Houston, We Have No Problems
Gross, Daniel, Newsweek
Byline: Daniel Gross
Houston has become a sort of Silicon Valley for the global energy industry. Urban cowboy? Think suburban geek.
To find a hot spot where soaring oil and commodity prices, and the booming economies of the developing world, are keeping cash registers ringing and construction crews fully employed, you don't have to trek to Dubai or Moscow. You need travel only as far as Houston. In May, the unemployment rate in the nation's sixth largest metropolitan area was a measly 3.8 percent. In the past year, Houston-based companies, which include 26 Fortune 500 firms, added 71,000 jobs to their payrolls. The local United Way closed out its fiscal year with a record $76.1 million in donations. At the Galleria, a high-end shopping oasis, Bridgette Bottone, manager of the De Beers store, notes, "We're still selling the big guys": three-carat-plus diamonds that retail for more than $50,000. Pessimists are as rare as Birkenstock sandals, or OBAMA '08 stickers in ExxonMobil's parking garage.
Houston's good fortune is largely a function of the current oil boom. But this isn't the type of gusher that led to busts in 1981 and 1986. Instead, Houston is experiencing a 21st-century boom fueled by a weak dollar and global growth. "Three things affect Houston's economy," says Patrick Jankowski, vice president of research at the Greater Houston Partnership: "the price of energy, the value of the dollar and the strength of the U.S. economy at large." As Meat Loaf said, two out of three ain't bad.
Houston's economy doesn't run on oil alone. "We're really diversified," says Mike Ballases, chairman of the Houston region for JPMorgan Chase, tongue partially in cheek. "We're only 50 percent dependent on energy." (The city's biggest employer: the Texas Medical Center, the nonprofit megaplex that runs two medical schools and 14 hospitals.) At Houston's port, the second busiest in America, cranes are loading ships with industrial equipment. Exports rose 25 percent in 2007, to $72 billion.
Exports are rising because Houston has become a sort of Silicon Valley for the global energy industry. "There's hardly any oil and gas production in a 40-mile radius of Houston," says Mayor Bill White, a former energy executive, as he held court in the city's charming art deco city hall. (Think of a much smaller Rockefeller Center, but without the tourists.) "It's the knowledge that has concentrated here that is driving things." In 1981, the oil and gas industry was a domestic, blue-collar one. Today it's an international, white-collar one. Oil companies, wind-energy start-ups, consulting geologists and software developers compose what John Hofmeister, who is retiring in July as president of Shell Oil Co., calls "this mass aggregation of people who know what they're doing in the energy world. …