Houston Horizon Brightens a Bit

Specialty sectors driving job growth stalled last year but should improve by 1995

IF the nation's economic recovery was a train leaving the station, Houston would be a car back by the caboose, finally feeling some forward pull. But economists do not expect the South's largest city to really get rolling until 1995.

Traditionally, employment growth in Houston has been driven by a handful of specialty industries: ``upstream'' energy, which includes oil and gas exploration, oil field equipment sales, and pipeline transportation; ``downstream'' energy, which consists of petroleum refining and chemical manufacturing; health care; the Johnson Space Center; and the Port of Houston.

For various reasons, all ran out of steam last year. December '92 to December '93 job growth was a scant 0.5 percent, with gains in government and trade slightly exceeding losses in manufacturing.

Jared Hazelton, director of the Center for Business and Economic Analysis at Texas A&M University, remarked in a February report that the city was attempting to grow by ``everyone taking in each other's laundry'' in defiance of economic logic.

That assessment is ``accurate but incomplete,'' responds Skip Kasdorf, who has tracked Houston's economy since 1974 for the Houston Chamber of Commerce and its successor organization, the Greater Houston Partnership (GHP). ``We're treading water, but at a record-high level,'' says Mr. Kasdorf, the GHP's manager of research.

Revised employment figures just released by the Texas Employment Commission correct the impression that Houston lost jobs in 1992. That means the city's job base has expanded continuously since 1987, Kasdorf says.

That growth slowed last year, but December's employment figure was the highest ever. The growth rate of new jobs increased in January and February, a fact that Kasdorf attributes to the impact of the nation's 7.5 percent real growth in gross domestic product during the fourth quarter. Kasdorf's forecast for job growth in Houston this year had been 1.3 percent, based on an increase in real national output of 2.7 percent. Now he says that forecast will be conservative. On the other hand, Houston should still lag the nation in job creation because none of its traditional industries are expected to do more than hold their own during 1994.

Upstream Energy. This sector was depressed through the middle of last year by the proposed energy tax. Congress voted down the tax, but by that time, weakening oil prices were weighing on the industry. Prices are expected to fall further when the United Nations eventually lifts its embargo on Iraqi oil exports.

Job losses related to oil were offset by gains from natural gas. ``Gas is holding up quite well'' in the wake of a long, cold winter in North America, says Ike Kerridge, vice president of Baker Hughes.``We'll end this heating season with the lowest underground storage in a decade.'' A spring buying binge will keep prices firm.

Already, the number of rigs drilling in the United States is 8.1 percent higher than last year, with most seeking natural gas. But Houston suppliers are finding little demand for their oil field services and equipment from depressed foreign markets, Mr. Kerridge says.

Downstream Energy. This sector is expected to hold steady. Industry shipments in both volume and dollar value set a record last year. The industry at the same time shed 1 percent of its work force - primarily white-collar jobs, notes Allen Lenz, an economist with the Chemical Manufacturers Association. Yet profits were ``not very good'' - $15.5 billion, down from the $24.5 billion high in 1989, he says. This year, manufacturers expect a 10 percent improvement, Dr. Lenz says. The thriving construction and automobile manufacturing sectors are two of the largest markets for chemicals. But with demand down in Germany and Japan, global oversupply will depress chemical prices.

Health Care. Houston is home to the Texas Medical Center, the world's largest concentration of hospitals and specialty institutes. Foreign patients alone number 25,000 a year. Growth in health-care employment stalled when President Clinton was elected. ``A lot of doctors panicked'' over Mr. Clinton's plans to reform the health-care system, says Dawn Hiner, vice president of Medi-Call Personnel Services. Some physicians retired, others joined health maintenance organizations, and one Ms. Hiner knows went to law school.

The head of a major hospital warned in January that if the health-care reform bill forces more reliance on primary-care givers, one-third of Houston's hospital beds would go empty and half of the city's specialists would be out of work. Two hospitals have announced plans to hold down staff levels through attrition, and a third is believed to have similar plans.

Johnson Space Center. The selection of Houston as headquarter of the Space Station Freedom - with its 600 jobs - was a victory for the city, says Don Hoyte, an economic analyst with the Texas Comptroller's office. On the other hand, the project has progressively shrunk. At least some of its congressional supporters have wondered aloud if enough of the project remains to be worth funding. In this climate of uncertainty, economists do not expect the Johnson Space Center to provide any significant job gains for Houston. ``We're in better shape than we've been in a long time'' because of the space station redesign, Russian participation, and White House support, says Barbara Schwartz, the space center spokeswoman. Congress has yet to fund the space station for this year, but Ms. Schwartz says that ``everything is looking hopeful.''

Port of Houston. The port recorded double-digit increases in tonnage last year, in part because of oil imports to replace declining US output. And January was the port's best month for steel imports in four years. But the North American Free Trade Agreement provides the port's best opportunity to attract new trade.

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