Energy and Houston's Economy
by: Capella Tucker, April 5, 2006 12:04:00 am
Houston Federal Reserve Vice President Bill Gilmer says what is happening in the energy sector has been good for the Houston economy.
"Oil at 66 dollars a barrel and natural gas at seven dollars a thousand cubic feet, that can't be bad for a city that still by most measures has half of its jobs dependent on the energy sector."
Gilmer says oil producers are believing in the market and investing as a result.
"Wages and salaries are expected to go up ten percent in the energy sector this year. The energy sector is expected to grow ten percent just in terms of number of workers this year. The problem, the dilema is finding qualified workers and engineers and even truck drivers at this point in time."
Gilmer says some are concerned the energy industry is in a speculative bubble. But Gilmer is more inclined to think it's based on global growth and a shortage of reserves. He says the current cycle could be here for a while. University of Houston Economics Professor Barton Smith says while energy has been good for the city, he's not so sure how long it's going to last. Beyond energy, Smith says recently revised employment numbers have also painted a better picture for Houston. It hasn't all been energy.
"The recovery is much broader. We are seeing almost every sector in the Houston economy show at least moderate if not good levels of growth. And in many ways that's more encouraging to me than energy prices."
Smith says unlike times in the past, Houston is going to be more sensitive to the national economy. But he thinks the handling of interest rates will lead to a soft landing. He says long-term interest rates are starting to creep up which will affect the housing market.
"Houston's housing market looks like it's in pretty good shape. We don't have a speculative bubble here. Housing is cheap. Over-supply if there is any over-supply is pretty moderate here in Houston. But that doesn't mean we can't be affected by a housing market collapse in California or Las Vegas or in Florida so we need to watch that."
Capella Tucker, Houston Public Radio News.