A J.P. Morgan economist says the American economy is slowly recovering but he has three concerns. 

An economist with the Greater Houston Partnership, on the other hand, used the example of a hurricane to explain how Houston’s economy is dealing with sagging gas/oil prices.

Both spoke at the Lake Houston Chamber’s annual Economic Outlook luncheon Feb. 23 at Walden Country Club in Atascocita.

“I’m not going to predict the future,” Dustin Reid, vice-president of J.P. Morgan Asset Management, told chamber members. “I’m going to help you see the present more clearly.”

Jamey Smith, left, of Citizen’s Bank-Humble Banking Center, and Jerry Martin, right, Lake Houston Chamber chair and pastor of Light of the World Christian Fellowship, welcome Patrick Jankowski, economist with the Greater Houston Partnership, to the Chamber’s February Luncheon on Economic Outlook. Jankowski compared the drop in oil and gas prices to Houston being hit by a hurricane. Photo by Tom Broad

“The national economy has been a coaster ride since 1997,” Reid said. “We’re like the little engine that could; slowly, slowly going up that hill. It has been a long and weak recovery.”

Reid is optimistic about impending, much-discussed tax reform due in August. “There are 160 countries with rates lower than ours,” he said, “and change is needed. Whether you supported this president or not, I can tell you that his tax concept is sound.”

Reid cited the fiscal conservatives in Washington, D.C. who will not go along with increased spending or an increased federal debt. Reid also is optimistic about Federal Reserve action. He predicts they will raise rates three times this year. 

“When the Fed raises rates, that puts money back into the economy,” he said. “That’s good for consumers and, ultimately, our economy.”

Reid does have three worries: Four major European countries will have elections, including Germany and France. The results of those elections could affect our economy.

Second, stocks are getting expensive, so everyone expects a correction. This stock market rise, however, is the third longest in history and Reid predicts that it will end up being the longest ever. Reid also gave a history lesson – when the stock market corrects, it declines five percent, but recovery always occurs a couple of months later.

Third, thousands a month are retiring and there aren’t enough GenXers to replace them. While there are more than enough millennials, they don’t have the experience or expertise to take over. Reid points out that there are five million jobs open, mostly technical, and not enough workers to fill them.

“These are interesting times,” Reid said. “Our underpinnings are good because 70 percent of our growth is consumer spending; that’s a positive thing, but it’s a slow recovery.”

Patrick Jankowski, regional economist and vice-president of research at the Greater Houston Partnership, focused on Houston’s economy.

“What happened in Houston, I compare to a hurricane,” Jankowski said. “The eye of this storm was on oil prices. One in five oil and gas jobs was lost – 67,000 men and women. A little away from the eye, another 80,000 jobs were lost in industries closely allied with oil and gas.”

There was a “dry side” to this storm, Jankowski said. “The number of jobs we lost was almost offset by the growth in the hotel, bar and restaurant sector, but those jobs can’t compare to oil and gas jobs.”

The average annual oil and gas salary is $151,000, while annual hotel, bar and restaurant salaries are $21,000.

“You can see why our economy shrank,” Jankowski said. “We lost a billion dollars in wages. That’s purchasing power. That’s buying those autos, appliances, furniture and homes.”

Jankowski predicts three sectors will see job cuts – oil and gas, construction and technology.

“Oil and gas is still losing money. You can’t hire when you’re losing money. You can see how the industry is getting rid of the thousands and thousands of square feet of office space they thought they’d need,” he said. “Construction was doing well, but that was because of the Ship Channel. Now that that is winding down, you’ll see a loss in the construction industry as well, and telecommunication is reducing the number of workers as well.”

In 2014, Houston added 110,000 new jobs, but 2017 will see just 30,000 more jobs due to five sectors that will see job increases: healthcare, hotels, bars and restaurants, government, retail, and manufacturing. Those sectors will help to offset the oil and gas hurricane that Houston has faced, according to Jankowski.

“One in 10 jobs in Houston is in healthcare,” he said. “It’s growing faster as Houston grows and Boomers age.”

Jankowski said hotels, bars and restaurants will grow in spite of the number of failures in that business. Likewise, retail is soft because of online shopping, but it will still add almost 5,000 jobs to Houston’s economy. 

Government will continue to grow and most of that growth will be teachers, since 60 percent of government jobs are school-district jobs.

Manufacturing, Jankowski said, is moving from construction to production – making things – and workers are needed to operate the computers and machinery that make things. He predicts 3,000 new jobs this year.

“We had 35,000 people die last year, but 100,000 were born in Houston,” Jankowski said. “There 140,000 people who moved away, but 200,000 moved in. That keeps our economy thriving.”

Houston’s economy may have shrunk because of oil and gas prices, but Jankowski had a silver lining to reveal to Lake Houston Chamber members, “The Houston economy still is bigger than Dallas!”

Lake Houston’s peace officers and firefighters will be honored at the Chamber’s March 21 luncheon at the Humble Civic Center. Art Acevedo, the recently sworn-in chief of the Houston Police Department, will speak. For more information or to register, call the Chamber at 281-446-2128 or visit lakehouston.org.

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