Houston Chronicle recently question experts to get their opinion on the Houston economy:

Houston’s diverse economy may be the port in the economic storm, but that still doesn’t mean the city will have a better-than-average Christmas or that employers will start taking on lots of workers anytime soon, according to local economic experts.

The city’s strong energy base has helped the region weather previous downturns, but with natural gas prices so low and oil prices so volatile, the buffer isn’t as strong as it once was. Employers are still nervous about hiring, and until they see more concrete signs Houston is on the way back, any recovery may likely be without much job growth.

We questioned four experts — a career counselor, a real estate management executive, an energy analyst and the head of a project management association — to get their thoughts on the effect of low natural gas prices, on the likelihood of a commercial real estate bust, and on when they think Houston employers will begin hiring again.

Here are excerpts from that conversation:

Q: The chairman of the Federal Reserve has said the recession is likely over. Is Houston on the rebound, too?

A: Market analyst, trader and financial writer Dian Chu isn’t quite so bullish.

“I don’t believe the recession is quite over yet,” she said, calling Ben Bernanke’s comment more of a “positive assertion” than solid proof. But Chu said she believes the nation is on the way toward a recovery.

“Houston isn’t quite there yet,” she said. Energy prices have been very volatile this year and natural gas prices are low. Because of that uncertainty, energy companies will be hesitant to make large investments.

While she thinks Houston will recover during the second half of 2010, at the moment it’s wavering because of mixed signals like an increase in industrial production but a dip in consumer confidence.

Brent Smith, Houston manager of Marcus & Millichap, a real estate investment services firm, is also not ready to proclaim the nationwide recession over. Many of the same economists, he noted, are the same ones who predicted recovery in late 2008.

But if they’re right about a jobless recovery, then the return of consumer spending will be delayed along with a full recovery, he said. On the plus side, though, consumers are spending less and saving more, and that saving will lead to a more sustainable long-term recovery

A recovery? John Alston, president of the Innis Co., a career management consulting firm, doesn’t see it.

“It’s really hard to find a new job, especially at the executive level, and it’s as bleak as I’ve ever seen it,” said Alston, whose firm specializes in coaching senior executives. “It’s even worse than the 1980s.”

Compounding that is the sour outlook for small businesses, which are suffering from the lack of consumer spending and credit availability, he said.

Q: When do you think employers in Houston will start to hire once again?

A: Smith is projecting the second quarter of 2010. There’s certainly some optimism in corporate America now, but companies will probably want to see a quarter or two of sustained growth before they jump back in.

There has to be a clear signal the economy is on the way up, Chu said. Until then, companies won’t be willing to make a large investment.

Chu’s best guess? As long as the economy doesn’t sink back into recession — the dreaded W-shaped recovery — a rebound will probably start taking hold during the second half of 2010. But it won’t be until 2012 that the unemployment rate will drop significantly, she said.

The president of the Project Management Institute-Houston Chapter is already seeing improvement.

Jobs are opening up in the oil and gas sector for experienced project managers as well as information technology for project management office experience, John S. Gorman III said.

Companies are focused on increasing efficiency, cutting costs and increasing revenue, and they can do that by managing projects well, Gorman said.

Q: How does it look for Christmas spending this year? Will we spend more, less or about the same as we did in 2008, which turned out to be one of the bleakest years on record?

A: Gorman is forecasting a slightly better Christmas, more for psychological reasons than for any huge improvement in the fundamentals.

A year ago the Dow Jones industrial average was on a decline, he said, but now it’s on more of an uptick. “Hopefully we’ll feel more comfortable spending money this year,” Gorman said. And if the unemployment numbers go down, Christmas spending will go up.

Alston expects shoppers to stay in bargain-hunting mode this Christmas season. Parents bought their back-to-school clothes at the discounters this year instead of at more expensive department stores, he said. Instead of buying a $20 bottle of wine, they’re buying a $5 bottle; instead of eating out, they’re eating at home.

When shoppers don’t have to spend, they won’t, Chu said. Consumers are still very worried about job security and the economy.

Q: How will a potential national commercial real estate meltdown affect the local market?

A: “We’re not forecasting a meltdown,” Smith said. “Certainly we’re in a downturn, but we see this as a debt crisis, not a commercial real estate crisis.”

It’s not a problem of overbuilding, he said, but how to refinance the estimated $535 billion of commercial mortgage debt that will mature over the next two years. Because of declining real estate values and tighter lending criteria, refinancing those mortgages may be a challenge.

But most of the properties have positive cash flow and lenders are interested in working those deals out, Smith said. However, there will likely be foreclosures in the next two to three years.

As the commercial real esate market deteriorates, a lot of community and regional banks have loans on that real estate, Alston said. When lenders have trouble repaying, that creates a capital call on the banks.

And that, in turn, will drag more banks down, he said.

And then there are those empty storefronts.

“Any time any of us drives past an empty strip center, what does that do to your level of confidence of where we are?” Alston said.

“I think it’s pretty serious now, but it will get significantly worse.”

But there is an upside.

Gorman said the spike in bankruptcies will likely mean more available space. Companies can take advantage of that by moving to cheaper space and consolidating their existing vacant space.

Q: What is the effect of low natural gas prices on the energy economy in Houston?

A: “Not good,” Smith said. “That’s the short answer.”

He pointed to prices at seven-year lows and enormous supply-side pressure. That translates into fewer rigs coming on line and overall rig levels staying below the 2008 peak.

As a result, he said, local businesses that supply parts for gas drilling will be met with a continuing slump in demand, which isn’t good for Houston’s manufacturing base.

At the moment about 70 percent of domestic rigs are drilling for natural gas, Chu said, but she doesn’t see that going up any time soon because natural gas prices are so low.

However, companies are reluctant to let too many workers go, she said, or they’ll likely face a skilled labor shortage later.

In the end, oil will lead the drilling recovery, she said. “You can see the Gulf is still pretty busy.”

Source: Houston Chronicle