Houston Economic Overview

Presented by Patrick Jankowski, Vice President, Research

• • •

9 Counties 125+ Cities and towns Most Populous

• Harris County • City of Houston

The Big Picture

Fifth Largest U.S. Metro Economy 2011 Gross Domestic Product Rank 20 Most Populous Metros $ Billions

1 2 3 4

5

6 7 8 9 10 New York, NY Los Angeles, CA Chicago, IL Washington, DC

Houston, TX

Dallas-Fort Worth, TX Philadelphia, PA San Francisco, CA Boston, MA Atlanta, GA 1,277.2

747.3

547.6

433.1

419.7

391.3

353.3

347.1

325.6

283.3

2011 Gross Domestic Product Rank 20 Most Populous Metros $ Billions

11 12 13 14 15 16 17 18 19 20 Miami, FL Seattle, WA Minneapolis, MN Detroit, MI Phoenix, AZ San Diego, CA Baltimore, MD St. Louis, MO Tampa, FL Riverside, CA 263.4

239.7

207.8

199.4

194.8

172.6

148.3

132.0

116.2

111.5

Source: U.S. Bureau of Economic Analysis

Fastest Growing Major Metro Economy Change in Real GDP ’10 – ’11 Rank 20 Most Populous Metros % 1

2 3 4

5

6 7 8 9 10

Houston, TX

Detroit, MI Dallas-Fort Worth, TX Seattle, WA San Francisco, CA Boston, MA San Diego, CA Atlanta, GA Minneapolis, MN Phoenix, AZ

3.7

3.5

3.1

2.9

2.6

2.4

2.3

2.2

1.9

1.8

Source: U.S. Bureau of Economic Analysis

Change in Real GDP ’10 – ’11 Rank 20 Most Populous Metros %

11 12 13 14 15 16 17 18 19 20 Los Angeles, CA Tampa, FL Chicago, IL St. Louis, MO Washington, DC Baltimore, MD Philadelphia, PA New York, NY Miami, FL Riverside, CA 1.7

1.6

1.4

1.2

1.1

1.1

1.0

0.8

0.6

0.4

Houston has a long history of economic growth.

Fifth Most Populous Metro Most Populous U.S. Metro Areas - 2012 Rank Metro Area

1 New York 2 3 4 Los Angeles Chicago Dallas-Fort Worth

5

6 7 8 9 10

Houston

Philadelphia Washington Miami Atlanta Boston

Population

19,831,858 13,052,921 9,522,434 6,700,991

6,177,035

6,018,800 5,860,342 5,762,717 5,457,831 4,640,802

Most Populous U.S. Metro Areas 2012 Rank Metro Area

11 San Francisco 12 Riverside 13 14 15 Phoenix Detroit Seattle 16 17 18 19 20 Minneapolis San Diego Tampa St. Louis Baltimore

Population

4,455,560 4,350,096 4,329,534 4,292,060 3,552,157 3,422,264 3,177,063 2,842,878 2,795,794 2,753,149 Source: U.S. Census Bureau

Fastest Growing Major Metro

Rank

1 2 3 4 5 6 7 8 9 10

Metro Areas

Houston Dallas-Ft Worth Phoenix Seattle Washington Atlanta Miami San Francisco San Diego Riverside

Change Since 7/1/11

125,185 131,879 77,456 54,338 89,129 83,153 74,809 58,642 38,880 48,255 2.1% 2.0% 1.8% 1.6% 1.5% 1.5% 1.3% 1.3% 1.2% 1.1%

Rank

11 12 13 14 15 16 17 18 19 20

Metro Areas

Minneapolis Los Angeles Boston Baltimore Tampa New York Philadelphia Chicago Detroit St. Louis

Change Since 7/1/11

33,215 107,781 37,458 19,471 16,440 101,928 21,326 26,715 4,094 2,419 1.0% 0.8% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.1% 0.1% Source: U.S. Census Bureau

Growth is the norm for Houston.

Employment Picture

Employment

Employment

Employment

Houston vs. the Top Metros

Percent of jobs recovered through June ’13 Houston vs. Top 10 Metros 100%

Source: U.S. Bureau of Labor Statistics Seasonally adjusted

Houston vs. the Top Metros

Percent of jobs recovered through June ’13 Houston vs. Top 10 Metros 100%

Source: U.S. Bureau of Labor Statistics Seasonally adjusted

Houston vs. the Top Metros

Percent of jobs recovered through June ’13 Houston vs. Second Tier Metros Houston Baltimore Minneapolis Seattle San Diego Tampa San Francisco Phoenix St. Louis Detroit Riverside 80.9% 66.2% 60.6% 49.4% 44.8% 23.0% 39.5% 17.6% 108.0% 128.8% 100% 246.8%

Source: U.S. Bureau of Labor Statistics Seasonally adjusted

Job Growth

Job Growth

Annual Job Growth (000s)

Source: U.S. Bureau of Labor Statistics

Annual Employment Change

5,400 5.4% 9,900 5.5% Houston-Sugar Land-Baytown MSA June ’12 – June ’13 13,500 4.1% 13,300 5.0% 12,000 4.4% 11,100 2.7% 7,000 2.9% 5,900 4.1% 4,100 3.2% 800 2.5% 3,000 2.1% -1,100 -1.1% 12,800 3.6%

Source: Texas Workforce Commission

Unemployment

6.7% = Houston’s current unemployment rate

What’s driving Houston’s growth

Energy

World Energy Headquarters

 28.8% of U.S. jobs in oil and gas extraction  11.7% of U.S. jobs in oil field services  16.5% of U.S. jobs in O&G and construction machinery manufacturing

And energy jobs pay very well.

Average weekly wage  Oil and Gas Extraction = $4,301  Support Activities for Mining = $2,353  Ag., Construction, and Mining Machinery = $2,267  All Industries = $1,255

Energy entering a new phase

Increased domestic oil and gas production.

Cheap, abundant gas to spur manufacturing re-shoring.

33 local chemical plant expansions underway.

Oil Prices & Employment Growth

Houston is an engineering center.

   2,800 engineering and architectural firms operate here 20 of the world’s 25 largest with Houston operations 86,380 engineers, architects and technicians

What’s driving growth . . . Foreign Trade Houston-Galveston Customs District $ Billions (U.S.) Exports Imports

Houston-Galveston Customs District • • • • Ports – Houston, Galveston, Texas City, Freeport, Corpus, Victoria Airports – Bush Intercontinental, Sugar Land Regional 41 countries with $1+ billion in trade 17 commodities with $1+ billion in trade – Oil, industrial equipment, computers, chemicals, plastics, rubber, iron and steel products, copper products, motor vehicles, scientific instruments, beverages, grains

Foreign Trade – Port of Houston

• • • • • • 15th Busiest Port in the World First in the U.S. in foreign tonnage Second in U.S. in total tonnage 220 million tons annually 8,000+ deep draft ships called at Houston Service between Houston and more than 1,000 world ports

Houston’s Top 25 Export Destinations

Houston’s Top 25 Export Destinations

Country

Mexico Brazil Netherlands Venezuela Chile Colombia United Kingdom Belgium Singapore China France Saudi Arabia Peru

Trade ($B)

$13.470

$9.144

$7.899

$3.629

$4.212

$4.801

$3.514

$3.459

$3.614

$3.835

$2.459

$2.099

$2.616

Country

Argentina Nigeria Korea, Republic Of Ecuador Turkey Panama Russia Germany Costa Rica India U.A.E.

Japan Source: WISER Trade

Trade ($B)

$2.579

$2.480

$2.762

$2.325

$3.025

$1.817

$1.708

$2.088

$1.699

$2.163

$1.791

$1.502

Outlook for Houston’s Export Destinations Country Projected Economic Growth – Houston’s 25 Largest Trading Partners ∆ GDP Direction Country ∆ GDP ’12 – ’13 ’12 – ’13 Direction

Mexico 3.7

↔

Argentina 4.0

↔

Brazil Netherlands 4.1

0.8

↑ ↑

Nigeria Korea, Republic Of 6.6

4.0

↓ ↑

Venezuela Chile 3.2

4.5

↓ ↔

Ecuador Turkey 3.9

3.2

↓ ↑

Colombia United Kingdom 4.4

2.0

↔ ↑

Panama Russia 8.5

3.9

↑ ↔

Belgium Singapore 0.8

3.9

↑ ↑

Germany Costa Rica 1.5

4.0

↑ ↔

China France 8.8

1.0

↔ ↑

India United Arab Emirates 7.3

2.9

↑ ↑

Saudi Arabia Peru 4.1

6.0

↓ ↑

Japan Source: International Monetary Fund 1.7

↓

Outlook for Houston’s Export Destinations ’13 Outlook for Houston’s Top Export Destinations GDP Direction # Countries ↑

13

↔ ↓

7 5

International business presence

More than 100 international companies have opened, expanded or relocated to Houston in the last few years…

Aviation supports growth

• • • • • Three Airports – Bush Intercontinental – – William P. Hobby Airport Ellington Airport Passengers – 50.3 million passengers in ’12 Air cargo – 419,000 metric tons in ’12 13 international passenger carriers – 68 destinations in 30 countries 11 domestic carriers – 119 domestic destinations

Houston’s Global Reach

Source: Houston Airport System 38

Houston has the nation’s largest medical center.

    Texas Medical Center  45.8 million gross sq ft physical space  106,000 employees 54 member institutions, including 17 hospitals 7.2 million patient visits annually More than 16,000 international patients

Population Growth

• • • • Growing population – 125,000 people/year Infant population – 65,000 births/year In-Migration – 60,000 newcomers/year Aging population – 15,000 seniors (65+)/ year Source: U.S. Census Bureau

Houston Outlook

Population

Employment

Gross Regional Product

Houston Economic Overview

Presented by Patrick Jankowski, Vice President, Research