When the downturn in the oil industry hit this town three years ago, there were predictions that Houston -- then called the energy capital of the world -- would be sent into an indefinite economic slump. While Houston may be down, it is not out. What the doomsayers didn't count on is the city's indomitable optimism and can-do spirit, which many say run deeper than typical civic boosterism.
Business people trace this spirit to a lack of government controls and an open, unstratified business climate. Jay Tribble, part owner of a large Houston general contracting firm, recalls how, as a graduating college student in Austin, Texas, he sent out 15 job queries. The seven he sent to Houston were answered promptly, by ``the people who had their name on the letterhead''; while the others, sent to other Texas cities, were answered slowly and often by secretaries.
``To me, that's Houston,'' says Mr. Tribble.
In a city where up to 70 percent of the economy was tied to the energy sector in 1982, the sudden drop in oil prices and oil-related activity touched almost everyone.
Some 100,000 jobs were lost during the worst of the slump, in 1982 and '83. (Houston's unemployment of 8.4 percent is still higher than Texas and national averages.)
Following a decade that saw construction of 500,000 houses, the mortgage-default rate in Houston helped to boost the Texas foreclosure rate to more than double the national average.
In the commercial sector, a wild office-building boom left the city with more vacant square footage than Denver has in total office space.
Those who have studied the city say Houston's energy and ability to bounce back from such a downturn, stem from decades of mobility and progress in the working population. Another distinguishing attribute of Houston is a manufacturing sector based on small, locally-owned companies, rather than large concerns controlled by distant corporate headquarters.
``Houston is traditionally a city of social and economic dynamism,'' says Harold Gross, assistant director of the Center for Enterprising at Southern Methodist University (SMU) in Dallas. A large blue-collar work force with a middle-class standard of living, has provided the city with succeeding generations of adaptable and resilient people, making it a ``hotbed of entrepreneurship,'' says Mr. Gross.
Or, as real estate appraiser and life-long Houstonian Robert Jones put it more succinctly, ``We're very positive down here. If you want to talk negative, don't come to Houston.''
Houston today exemplifies the economics adage that bad times breed hard work and entrepreneurship. Carol Bennett, a vice-president and economist with Texas Commerce Bank, says that someone losing a job in Houston is more likely to go into business for himself than a person in another city, partly because business restrictions on start-ups are few. Stories abound of the accountant, laid off by a major oil company, but now running his own accounting firm, or of the executive who drives a cab in a three-pi ece suit while scouting for greener pastures.
In fact, the Houston Economic Development Council (HEDC) claims that 13,000 new businesses were incorporated in Houston in each of the last three years, although the failure rate probably approaches 80 percent. ``People just aren't willing to be out of work here,'' says Dick Bryant, council spokesman.
The HEDC is one of the more obvious examples of how Houston is fighting back. The city had no development council before the slump because no one thought it necessary. The HEDC was born a year ago after a campaign to raise $5.5 million ended up netting $6.6 million in six months.
``But the bulk of the [HEDC start-up] money was from people like us who believed in the idea and gave our thousand,'' says Lawrence Thompson, Mr. Jones's business partner. He says Houstonians found the council concept appealing because it involved private funding, implementation of ideas and information sharing, but did not increase red tape.
The council began with the premise that energy will continue to be a cornerstone of the city's livelihood, but diversification will be necessary in order to regain economic stability. This led to a focus on sectors of the Houston economy that the council believes have the greatest potential for growth: commercialization of medical research, anchored by the 50,000-employee Texas Medical Center; commercialization of space, spurred by National Aeronautics and Space Administration's Johnson Space Center; an d further capitalizing on the port of Houston, which has already helped make Houston a center of international trade and finance.
In fact, the international business sector ``has the best potential for the short term,'' says council spokesman Bryant. For example, in 1984 in the manufacturing sector alone, companies from 20 countries commenced 43 joint ventures with American companies in Houston.
Despite excitement in Houston over HEDC's efforts, some local economists say the council will succeed only if it focuses on the existing business base -- which gave the city its industrial-powerhouse status and forward-looking spirit.
``The most effective and productive route is working with companies that are already in the area,'' says Bill Gresham, an economic analyst with the Rice Center in Houston. SMU's Gross agrees, stating that the medical and space sectors, while vital, cannot replace the city's manufacturing base that is oriented toward oil-field items such as steel pipe and drilling equipment.
He says the council should concentrate on helping existing industries learn about and finance up-to-date manufacturing and business methods. Otherwise, more and more of the jobs in this sector will be lost to foreign competition, and the growing employment alternative will be lower-paying service-sector jobs.
Gross, who has just completed a two-year study of Houston's economy, adds he has no doubt that ``the spirit is there'' for the city's comeback.
In fact, many are already planning for it. Mr. Tribble says his firm recently created a Houston division to finish off the interiors of long-standing building shells. He believes the day is not far off when those vacant buildings will be leased.