The global coronavirus epidemic, combined with a sustained drop in oil prices, could wipe out job gains in Houston this year and, in the worst case, push the local economy into a recession.
“A recession is quite possible here in Houston right now, and that is something we would not have said a few months ago,” said Bill Gilmer, director of the Institute for Regional Forecasting at Bauer College of University of Houston Enterprise. “It is not difficult to see the jobs go to zero and become negative (this year).”
Although it is too early to predict a recession, said Gilmer and other economists, the outlook for the Houston economy has deteriorated considerably, with oil prices slumping more than 30% on Monday morning, falling to less than 30 dollars a barrel, and new cases of coronavirus are reported in the United States The epidemic affects everything from manufacturing production to consumer spending.
US stocks beat Monday morning amid weak indicators of the national economy; the S&P 500 fell 7%, temporarily causing an emergency stop to trading.
Local economists said the biggest concern was a worsening coronavirus epidemic in the United States.
“Even a mild epidemic will cause a major slowdown in the US economy, and if it turns out to be severe, it could be the trigger for a moderate American recession,” said Gilmer. “It could wipe out any job gains in Houston (this year).”
On HoustonChronicle.com: Here’s everything you need to know about Houston coronavirus
Four other cases of COVID-19, the name given to the disease caused by the coronavirus, were identified in Houston Monday morning, bringing the total area to 12.
At the same time, oil prices fell below $ 30 a barrel on Monday morning, the largest decline in nearly three decades, as Saudi Arabia and Russia failed to reach an agreement to reduce the production and said they would inject more into the market.
While conventional wisdom says lower oil prices are a boost to the US economy because it means lower prices at the pump, it’s a big deal for Houston, where several major oil companies and gas companies are headquartered and where a quarter of manufacturing jobs – Houston’s largest sector – are linked to oil and gas.
On HoustonChronicle.com: Houston energy company shares plunge into oil war
For local exploration and production companies, oil price collapse couldn’t come at the worst time: help from Wall Street, which helped float the oil and gas industry during downturns previous years dried up last year as investors soured the industry and demanded higher returns.
“We are not talking about normal times in this credit crunch,” said Gilmer. “These guys are absolutely dependent on the price of oil and in a very precarious financial situation.”
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