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Houston is a Leader in Job Creation

The state of Texas overshadowed other states during the recession, dominated the recovery, and according to a new analysis about jobs recovered since the downturn, Houston is the strongest job creator in the nation.  On average, the 10 largest metros have recovered 98 percent of the jobs lost during the recession.  Houston, however, was the first major city to regain all the jobs lost in the recession and has added more than two jobs for everyone it lost after the crash.

So, why is this?  It’s Houston’s geographical location because of its proximity to oil and Mexico.  Houston has also learned from its past mistakes.  In Texas, the recession was relatively mild.  According to economist and vice president of research at the Greater Houston Partnership, Patrick Jankowski, this is due in part to mistakes learned by the region’s real estate and energy industries.  Texas was the winner in the recession because of the jobs it created and because of the jobs it kept, especially in the energy industry.

Lesson’s Learned

In 1973, the Arab Oil Embargo quadrupled oil prices in only three months-time, which created a drilling boom that at one time accounted for half of Houston’s jobs in the export sector.  However, when oil prices collapsed in 1982, all and mining jobs decreased 57 percent.  Jankowski said in an email, “By the time Houston’s economy hit bottom in January 1987, the region had 221,900 fewer jobs than it had five years earlier.”

This time the energy industry avoided the dramatic boom/bust cycle.  Jankowski said, “The region lost one in twenty two jobs this recession versus one in seven jobs during the recession of the 1980s.”  According to Jankowski, because the Houston energy sector is over 50 years old, companies didn’t want to lay off too many of their veteran workers before they could train the younger generation to take over.  The energy demographics in Houston “helped to moderate energy industry job losses” which led to fewer job losses overall.

Houston also learned a lesson about real estate from the 1980s.  Jankowski said, “Houston suffered one of the worst regional recessions in US history between 1982 in 1987.”  Over 220,000 jobs, one in seven in the region, were lost and approximately 188,000 housing units were added because developers ignored the signs that demand had crashed.  This, hurt the real estate industry severely and left its scar.

Houston was able to avoid over-building problems in this recession because it tightened lending and home construction at the beginning of the crisis.  In the 2000’s, Houston didn’t really have a housing bubble.  In 2006, the ratio between its median house prices and median household incomes peaked at 2.7.  When compared to Miami in 2006, where the average family would have to spend 5 ½ years of their total income to afford an average house.  It would take almost 7 years in Riverside.  As housing values decreased 40 percent in Miami and 44 percent in Riverside, Houston’s only decreased by 2 percent.

Houston’s Saving Grace

The great recession was worse than every post-war recession in every metric and sector except one.  Thanks to developing countries like China, global trade continued to increase.  Houston was in a unique position to benefit from the growing world because of its strength in energy and its proximity to Latin America.  Jankowski wrote, “More than 100 foreign-owned companies relocated, expanded or started new businesses in Houston between 2008 and 2010.”

Houston’s willingness to conduct overseas business boosted job creation during the time that domestic demand was severely lacking.  As a result of Houston’s previous mistakes, the city was able to avoid the mistakes of over-building and over-firing that other cities across the nation couldn’t.


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