KAEDC hears economic update from GHP’s Jankowski

By: Susan Rovegno - Katy Tines

Members of the Katy Area Economic Development Council gathered on February 13th at the Katy campus of Members of the Katy Area Economic Development Council gathered on February 13th at the Katy campus of Houston Community College, Colonial Parkway, to hear Patrick Jankowski, chief economist and senior vice president for the Greater Houston Partnership, deliver his annual “state of the economy” presentation. Colonial Parkway, to hear Patrick Jankowski, chief economist and senior vice president for the Greater Houston Partnership, deliver his annual “state of the economy” presentation.

Jankowski began by stating that the U.S. economy is very robust and that a recession was avoided in 2023, in line with his prediction during his presentation to the EDC last year. Real EDP growth is strong at more than 3.4% and more than 353,000 jobs were created in January 2024, continuing a long trend of positive job growth.

Jankowski cited a CNN report that said that “unemployment hasn’t been this low since Nixon was president,” adding that unemployment consistently remains below 4 per cent. He said that only three presidents have had extended periods of such low unemployment -- Harry S Truman (35 months), Richard Nixon (27 months) and Joe Biden (24 months).

Consumer confidence appears to be increasing as inflation fears start to ease, Jankowski said. He quoted the Wall Street Journal’s survey of forecasters, which predicts that inflation in 2024 will be about 2.4 per cent. High interest rates, especially for 30-year fixed rate mortgages, remain a concern, and Jankowski said that they won’t drop any time soon. Home ownership may become more difficult, as the percentage of households able to afford a mortgage continues to fall. In 2021, according to data from the Houston Association of Realtors, 58 percent of Houston households could afford the median mortgage; in 202e, only 35 per cent could.

Commercial banks continue to tighten lending standards to both small and large firms, as shown by data from the Federal Reserve System.

Retailers, long bedeviled by pandemic-created supply chain issues, often over-ordered when goods were available and were carrying excess inventory, Jankowski said. That excess inventory has now been cleaned up and retailers are now ordering less -- impacting manufacturing, which is now receiving fewer orders for goods and facing a decline in employment.

For 2024 nationally, Jankowski predicts:

· Tight labor markets. Jankowski said that Bureau of Labor Statistics data shows that job openings were 6.4 million before the pandemic and are projected to be 9.0 million this year. The number of people quitting their jobs is also falling, he said.

· “Stubborn interest rates.” Because of the Fed’s dual mandate to maintain maximum employment and price stability, they are in no hurry to cut interest rates, Jankowski said.

· Inflation will remain at about 2 per cent, according to the U.S. Bureau of Economic Analysis, which studied core personal consumption expenditures adjusted for inflation, he said.

· Real estate will be thrown into turmoil, particularly commercial real estate. Jankowski quoted stats from Bloomberg showing commercial property distress at a ten-year high and said that it is

very difficult to get a commercial real estate loan. He said that commercial landlords are even handing properties back to lenders.

Locally, what happens in the Houston area in 2024 depends on the industry, Jankowski said.

· Net in-migration – the number of people moving to the greater Houston area, remains strong – at 85,044 in 2022 according to U.S. Census records.

· Education, retail, entertainment, bars and restaurants will do well as a result of new people moving in.

· Births are expected to exceed 94,000 – driving the need for more healthcare and more healthcare jobs.

· As the population ages – with over 32,000 people turning 65 each year – additional demand for healthcare will be created.

· Oil and gas will remain relatively stable, with few new jobs being created. Production will continue to become more efficient, he said, citing statistics showing high U.S. production from fewer oil rigs.

· There will be growth in demand for professional services (law, accounting) as oil company mergers continue. Mergers almost always result in headquarters being moved to the Houston area, he said.

· The future also looks bright for manufacturing, wholesale trade and transportation, along with hotels, and bars.

· Office construction will be weak and industrial construction will also fall.

· New home construction is expected to rise slightly to 37,200 starts, up from 36,900 in 2023.

· Construction, finance, insurance and real estate will plunge in 2024.

· Information companies, such as traditional media outlets, will also suffer in 2024.

· Projected job growth will be 57,600 jobs in 2024, according to the Texas Workforce Commission and research by the Greater Houston Partnership.

Jankowski concluded his remarks with the reminder that the Houston economy is more like a marathon than a sprint.

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