year, a 6.8 percent rate of growth.

But by September, that year-over-year growth had slowed to 2,800 new jobs, a 1.5 percent increase. Employers are doing away with contract workers and temporary workers, Wagher said.

"It's been real tough," said Tony Pannagl, managing partner of IS&T, a company that specializes in providing contract workers for information technology network and infrastructure jobs.

Pannagl said he's seeing a lot of clients that have put their projects on hold as they wait to see how the economy shakes out. They haven't reached the point when they say the work has to get done and we need some temps.

To cope with the soft market, Pannagl said he had to lay off two recruiters two months ago. And he's also seeing some of his competitors go out of business.

Luckily, small businesses are still quite active and providing quite a bit of work for IS&T. These smaller shops are using this time to overhaul their networks and buy hardware while prices are way down.

There are other signs the area's economy is slowing.

The September survey of purchasing managers at Houston companies showed weakness in production, sales and purchasing, according to the National Association of Purchasing Management's local chapter.

Some lawyers also sense a change.

Jim Reeder, hiring partner at Vinson & Elkins, said he pays close attention to the shift in the firm's business from transactions to litigation to tell how the city's economy is doing.

When the economy is hot, clients with a business conflict tend to find a business solution to resolve the dispute, Reeder said. But when the economy softens, they tend to litigate more.

But Reeder said that while the firm has seen an increase in litigation, it's been nothing like the sea change he would expect if the economy is indeed in a recession.

Perhaps it's because Houston's economy continues to be buffered by an energy economy, Reeder said. Oil and gas companies had been doing well until fairly recently when prices for oil and natural gas began falling.

Statewide unemployment, which remained unchanged in September at 5 percent, is higher than Houston's rate.

Job growth is also slower across the state. Texas employers added 183,000 jobs during the past 12 months, a 1.9 percent increase.

The weakening state economy is reacting to the global slowdown that's centered in high tech, computers and communications, said Robert Crawley, economist for the Texas Workforce Commission in Austin.

Austin, Dallas and, to a lesser extent, Houston are suffering more than the rest of Texas because of larger concentrations of high-tech employment.

Nationwide, new claims for state unemployment insurance are rising. For the work week ending Oct. 13, new jobless claims rose by a seasonally adjusted 6,000 to 490,000, the Labor Department reported Thursday. The only time claims were higher this year was at the end of September -- 535,000, a nine-year high.