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Houston Economic Indicators

Economic Indicators

July 30, 2020

More signs that the local economy improved or at least bottomed out in June were tempered by weaker July data that point to a stalling recovery. Leading and coincident indexes improved in June, payrolls extended their recovery and unemployment fell. However, existing-home sales worsened, as did more recent data on weekly unemployment claims and the daily number of hourly employees working at smaller firms. On balance, the data point to a plateauing of the recovery in July.

Business-Cycle and Leading Indexes

The Houston Business-Cycle Index (BCI) increased for a second consecutive month in June but remains well below pre-COVID levels. The index declined an annualized 23.9 percent over the three months ending in June (Chart 1).

Chart 1

An index of 10 leading economic indicators for Houston (HLI) also improved in June—the first month-over-month increase since December. The HLI fell 6.9 percent over the three months ending in June, annualized. While changes in this index are highly correlated with Houston job growth over the next several months, the unusual dynamics of how individuals and policymakers react to the local pandemic add considerable uncertainty to the interpretation of the leading index.

Purchasing Managers Index

The Houston Purchasing Managers Index rose to 49.5 in June (Chart 2). That is consistent with nearly flat manufacturing activity relative to May and modest growth in the Houston BCI. The survey period for the index took place in late June. Two of the index’s components—the sales (new orders) and production indexes—are part of the HLI and are historically highly correlated with job growth over the next three months. The sales and production indexes rose to 56.8 and 55.5 in June, respectively, the first positive growth readings this year.

Chart 2

Employment

One-Third of Job Losses Recovered

Houston added back over 120,200 jobs over the two months through June 2020, nearly one-third of the 361,900 payroll jobs lost in February and March (Chart 3). The biggest source of job growth was in hard-hit leisure and hospitality, which added 70,000 jobs (50 percent of its loss) as the phased reopening of the state economy allowed restaurants and bars to resume operation. In late June, as COVID-19 hospitalizations and deaths surged in the region, the state ordered a pullback in reopening that included a mandate that bars close again. This will likely show up in the July jobs report to be released next month.

Over the two months ending in June, government jobs declined by 11,800, mostly in state government educational services.

Chart 3

Houston’s unemployment rate fell to 8.5 percent in June, down from 13.2 percent in April. The decline in unemployment over the past two months occurred as 200,400 people rejoined Houston’s labor force.

For comparison, the Texas unemployment rate was 8.6 percent and the U.S. rate was 11.1 percent.

Unemployment Claims Remain Elevated

Weekly initial unemployment claims increased to an average of nearly 28,300 over the first two weeks of July after leveling off near 23,600 in late June (Chart 4). The rise in claims followed decisions to roll back aspects of the reopening and a drop in mobility and engagement.

Chart 4

Number of Hourly Employees Working Flattens

The number of hourly employees working at mostly small firms in Houston leveled off in July near 74.1 percent of January levels—down from the mid-June high of 79.2 percent (Chart 5). Texas overall performed similarly. The June-to-July drop can also be seen in data for California, Florida, Arizona and other regions of the U.S. that have seen sharp increases in COVID-19 cases and hospitalizations over the summer.

Chart 5

Existing-Home Sales

The number of existing homes sold in the Houston metropolitan area fell sharply across all price categories from February through June (Chart 6). Total sales fell 17.8 percent, with a disproportionate share of the decline attributable to homes priced over $499,999. That category saw sales drop over 25.1 percent from February to June.

Sales of homes priced between $200,000 and $299,999 saw the smallest drop at 12.4 percent. This category’s share of total sales has been rising since 2011 as population growth, an undersupply of new homes in lower-priced categories and inflation have contributed to appreciation of less-expensive properties into higher price categories.

Chart 6

NOTE: Data may not match previously published numbers due to revisions. 

About Houston Economic Indicators

Questions can be addressed to Jesse Thompson at jesse.thompson@dal.frb.org. Houston Economic Indicators is posted on the second Monday after monthly Houston-area employment data are released.