The slowdown of the Houston economy is picking up speed.

The slowdown of the Houston economy is picking up speed.

After setting a torrid pace less than a year ago, the local economy is barely adding new jobs now. At the same time, the unemployment rate has shot up, and so has the number of first-time filers for jobless benefits.

Houston-area employers created 17,200 new jobs between January 2008 and January 2009, according to data released Thursday by the Texas Workforce Commission. That 0.7 percent year-over-year increase was the weakest since the summer of 2004 and doesn’t include the large layoffs already announced in Galveston at the University of Texas Medical Branch and Shriners Hospital for Children.

It’s a sharp departure from just a year ago, when Houston gained 87,400 jobs in the preceding year for a robust 3.5 percent clip.

“I think we’re headed to negative territory in just a few months,” said Barton Smith, director of the University of Houston’s Institute for Regional Forecasting. “By May or June they’ll be negative.”

Weaker hiring coupled with a spike in the number of folks looking for work caused the local jobless rate to jump to 6.5 percent in January, its highest level since July 2004, according to the commission. In December, the rate was 5.6 percent.

The rate is also climbing statewide. In January, the Texas unemployment rate was 6.4 percent, which commission Chairman Tom Pauken expects to grow to 8 percent later this year. Statewide data is seasonally adjusted while local data is not.

“It’s occurring a little faster than we thought,” said Smith, referring to the slowdown that has been especially hard on retailers and financial firms.

New figures due today

While the strong energy industry buffered Houston during 2008, Smith predicts the city soon will lose that cushion. As world economic conditions deteriorate and reduce the demand for energy, he expects widespread job cuts in oil field equipment manufacturing, a key industry for Houston.

The layoffs are still relatively mild but they’ll pick up during the year, he said.

“The national economic storm has hit us,” said Pauken, who spoke with the Houston Chronicle’s editorial board Thursday.

The unemployment rates in Houston and Texas are still better than the U.S. figure, which stood at 7.6 percent in January and rose to 8.1 percent in February, according to federal statistics released today.

Pauken pointed to the spike in initial claims for unemployment benefits that has made it difficult for out-of-work Texans to get through on the busy phone lines to file for benefits. The commission is adding phone capacity to handle the calls, he said.

He pointed to the spike in initial claims for unemployment benefits that has made it difficult for out-of-work Texans to get through on the busy phone lines to file for benefits. The commission is adding phone capacity to handle the calls, he said.

In January, 26,828 Houston-area residents filed initial claims for unemployment benefits. That’s up 24.4 percent from December, when 21,567 residents requested benefits, and nearly double the number of applicants a year ago.

Previous report revised

It’s not uncommon to see job losses from December to January because companies are cutting holiday help and evaluating budgets, said Joel Wagher, labor market analyst for Workforce Solutions, which manages employment services, education and training for the area.

But this time losses were higher than usual because of the struggling economy, he said. It was the worst one-month employment decline in the last 10 years, he said.

Also, the latest report included the annual revision of the previous year’s estimates. Houston’s job base didn’t grow nearly as quickly as the commission thought.

In January, the commission estimated the Houston area added 57,300 new jobs between December 2007 and December 2008, a 2.2 percent increase. But once actual payroll tax records were tallied, the area gained only 22,500 jobs during that time for a 0.9 percent increase.

Houston’s annual job growth peaked last June at 4.6 percent. It has declined ever since, Wagher said.