MESSING WITH TEXAS

Houston’s unemployment is set to outpace the national rate for the first time in a decade

Obsession
Energy Shocks
Obsession
Energy Shocks

Houston is America’s oil capital, and in oil’s boom times it was a great place to be. But now that energy prices are slumping, the local job market is no better than that of the average American city. The Houston area’s unemployment rate hit 4.9% in December, just shy of the national rate of 5% at the time.

Should the jobs picture get any worse locally, or any better for the rest of the country overall, Houston’s unemployment rate could rise above the national rate for the first time since November 2006.

It isn’t just the drop in oil prices that is hurting Houston. Years of easy financing sent the area’s energy companies on a borrowing binge.

But now that US interest rates are rising, the music has stopped. Between July 2014, when crude prices first began falling, and December 2015, 65% of oil industry bankruptcies have taken place in Texas, per Deloitte (pdf).

A shock like this creates ripple effects. Thus, you get stories like this one from Reuters, about how energy industry executives’ declining earnings are hurting the housing market, and this one from Nation’s Restaurant News, reporting the pain that the corporate parent of the Chili’s restaurant chain is feeling in the oil-heavy economies of Texas, Louisiana, and Oklahoma. But with large-scale crude production cuts from major exporters like Saudi Arabia off the table, it’s not clear where relief is going to come from.

Probably the best Houston can hope for right now is a production freeze.

home our picks popular latest obsessions search