In a matter of months, more than 30 million Americans lost jobs, including more than 2 million in Texas and 500,000 in Houston. The pace of job losses has slowed in recent weeks as businesses have reopened, employees have returned to work and consumers have ventured from their homes, but the economy’s path forward remains uncertain — perhaps more uncertain than it has ever been.
Across every industry and employment sector, businesses face the question of not just when, but whether their customers will revert to normal behavior, or at least something resembling it. Restaurants wonder whether diners will feel comfortable entering their dining rooms retailers if consumers will feel safe again to browse.
Commercial real estate firms are at risk if companies continue to keep large numbers of employees working at home and cut back on office space. Oil companies, trying to survive the second major supply glut and price crash in five years, could suffer from fewer commuters burning gasoline as well as fewer passengers booking flights to consume jet fuel.
Many laid-off workers, particularly in front-line sectors such as retail, restaurants and hospitality, fear returning to work without jeopardizing their health. Employers wonder if they will.
“Workers are in a dilemma where, if they've been at home for some time unemployed, they are desperate to be able to go back to work,” said Hany Khalil, the executive director of the Texas Gulf Coast Area Labor Federation. “But there are deep concerns about whether their workplaces will be safe.”
It all makes a slow, painful recovery likely. On Wednesday, Jerome Powell, chairman of the Federal Reserve, said the recovery will likely take years. Millions of people remain out of work and national unemployment may top 9 percent by the end of the year — nearly triple the rate at the end of last year.
In Houston, economists expect an even tougher time because of the region’s dependence on oil and gas, which is reeling from the unprecedented plunge in demand and prices. As the energy industry goes, so, too, do the businesses and workers who provide goods and services to it.
Many of jobs lost in energy and ancillary sectors, such as manufacturing, are not coming back, experts said. After the oil bust that lasted roughly from 2014 to 2016, the energy industry regained only about one-third of the tens of thousands of jobs it slashed in that downturn.
“The more challenging time is ahead, because some of the losses we’ve had are likely to last,” said Peter Rodriguez, an economist and dean of the Jones Graduate School of Business at Rice University. “The best-case scenario is a return to normal, but it’s unlikely.”
A Bumpy Ride to Recovery
Recent data have suggested the beginnings of a recovery. The nation gained 2.5 million jobs in May, according to the Labor Department, and first-time jobless claims in Texas fell last week fell below 100,000 for the first time since March. A local business index showed that the decline in economic activity in Houston began to slow in May.Early in the crisis, economists and policy makers hoped for a v-shaped recovery — a sharp rebound after a sharp decline. Few expect that now. Economists doubt employers have finished slashing payrolls, believing some haven’t started yet.
Part of it is the dynamics of a recession, which in this case began in February. Worried consumers spend less money when times are tough, and that leads to lower demand, less production and more layoffs, which further reduce consumer spending. The fear of contracting the coronavirus only intensifies the destructive cycle by keeping people at home and further depressing consumer spending, which accounts for about 70 percent of U.S. economic activity.
Meagan Giddens, a mother of three in Cypress, has underlying health conditions that put her at particularly high risk of complications if she contracts COVID-19. Her elderly parents also live with her. As a result, she has rarely ventured out in recent months, relying mostly on grocery and other deliveries.
That means she’s not spending money on gasoline or car maintenance. She’s not stopping at stores to buy school supplies, clothes and occasional presents for her kids. She’s not taking them out to Towne Lake Boardwalk in Cypress, where they used to shop at the farmer’s market and lunch in one of the many restaurants.
“Making sure my kids have a normal life, or a healthy life, without exposing us to unnecessary risk, is going to be a difficult challenge,” said Giddens. “I can't control what other people do. But I can control my kids' exposure, my exposure, my parents' exposure.”
Ray Perryman, an economist in Waco, forecasts the Texas economy will lose about $134 billion in economic activity and more than 860,000 net jobs this year. He estimates it could take as long as five years for the state to return to the level of business activity before the coronavirus pandemic.
Oil’s Reach
The oil and gas industry faces another long, slow recovery as prices stay depressed. In Houston, the industry slashed 4,000 jobs in April alone, according to the Labor Department.The impact of low oil prices reaches beyond the energy. Retailers, restaurants and office buildings depend on the spending of oil companies and their employees, which rises and falls with crude prices.
One in every three manufacturing jobs in Houston are tied to oil gas. Local manufacturers cut more than 17,000 jobs in April; employment in the sector fell its lowest since 2017, according to the Labor Department.
When the oil industry emerges from yet another bust, it is expected to get smaller and leaner. Many of the lost jobs will never return as low prices drive oil and gas companies to become even more efficient by adopting automation and technologies to control oil field activities remotely, analysts said. That means fewer workers.
It will also mean fewer opportunities. Janet Miranda, who graduated in May from the University of Houston, hoped to take her marketing degree to the energy industry, but quickly found entry-level jobs were frozen,
“I’m exploring my options,” Miranda said. “I still have my heart set on energy, but you don’t know long the recovery will take.”
There may not be a lot of options. Even health care, traditionally a steadily growing sector that offset some of oil’s volatility, has been rocked by the pandemic’s economic shockwaves.
In April, Houston’s health care and social assistance sector experienced its first year-over-year job losses in two decades, shedding nearly 33,000 jobs, or 10 percent of employment, from April 2019. Even with high demand for hospital workers who care for COVID-19 patients, job cuts by other providers more than offset those gains as elective surgeries were canceled and patients avoided dentists’ offices, primary care practices and specialists.
Vivian Ho, a health economist at Rice University, said those pains are likely to continue as patients will remain wary to go to doctors’ offices for fear of contracting the virus. And with unemployment reaching record levels, fewer patients will be able to afford routine visits and elective procedures.
An estimated 1.6 million Texans have lost employer-sponsored health insurance, according to the Kaiser Family Foundation, a health policy think tank in San Francisco.
“It’s going to be a double blow,” Ho said. “They lost a lot of patients because of fear, and they’re going to have some really sick patients that they have to take care of who cannot pay.”
Never the Same
Other industries that provide face-to-face interactions with customers also face staggering losses from what could be a lasting shift away from shopping, eating out and experiencing products in person, economists said.Restaurants will need to figure out how to service diners afraid of sitting too close to fellow patrons. Social distancing measures by their nature will reduce volumes in an industry that survives on tight margins.
Even if fear of the virus abates, the losses in income from the recession could make people less likely to spend money dining out, according to economists. It’s one of first expenses cut from a household budget.
The pandemic, meanwhile, is accelerating trends that have buffeted retailers for years as home-bound customers turn to Amazon and other online sellers. Retailers that were struggling before the pandemic, such as the Houston department store chain Stage Stores, have plunged in bankruptcy.
Local retailers cut 22,200 jobs in April from the same month in 2019, a 7 percent decline. Many of those jobs also are not coming back.
“We will never see retail employment at the level it was,” said Jankowski, of the GHP. “The sad part is (retail) provides employment for a large sector of the population.”
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