Houston Economic Indicators

Houston’s labor market grew modestly over the three months ending in April while the unemployment rate held steady. Initial claims for unemployment insurance rose from February through May but were little changed from a year ago. Rising oil prices prompted the rig count to increase modestly from February to May, and gasoline prices remained elevated after increasing significantly since February.

Labor market

Payrolls increase modestly

Houston payrolls grew 1.0 percent (9,100 jobs) annualized over the three months ending in April (Chart 1).

During the period, professional and business services grew an annualized 4.3 percent (5,900 jobs), driven primarily by employment services and legal services. Manufacturing also posted solid growth of 2.8 percent (1,700 jobs). There was a notable decline of 6.5 percent (-1,200 jobs) in oil and gas extraction and support activities for mining. Construction employment contracted 2.3 percent (-1,500 jobs), and leisure and hospitality, information and other services and financial services also contracted.

April’s year-over-year job growth was anemic at just 0.4 percent (13,200 jobs). The construction sector grew a strong 3.2 percent (8,000 jobs) year over year, driven by heavy and civil engineering construction and specialty trade contractors. There was a significant year-over-year reduction in oil and gas employment, with the sector contracting 6.7 percent (-5,000 jobs). The trade, transportation and utilities sector declined 0.8 percent (-5,600 jobs) year over year.

Unemployment holds steady

Unemployment in Houston remained stable at 4.6 percent from January through March. Over the same period, state and national unemployment were also unchanged at 4.3 percent. For April, the unemployment rate in Texas and the U.S. held at 4.3 percent.

Houston’s labor force growth has slowed dramatically in recent months. The smoothed three-month annualized change was 0.1 percent in March, according to data from the Bureau of Labor Statistics. Year over year, the labor force in Houston grew just 0.8 percent, well below the 1.8 percent annualized average growth rate from December 2015 through December 2025.

Initial claims tick up

The three-week moving average of initial claims for unemployment insurance in Houston increased to 4,510 the week of May 16 from 4,009 the week of Feb. 14, a 12.5 percent increase. However, initial claims are slightly lower than a year earlier.

Oil and gas

Rig count ticks up in response to higher prices

The number of active rotary oil rigs in Texas and New Mexico increased to 302 the week of May 29 from 280 the week of Feb. 27. (Chart 4). Given the timing, the increase was likely driven both by higher oil prices and the scheduled completion of new pipelines by the end of the third quarter that will relieve constraints on transporting gas out of the Permian Basin. During the week of May 22, the average spot price for West Texas Intermediate (WTI) crude oil was $105 per barrel, a 61 percent increase from $65 the week of Feb. 20.

Whether oil prices will remain high is uncertain, and many producers expect little to no change in production. The March and April Dallas Fed Energy Surveys indicate that smaller producers are more inclined to quickly increase production in response to high oil prices, and the most recent drilling data from firms including Baker Hughes and Enervus bear that out.

Retail gasoline prices remain high

The average retail price of gasoline in Houston had increased to $3.85 dollars per gallon the week of May 25, a 54.9 percent increase from $2.48 per gallon the week of Feb. 23 (Chart 5). Over the same period, the average price of U.S. Gulf Coast on-highway diesel increased 44.6 percent to $5.05 the week of May 25.

Gasoline prices are most closely tied to Brent, the worldwide benchmark price for crude oil, which increased from $1.71 per gallon the week of Feb. 16 to $2.63 per gallon the week of May 18. Crude oil cost accounts for about half the total retail price of motor fuels.

Note

Data may not match previously published numbers due to revisions.