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The Big Question
Has the
recession
ended?
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The Big Answer
Yes, probably
around the thirdquarter of last
year.
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How bad did it get?
How long is the road torecovery?
What will Houston look likethen?
Three little questions
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How long is the road torecovery?
10 to remain weak
11 expect improvement
Three little answers
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What will Houston look likeafter recovery?
Not like 07 or 08
More like 05 and 06
Three little answers
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Houstons Gross Metro Product growing 1.8 percent in Q3/09 Source: The Brookings Institute
Local job losses tapering off 1,500 month now versus 13,000 month Q1/09 Source: Federal Reserve Bank of Dallas
Drilling rig count up
Up 36% from Jun 09 trough of 876 Source: Baker Hughes
Evidence of recovery
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Purchasing Managers Index above 50 Up from a record low of 39.0 in March Source: Institute for Supply Management-Houston Chapter
More people flying Four consecutive months of passenger gains Source: Houston Airport System
Single-family home median prices up 8.7%
Seventh straight monthly increase in median price Source: Houston Association of Realtors
Evidence of recovery
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Auto sales down 31% Cash for clunkers had minimal impact Source: TexAuto Facts Report
Foreign trade down 39% Weak commodity prices exacerbated the decline Source: WiserTrade
Hotel occupancy down 10%
Revenue per available room down 20% Source: PKF Consulting
Construction off nearly 40% Industry performing at 03 levels
Source: McGraw Hill
Still some pain
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Job Losses
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Job Losses
Houston lost most in 2009
Dec 2008 through Dec 2009 25,500
AGC reports const spending lowest in 6 yrs
Const spending fell by $100B in December,to a six-year low of $903 billion.
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As bad things were,Houston stood fast
as one of the bestplaces to ride out
the storm.
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Recessions Arrival
MSA
Employment
Peak MSA
Employment
Peak
Detroit Jun 00 Chicago Jan 08
Tampa Sep 06 New York
Feb 08
Minneapolis Jun 07 Seattle
San Diego
Jul 07
St. Louis
Riverside Baltimore
Los Angeles Boston Mar 08
Phoenix Aug 07 Philadelphia Apr 08
Miami Dallas May 08
Atlanta Sep 07 Washington Jun 08
San Francisco Dec 07 Houston Aug 08
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Length of Recession
Months Since Peak EmploymentLargest U.S. Metro Areas
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Depth of Recession
* Excludes Detroit
Source: U.S. Bureau of Labor Statistics
% Jobs Lost Since Peak EmploymentLargest U.S. Metro Areas*
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How long
will the
recoverytake?
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Output recovers quickly
U.S. Post-War Recessions
DateDuration(Months)
Return to PreviousLevel of GDP
(Months)
Nov 48 Oct 49 11 12
Jul 53 May 54 10 15
Aug 57 Apr 58 8 12
Apr 60 Feb 61 10 12
Dec 69 Nov 70 11 15
Nov 73 Mar 75 16 21
Jan 80 Jul 80 6 9
Jul 81 Nov 82 16 12
Jul 90 Mar 91 8 15
Mar 01 Nov 01 8 3
Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis
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But employment will lag
U.S. Post-War Recessions
Date Duration(Months)
EmploymentRecovery
(months)
Nov 48 Oct 49 11 22
Jul 53 May 54 10 23
Aug 57 Apr 58 8 24
Apr 60 Feb 61 10 19
Dec 69 Nov 70 11 17
Nov 73 Mar 75 16 19
Jan 80 Jul 80 6 9
Jul 81 Nov 82 16 28
Jul 90 Mar 91 8 32
Mar 01 Nov 01 8 48
Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis
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Employment recovery taking
longer with each recession
Post-War Recessions
Date Duration(Months)
EmploymentRecovery
(months)
Nov 48 Oct 49 11 22
Jul 53 May 54 10 23
Aug 57 Apr 58 8 24
Apr 60 Feb 61 10 19
Dec 69 Nov 70 11 17
Nov 73 Mar 75 16 19
Jan 80 Jul 80 6 9
Jul 81 Nov 82 16 28
Jul 90 Mar 91 8 32
Mar 01 Nov 01 8 48Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis
This is a real concern.
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Employment recovery taking
longer with each recession
Post-War Recessions
Date Duration(Months)
EmploymentRecovery
(months)
Nov 48 Oct 49 11 22
Jul 53 May 54 10 23
Aug 57 Apr 58 8 24
Apr 60 Feb 61 10 19
Dec 69 Nov 70 11 17
Nov 73 Mar 75 16 19
Jan 80 Jul 80 6 9
Jul 81 Nov 82 16 28
Jul 90 Mar 91 8 32
Mar 01 Nov 01 8 48Source: National Bureau for Economic Research and U.S. Bureau for Economic Analysis
After the 01-02 recession, ittook Houston 34 months toreach the previous employmentpeak.
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Nationwide
Jobs Lost This Recession . . . . . . . . . . . . . . . . . . 8 million
Avg Monthly Job Growth Aug 03 Dec 07. . . . . . 160,000
Months to Replace Lost Jobs. . . . . . . . . . . . . . . . . . . . . .50 months
A back of envelopecalculation
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Houston
Jobs Lost This Recession . . . . . . . . . . . . . . . . . . 100,000
Avg Monthly Job Growth July 03 June 08. . . . . . 8,000
Months to Replace Lost Jobs. . . . . . . . . . . . . . . . . . . . . .12.5
But this includes the red hot job creation of 2007, which wont berepeated again.
A back of envelopecalculation
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It depends on what happens to Oil and gas prices
Global growth
The U.S. economy
How soon will Houston
recover?
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Energy
1 in 7 Houston-area jobs
27% of Gross Metro Product
Global Trade
4th busiest Customs District
3,000+ Houston companies doing business globally
U.S. Economy Drives demand for energy, chemicals, plastics,engineering services, manufactured goods allproduced in Houston
In a nutshell . . .
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Oil Prices (WTI Barrel)
Trough
$33.17 (12/19/08)
Recent
$79.39 (12/31/09)
Next Year
$78.67 (2010 avg.)
Source: U.S. Energy Information Administration
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Gas Prices (Henry Hub mcf)
Trough
$1.84 (9/4/09)
Recent
$5.21(12/11/09)
Next Year
$4.62 (2010 avg.)
Source: U.S. Energy Information Administration
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Annual Gross Domestic Product Growth RatesHoustons 20 Largest Trading Partners
Country 08 10 Country 08 10
Argentina 6.8 1.5 Japan -0.7 1.7
Belgium 1.0 0.0 Korea 2.2 3.5
Brazil 5.0 3.5 Mexico 1.4 3.3
Chile 3.2 4.0 Netherlands 1.9 0.7
China 9.0 9.0 Nigeria 5.9 4.9
Colombia 2.5 2.5 Russia 5.6 1.5
France 0.3 0.9 Saudi Arabia 4.5 4.0
Germany 1.2 0.3 Singapore 1.1 4.1
India 7.3 6.4 U.K. 0.7 0.9
Italy -1.0 0.2 Venezuela 4.8 -0.4
Weak Global Economy Limits
Demand for Houston Exports
Source: International Monetary Fund
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U.S. Outlook
Road to recovery will be long
4+ years to replace jobs lost since Dec 07
Indicators pointing to growth
Industries need to replenish inventories Consumers still stressed
Reduced wealth, debt loads, tight credit
Housing to stabilize, maybe
Lower home prices and low mortgage rates
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U.S. Outlook
Commercial real estate still a problem
Too much surplus space, loans coming due
State and local budgets strapped
Lower property, sales and income taxes Great unknowns
National healthcare, carbon regs, new
financial regs
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07 08 was not the norm
$147 barrel oil
Price more than doubling in 12 months
100,000 jobs per year Almost double historical pace
$240 billion in foreign trade
Up nearly 50 percent from three years earlier 50,000 single family starts
Up nearly 50 percent from three years earlier
What will recovery look
like?
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05 and 06 are more like the norm
$70 $80 barrel oil
Slightly above trend
50,000 60,000 jobs per year Significantly less in 10, returning to trend in 11
$170 - $190 billion in foreign trade
Growth as global economy rebounds but withoutthe distortion of inflated commodity prices
20,000 25,000 single family starts
Tighter lending standards = fewer new homes
What will recovery look
like?
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If you work hard in this city, eventually you willsucceed.
Nationally, 58-63 percent agree with the statement.
In Houston, 79-90 percent agree
As Dr. Klineberg says, Houstonians have an
inherent belief that hard work pays off.
Thats the norm for Houston.
Houston Area Survey
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Houston Economic OverviewPresented to
Associated General ContractorsPresented by
Dan Bellow
President HoustonJones Lang LaSalle
February 10, 2010
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