Business

Oil Layoffs Lead To Economic Domino Effect

With plunging oil prices, Royal Dutch Shell is the latest to announce thousands of job cuts. Those layoffs have a ripple effect on Houston’s economy.

 

It’s not easy to quantify the trickle-down effects for Houston from the oil price downturn.

“There’s one main thing that really makes it difficult to quantify, and that is there’s normally a lag.”

“Anything that is just spending money within the Houston area — retail, groceries, anything like that, is going to suffer as a by-product,” said Dr. Adam Perdue, an economics professor with the Bauer College of Business at the University of Houston.

Job losses can affect restaurants, entertainment, car sales, home sales …

“Real estate’s actually kind of funny because despite the construction boom that we’ve recently seen, we’re still actually kind of far behind,” Perdue said. “And that’s why we’ve seen prices go up so much. And so we’ll probably stop seeing the prices go up, but we’re still well below the number of houses and apartments that we should have.”

Houston’s economy is more diversified than it was during the 80’s oil bust. And Perdue said there’s currently a boom in manufacturing that can help balance out the bust in drilling.

“Sixty billion in construction on the manufacturing plants along the Ship Channel and for the Houston area as a whole is kind of balancing out — all these new construction jobs and eventually the operations jobs, and they have a trickle effect, too,” Perdue said. 

Chevron this week announced it’s eliminating 1,500 jobs to curb spending by about a billion dollars.

ConocoPhillips is continuing layoffs as it also strives to slash $1 billion in spending over two years.

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