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Houston Finds the End of the Pandemic, Stimulus, and Inflation: A Healthy Pause Before the New Administration Gets to Work
March 2025
This report updates our December forecast for the US and Houston economies. The outlook was positive in December and pointed to a likely soft landing for both the US and Houston, but it also came with significant uncertainty generated by recent hurricanes and potentially large data revisions that were just ahead. We have now moved through much of this uncertainty, and the new data continue to firmly point to a soft landing.
As this report is written, all of the pending data issues from December have been resolved with the major annual revisions of the US and Houston payroll data now complete, and a new short-run forecast of the US economy from the Survey of Professional Forecasters points firmly to a soft-landing through 2025.
In summary, the previous estimate of US job growth in 2024 was recently revised down from 186,000 new jobs per month to 166,000. This brought the US average for 2024 back to near the trend growth of 125-150,000 jobs per month sought for a soft landing. The January 2025 data – perhaps our first look at post-hurricane results – was 143,000 new jobs. The newly released February forecast for 2025 from the Survey of Professional Forecasters now projects an annual average for the US of 145,000 per month.
Houston’s payroll estimates for 2024 from the Texas Workforce Commission were running at 57,800 before the annual re-benchmark and were cut to 49,500 after revisions. Data from the Dallas Fed -- which incorporate as they arise revisions throughout the year – we’re much closer to the 49,500 figure.
For Houston, this new data for 2024 leaves us starting 2025 on the low side of a perfect soft landing, as it implies below-trends growth of less than 1.6-1.7 percent or about 57,000 jobs annually. As we show later in the report, our estimate for 2025 is for 34,300 local jobs, 49,600 in 2026, and then a return to trend. These Houston figures assume WTI oil prices near $65 per barrel through 2025.
This report and forecast put aside new Trump administration economic policy until June. Tariffs, immigration policy, mass federal layoffs -- all potentially ominous for the near- term economic outlook – are still a moving target. It is too early to know what policies will remain in place and which will survive the month. Some proposed policies are stimulative while others lead to contraction, and we don’t know what the net result may be. So far, the main effect has been economic uncertainty, and chilling economic activity while we wait for an outcome.
Perhaps the saddest part for this economist is the return of interventionist policies by the Trump administration. After five years of the previous administration’s pandemic, massive stimulus, serious outbreak of inflation, and sharply tighter Federal Reserve monetary policy, a soft-landing and return to normal business cycle conditions was my fondest hope. Instead, continued political whim and opportunism continues rule the day.
What makes a soft landing?
By a soft landing we mean a broad-based slowing of the economy from rapid growth rates to sustained trend levels. When the Federal Reserve began raising interest rates in 2022-23 it was widely expected that a major US slowdown and perhaps a mild US recession follow 12-18 months later. The economy would take the express elevator down. Instead, the picture of US economic growth in Figure 1 is that of a long slow escalator ride. Month-to-month swings in employment during the slowdown were often large, but a simple three-month moving average makes clear the slow downward slide.
But a long slowdown alone is not enough, and we now need for US payroll growth rate to level off at about 125-150,000 jobs per month or about one percent per year as the economy returns from an over-heated condition to trend. The estimate of US job growth in 2024 before revisions was 186,000 new jobs per month, but it is now 166,000. This brings the US average back to near the range of trend growth sought for a soft landing. The January data – perhaps our first look at post-hurricane results – was 143,000 new jobs.
Houston has led the US descent throughout, taking a separate and faster escalator. (Figure 2) The local economy appears to be softening more quickly than the US with recent data revisions that had already taken 20,000 jobs out of job growth in 2023, and further downward revisions came in 2024.
For Houston, the revisions to local employment we now have in hand, plus the new US employment numbers, resulted in a 12-month increase of 49,000 jobs in 2024 or on the low side of a soft landing. For Houston, a soft landing implies trend growth of 1.6-1.7 percent growth or about 57,000 jobs annually. Our 2025 forecast for Houston is a subpar 34,300 jobs if we assume WTI oil prices near $65 per barrel and a pickup to 49,600 in 2026.
What Do Experts Say About a US Soft-landing?
Our US forecast contains no recession and sees the economy running at trend or just above trend is we rely heavily on the short-run outlook from the Survey of Professional Forecasters. The SPF is the oldest quarterly survey among US macroeconomic forecasts. It was compiled and published by the National Bureau of Economic Research from 1960 to 1990, when the Federal Reserve Bank of Philadelphia was asked to take over. Its results are published quarterly on the Philadelphia Fed website.
The survey response comes from at least 35-40 professional macroeconomic forecasting groups that acknowledge their regular participation, plus an unknown number of others that remain anonymous. Respondents are from academics, consulting, banking, and industry. Compare this to the general survey of the National Association of Business Economics membership who may or may not be forecasters or to the heavy financial- analyst participation of the Wall Street Journal’s outlook survey.
In past cycles, the result of the Fed raising interest rates by enough to halt inflation typically has been a recession. Figure 3 shows the results of the Survey for gross domestic product (GDP), the broadest measure of the economy. Despite sharp increases in interest rates through 2022-23, the SPF forecast saw no recession in 2023 and only a long slowdown. Then, even these slow-growth projections turned around and shifted back to normal trend growth for GDP at 1.7-1.9% per year and have remained within the range or just above it this year. This latest forecast looks like a soft landing is in the works.
The US jobs data in Figure 4 is of special interest to us because of Houston. Regional economic data are limited compared to the wide-ranging and detailed data available for the US. In Houston, GDP and personal income figures are published only annually and with a long lag of a year or more, for example. Payroll employment, in contrast, is available monthly for Houston and provides substantial industry detail that allows a broad comparison of Houston to US performance.
Like the GDP data, the 2023 payroll employment forecast for the US was expected to fall back in response to high interest rates in 2022-23, but jobs instead peaked along with GDP and general economic activity. These projections remain below the pre-pandemic levels of 150,000 per month. But because of a long-running baby bust in the US, both the BLS and the Congressional Budget Office have projected long-term US growth of only 70-80,000 monthly jobs, making the 125,000 jobs per month shown here look strong.
These SPF projections for US job growth have likely been pushed up from 70-80,000 by the surge in cross-border immigration of recent years. We accept 125,000 average in Figure 4 as the medium-term US jobs trend and as an appropriate soft-landing number over the next 4-5 years.
Consumers are key to US Economic Strength
Solid strength in the large US consumer sector is repeatedly cited as key to the current expansion, but its on-going strength is also out of step with forecasts of a soft-landing. Here, the elevator and escalator both seem broken, and we are just stuck near the top floor with high levels of spending.
The trillions in direct pandemic fiscal spending were mostly gone by late 2021 or early 2022. However, consumer spending would continue through 2023 and into 2024 fueled by extraordinary levels of “excess saving” that simply stacked up in consumer bank accounts. But even after excess savings were apparently gone, the US consumer has somehow continued to spend at high levels and to feed US economic strength.
Figure 5 shows recent developments in the most basic support for consumer spending – inflation-adjusted personal income after taxes. We see this measure trending upward at pre-COVID rates, sharply interrupted three times by COVID stimulus, then struggled to recover to trend income levels in 2022 and early 2023, but it has since seen inflation- adjusted income hang on to the trend.
Meanwhile, inflation-adjusted US spending in Figure 6 staged a same sharp one-time jump after the third-round stimulus. Real spending then remained high, supported by excess savings and economic recovery. The left side of the figure shows both nominal and real spending on retail sales and food service. Unlike income, we see real spending after the 2021 stimulus remaining flat at high levels. The right side of the chart also shows this real consumer spending compared to long-run pre-COVID trends. Spending is still running stronger than the trend and waiting for growth to catch up.
A soft-landing would see both series – income and spending -- reach their proper level of trend growth and then settle at trend rates. Instead, inflation-adjusted spending is still running hot and above trend, with real income still barely meeting the trend. A soft- landing should entail a long, moderate slowdown in spending that has yet to arrive.
Figure 7 shows San Francisco Federal Reserve Bank estimates that high levels of “excess savings” that accumulated in the wake of trillions of dollars of stimulus spending, as Americans could not spend the cash fast enough and allowed perhaps $2.1 trillion dollars to accumulate in personal short-term savings and checking accounts. Once stimulus funds were exhausted, this became the cushion to allow consumers to continue spending at high levels, avoid the Fed interest rate shock, and provide the long comfortable escalator ride through 2022-23. However, these estimates now show those excess funds were gone by early 2024.
However, these estimates now show that excess funds were likely gone by early 2024. However, the consumer continued spending at above-trend levels even with stimulus gone, excess savings exhausted, and income barely running at trend levels of growth since early 2023. Figures 8 and 9 show two easy reasons why higher spending might remain possible -- spending out of regular saving and higher debt levels.
Figure 8 shows how the personal saving rate spiked with the pandemic payments as excess savings accumulated. Despite holding excess savings, the consumer dipped heavily into regular savings early in the pandemic, slowly returned to normal savings rates, then in recent months – with the “excess” gone – again turned to drawing on regular savings. Better said, the consumer slowed the normal rate of saving from 5.8% annually to 4.8 percent.
Figure 9 is about consumer borrowing and debt, showing recent growth in credit cards and other forms of revolving debt. The chart on the left shows debt in both real and nominal dollars and adjusted for inflation. This debt has only recently returned to pre- COVID levels and is now rising slowly. On the right, we see that inflation-adjusted debt remains well below the typical, pre-COVID growth in consumer credit.
The lower saving rates and debt look like relatively small contributors to current consumer strength. Other avenues may also contribute. For example, the post-COVID era has brought sharp increases in stocks and other assets, supporting strong spending by the upper reaches of the income distribution. And consumer spending in FY2024 was likely supported by continued federal deficit spending via the Chips Act, the Inflation Reduction Act and other legislation. The just-ended FY2024 fiscal deficit was $1.8 trillion, an increase of $38 billion or eight percent over a year earlier. This would just be lost COVID stimulus replaced by more stimulus. Whatever the source, so far there are still few signs of any consumer pullback.
Why Is Houston spending slowing?
All of the reasons for US spending to run too high – excess savings, borrowing, asset values, growing debt, and deficit spending -- should be fully shared by Houston. But unlike the US, Houston shows a solid trend toward declining real spending since 2022, suggesting that local household budgets joined payroll employment on the down escalator.
Figure 10 does not show actual spending but relies on sales and use tax collections in Houston. This is the one percent tax collected by Comptroller and paid to the City of Houston and METRO MTA. While the US consumer continues to keep real spending above trend, Houston’s inflation-adjusted tax allocations have steadily continued to fall back since mid-2022. The City revenues are essentially a subset of the METRO tax base which is larger and spreads further into the suburbs. The left side of Figure 10 looks very much like Figure 6 with tax/spending revenues for the US shown with and without inflation adjustment.
Both Figures 6 and 10 show the recovery from the pandemic, the jolt to spending that followed the third round of stimulus, and the inflation outbreak. The difference is Houston’s long decline in sales and spending after the stimulus ends. Just following the trend line in Figure 10, since August 2022 real City revenues have fallen at 2.8 percent per year and METRO’s at 2.3 percent.
The problems with using the tax data are many. Most important for our purposes, the Figure 10 total is a broad array of both business and consumer taxes – and we are trying to make a specific point about consumers. We can improve on this by looking at Quarterly Sales Tax Historical Data from the Texas Comptroller: it is only available through 2024Q3, it is quarterly and not monthly, it is not tax revenue but the value of the taxable goods, and it is specific to the City of Houston. See Figure 11. Unlike more timely data, this can be divided into a number of industry groupings such as retail sales, food and drink, manufacturing, oil and gas, and others.
This consumer-specific data tell us that household spending makes up just over half of total allocations, with retail making up 31.1 percent in late 2024, food and drink 14.0 percent, and the small remaining amount is mostly household services such as pool cleaning, dry cleaning, or nail salons. We turn to the manufacturing and oil-field part of the data later in this report.
The chart on the left of Figure 11 is in both nominal and real $2020 dollars, and it shows the lockdown collapse and recovery, and a long slow decline that began as soon as stimulus ended in mid-2021. COVID spending by this measure peaked in 2021Q2 at a quarterly $9.5 billion inflation-adjusted dollars and returned to pre-COVID levels of $8.2 billion by the third quarter of 2024. The figure on the right shows a long decline has been underway in retail sales back to pre-COVID levels, while bars and restaurants have been just holding on at near pre-COVID spending levels with little growth or decline.
These results specific to consumer spending are consistent with Houston’s escalator down and slower growth in payroll Jobs. Also, annual data on real local personal income tell us that Houston income jumped by 5.6 percent in 2021 on stimulus help, only to then remain absolutely flat through 2022 and 2023. We will also see later in this report that the number of unemployed workers has been rising steadily through 2023-24, but again this is likely just a shift from an overheated labor market back to more normal conditions. This fall in spending is just one more step in a long process of slowly but steadily unwinding an extraordinary pandemic stimulus.
Monetary Policy Slows the Rate Cuts
The inflation outbreak came in the second half of 2021 and on the heels of the third and final round of stimulus. Figure 12 shows what all of us were feeling at the time as we paid the monthly bills, as inflation measured by the consumer price index rose over the following year to 8.6 percent.
Figure 13 shows the progress so far in taming inflation using the Fed’s preferred measure of price change, the Core Personal Consumption Expenditure (PCE) Deflator. The PCE deflator is generally accepted as a superior measure of price change compared to the Consumer Price Index. And the Fed policy measure removes food and energy prices, as oil markets and crop failure are out of central bank control. The remaining core PCE deflator is certainly not meant as a measure of household inflation but simply as the price measure most relevant for policy-making purposes.
Based on 12-month changes, the core PCE deflator shows real progress in reducing inflation through January, with 12-month inflation falling from a 5.4 percent peak in early 2022 to 2.6 percent by September 2024. However, declines have come more slowly in recent months with inflation seemingly stuck between 2.6 and 2.8 percent since April.
On August 17, 2024, Federal Reserve Chair Jerome Powell announced that it is time for interest rates to fall, and total cuts of one percent basis points were spread through September, October, and January. The fed funds rate now stands at 4.25 percent. The Open Market Committee announced early this year that cuts are now on hold as progress on inflation has slowed. Plus, it wants to gauge the new administrations economic policies.
Where is monetary policy headed? The Atlanta Fed provides a projection of rates based on COMEX futures and a number of international swaps. A year ago, aggressive markets foresaw continued rate cuts and a policy rate of 3.5 percent by the middle of last year.
After the Fed announced it was holding off on rate cuts for a while, these expectations wavered between one and two rate cuts this year (currently one cut). (See Figure 14.) However, the market is now forecasting no more rate cuts after the middle of this year through the rest of the year and even through 2026-27. This flat future is unlikely not based on economic projections but reflects markets that are completely uncertain as to which way to move next.
The second part of the Fed’s inflation fight is a commitment to firmly anchor expected price increases at two percent. Inflation can become a self-fulfilling prophecy if high or rising price expectations trigger worker demands for future wage increases to protect their incomes … which can turn into price increases by their employer.
Figure 15 shows that current price expectations are mixed. Consumers – always the pessimists in these surveys – see inflation on a steady 3.9 percent path for several years to come. These numbers rose sharply with the implementation of new tariffs. More encouraging is the latest issue of the Survey of Professional Forecasters that saw 2.8 percent core PCE inflation in the fourth quarter of last year, and annual average growth ahead of 2.4 percent in 2025 and 2.3 percent in 2026.
Financial markets, as judged by the behavior of inflation-protected bonds, have sharply pushed up five- and ten-year inflation projections since September. Five-year inflation expectations, for example, are up from 1.9 percent in September to 2.6 percent today, presumably based on a mix of election-outcome certainty and fiscal policy uncertainty.
Oil and the Weakness of 2024
Post-COVID oil prices returned to $70/b by late 2021, drawing strength throughout the early post-pandemic era from a rapidly improving global economy, stronger travel demand, and increased power generation. See Figure 16. Then in 2022 OPEC+ intervened in oil markets and cut oil production to maintain $80 oil prices in the face of a weakening global economy. In December 2023, OPEC+ announced that the strength of world oil markets justified restoring the cuts and expanding oil production in 2024-25. Instead, it has been forced to maintain previous cuts due to Chinese economic weakness and oil production increases in Brazil, Guyana, and the US.
The cuts today remain at 5.9 million barrels of oil per day or 5.7 percent of global demand; 3.7 million barrels are from the official OPEC+ framework and 2.2 million are “voluntary” cuts from several countries led by Saudi Arabia. Despite the price cuts, oil prices have recently fallen back to near or below $70 per barrel, bringing weakness in the US rig count, frac spreads, and Houston’s oil activity and employment.
Oil prices have hovered near $70 per barrel over the past nine months and dipped under $70 repeatedly since the fall of last year. The critical line is $65 per barrel, which marks the long-run marginal cost of oil or the price where the typical fracking producer begins to cut production.
Our oil puzzle for today is the recent neck-snapping reversal in oil field activity as indicated by inflation-adjusted sales levied on Houston’s oil-related and manufactured goods in Figure 15. Declines last year came after rapid expansion in 2022 and early 2023. Then sales taxes collected on Houston’s oil and manufacturing activity peaked in 2023Q2 before falling 8.7 percent over following two quarters. This reversal was an important test of American oil’s new financial model.
After three rounds of sharp declines in American oilfield activity between 2014 and 2020, each led by OPEC cutting oil prices, US producers took $300 billion in fracking assets through the bankruptcy courts. The key lesson learned by US producers was that they are a high-cost source of oil with a marginal cost of $65 per barrel. If OPEC was to once more flood oil markets with cheap oil, it would be very bad indeed for American oil.
The right side of Figure 18 demonstrates the effects of the third round of these OPEC cuts or the decline forced by the 2020 pandemic and the Russia-Saudi oil war. This final blow left the US producer with a business model that was unworkable and with no available financing after Wall Street turned its back on the industry.
The solution was a new business model and radical departure from the past – they would become a value stock that diverts an off-the-top 30 to 40 percent of operating cash flow to investors through dividends or by strengthening the balance sheet. They would be a smaller but much more conservative industry. Investors were often told by these companies that as long as OPEC holds reserves off the market, they will not expand production.
Following the 2020 production collapse in the US, we see a recovery of 3.1 million barrels by May 2023. It was a long and slow recovery, but the first six months of 2023 bought the fastest period of recovery. That followed an OPEC announcement that it was returning oil to market, essentially giving permission to US producers to speed up production. But then the Chinese economy faltered, oil markets slowed, OPEC’s $80 oil target was threatened, and US producers cut found themselves out of step with OPEC. Then US producers cut back, and the mid-2023 cut in local spending on oil-field goods followed quickly.
This combination of a new financial model and strict attention to OPEC spare capacity explains why there has been no rush back to the oil fields since 2020. (Figure 19) The rig count fell to near 760 before COVID arrived and then fell even harder to an all-time low of 253 during the Saudi/Russia oil war. Recovery saw a brief return to 780 working rigs before falling and they are now down by just over 20 percent.
Productivity growth and new fracking methods explain a meaningful part of this sluggishness, but certainly not all of it. Frac spreads are the more modern measure of activity in the oil fields, but they tell much the same story – well down from pre-COVID levels and close to 30 percent below peak levels of 2023.
Oil-related employment in Houston has behaved much the same way as the rig count – slower and lower despite healthy oil prices. (Figure 20). After losing 42,800 upstream oil jobs to the 2018 credit crunch, the COVID pandemic, and Saudi/Russia oil war, the return of these jobs continues at a slow pace. Only 26,800 oil jobs are back so far or 59.4 percent. If we begin counting from the end of the fracking boom in 2014, Houston has lost about 65,000 jobs in oil production, services, fabricated metal, and machinery. This slow recovery in jobs is just one more sign of a cautious domestic oil industry.
Houston’s economy now
We have already looked at the two data series that can tell us most about the local economy – payroll employment and local sales tax allocations as a proxy for spending. Both point to a soft-landing at this point. With benchmark revisions in place and moving past Hurricane Beryl, Houston’s payroll employment seems to have reached a steady near-trend growth rate. And if consumer spending is the key to the post-pandemic economy – not too hot, not to cold – Houston’s consumer sales taxes have been slowly contracting as they returned to trend from an overheated and inflationary pandemic economy.
Figure 22 shows the unemployment rate in Houston, which peaked during the pandemic lockdowns at 13.4 percent and has now returned to 4.4 percent. The rate fell as low as 4.1 percent in October 2023 and has slowly risen to 4.4 percent. A loosening of the labor market is to be expected as the metro area moves to a soft landing, but this small increase in the unemployment rate would be well short of a negative cyclical reading.
The right side of the figure shows an increase in total unemployment of about 10,6000 workers – the number unemployed as opposed to the percent share. Again, this looks like a regrettable increase for the workers affected, but it is also a healthy loosening of the labor market that comes with the last stages of a soft landing.
The Houston Purchasing Managers Index (PMI) is shown in Figure 19. It also shows a long slow weakening of the local economy after early 2022 and a leveling off in recent months. The line between expansion and contraction is 45.0, so we see a return to steady growth at levels that are well out of recessionary readings. It is a picture that looks much like our other soft-landing/escalator charts for Houston.
There is also a separate manufacturing index for Houston. Our sales tax data indicated great strength in manufacturing in 2023, followed by a quick turn to weakness in 2024. This PMI data shows a long slowdown in manufacturing after 2022 and through 2023, but by late 2024 it had turned to strength. The recent manufacturing improvement is in nondurable goods, however, particularly chemicals and plastics.
Locally, both autos and housing will benefit if interest rates fall this year. Both were hurt in different ways by the pandemic and responded differently. Autos, for example, struggled in 2021 and 2022 to deliver vehicles due to shortages in chips and other materials that choked supply chains. (Figure 24) The big supply kinks now have been worked out, local auto sales rose through late 2022 and early 2023, but then they declined steadily until last July and Hurricane Beryl. The hurricane has perhaps distorted auto sales since July, as they now run counter to a steady slowdown leading into Beryl.
Auto and truck prices remain high – still about 25 percent above pre-COVID levels. Prices peaked in early to mid-2023 and have been falling slowly even if we ignore inflation. Once we recognize that CPI inflation has risen by more than 20 percent since 2020, real prices for autos have been falling steadily, and they are now only a few percent-points higher than pre-COVID price levels.
Existing home sales were a local pandemic bubble that burst as mortgage rates began to rise in 2022. (Figure 25) Existing home sales in Houston fell hard during the lockdown months but recovered quickly with a check from the federal government and zero interest rates. Housing became a major element of the 2021 financial boom, as sales in Houston rose as much as 42.9 percent above pre-pandemic levels, only to fall hard after the Fed interest-rate hikes began. Sales fell as much as 39.8 percent below pre-COVID levels in 2023, briefly recovered to above pre-COVID levels, but have since slipped back again as mortgage rates have remained high.
Home inventories were flat through 2024 but are now rising. Existing home prices surged from $250,600 for the typical unit to $343,500 during the boom period, or by 37.4 percent. So far, the sharply falling sales have pulled nominal prices down by only 2.5%. Like autos, an inflation-driven bubble counts for a big part of the surge in home prices, and local history says prices could hang on to a large part of the nominal gains in years to come. However, measured against general inflation trends since 2020 Houston real home prices are only up by about 8.5 percent since 2020.
Houston’s economic outlook
The chief drivers of Houston’s job growth are the US economy and oil markets. Since the COVID job losses were restored for both the US and Houston in spring 2022, the escalator ride down sums up the recent path of both. We assume a soft landing as we step off the escalator this year. It looks like a bigger step down for Houston than the rest of the US, as local job growth comes in below trend. We follow the Survey of Professional Forecaster’s in assuming the US remains on trend growth through 2025-26 for both GDP and employment. No national recession is indicated. The work of the new administration remains a project for this summer.
For oil, the new financial model for large public oil companies is widely implemented, with 30-40 percent of producer cash flows diverted to stockholders to finance drilling. The result is a smaller and more stable upstream oil industry in Houston. At best, oil might see modest gains in 2025 as OPEC+ continues to hold large quantities of oil of the market to support oil prices.
Oil prices seem likely to remain near $65-$70 per barrel or lower than we typically have seen since late 2021, and we expect prices to hold in this range through the rest of 2025. Any projection of oil prices further into the future than 2025 is speculative, and a return to $65 per barrel is always the best guess at oil’s future path after late 2025 and into the following years.
To pull the forecast together, we use a high, medium, and low outlook for planning purposes. (Figure 27) We use the price of oil as the vehicle to spread the outlook from low to high employment levels. For current planning, the low oil price is set near $40 per barrel and the high at $80. The medium price is $65 per barrel or the long-run marginal cost of oil.
We will also show the effects of a $100 oil price, not because it is likely but because of public curiosity. What would happen if $100 oil were to return for a prolonged period of time? The short answer is that it is better than $80 per barrel, but don’t look for the return of past episodes of frenzied drilling.
Figure 28 is an overview of how economic fundamentals play out over the longer-run low, medium, and high forecasts. This is our forecast for Houston’s payroll employment through the calendar year 2029. We saw the COVID lockdowns end, a long recovery to pre-pandemic employment levels and beyond, and a meaningful slowing of job growth through the second half of this year and into 2025. After 2024-25 see the return to basics, Houston returns to a medium trend of 55-65,000 jobs each year through 2029.
Figure 29 is the 2025-2029 forecast of Houston’s payroll employment stated in annual changes and measured Q4 over Q4 each year. After seeing 49,000 jobs in 2024, the medium $65 forecast for Houston jobs in 2025 is 34,300, 49,600 in 2026, and years beyond see a return to trend ahead.
If WTI were to average close to $80 per barrel this year, we could look at the high forecast column in Figure 29 and find 2025 job growth improved to 45,800 jobs and 2026 at 62,300. Again, the $65 price is the long-run marginal cost of oil, always the best guess for oil price forecasts once we reach 9-12 months into the future.
Written by:
Robert W. “Bill” Gilmer, Ph.D.
March 2025