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Home , History of Houston, Houston, September 1900

HoustonBusiness A Perspective on the Economy

FEDERAL RESERVE BANK OF • HOUSTON BRANCH • NOVEMBER 2002

Houston in 1900 With rivers mostly un- charted and none of them navi- Part 3. The Galveston–Houston Rivalry gable for any significant dis- tance, Houston’s location was strategically chosen at the most interior point in the state that could be served by water trans- By 1900, Galveston Galveston is located two portation on a year-round miles offshore on one of the basis. Houston was a river port, held a clear edge in many barrier islands along the accepting agricultural produce port facilities but Gulf of . Throughout its from the rich bottomlands history, the waters of Galveston along the Brazos and Colorado found itself at the Bay attracted Indians, pirates rivers and shipping to Galves- and explorers and served the ton by barge or steamboat for terminus of a Gulf Coast as the best natural export from the state.1 Of all poorly developed rail harbor between the exports leaving Texas and Vera Cruz. through Galveston before the network. Houston was After the , Civil War, 80 percent would Michel B. Menard and a group have arrived in Galveston via the regional rail of investors gained title to 4,605 Houston and the Buffalo hub but could not acres of land on Galveston .2 Warehousing and ship- Island through a complicated ping became Galveston’s main demonstrate the logic set of financial transactions. commercial activity. They had a new surveyed Initially, both earned of a second port and platted at this site, basing a profitable living off of geog- only 50 miles the layout on and raphy by providing noncom- street plans. The petitive transportation services. from Galveston. Galveston Co. began sell- Over time, this cooperative ing lots in 1838, and the Texas relationship eroded as shallow- Legislature incorporated the draft steamships, railroads and city the following year. port improvements shifted the When Houston and Galves- balance of power from one city ton were founded, the economic to the other. Both Houston and roles played by the two cities Galveston aspired to greatness complemented each other. from their inception—the use of as a model for transportation in the state— The problem with the Galveston streets, for example, that railroads would be the key Galveston plan was that it ran was not without forethought. to moving product from the against a strong national tide of In many ways, the two new state’s rich agricultural regions. transcontinental construction, cities were economic twins: The battle would ultimately and it was impossible to secure located 50 miles apart, settled turn on two questions: Should private financing for such a by Southerners, drawing on the the orientation of the rail system project. In the mid-1850s, the same agricultural wealth, built be north–south or east–west? Galveston plan evolved into a on transportation services and And should ownership of the proposal for state ownership of led mainly by members of the railroads be in state or corpo- the rail system. The Compromise commercial elite. rate hands? of 1850 had settled the dispute By the 1850s, the relation- The transcontinental plan between Texas and the United ship began to turn into a power- advocated by Houstonians— States over the Texas–New ful economic rivalry, for only the conventional program of Mexico boundary, paid the state one of the cities could possibly the times—sought an east–west debt and left $5 million in bonds achieve national or international system developed by private in state coffers. Just as corpo- status. Historians disagree on corporations with public subsi- rate interests wanted a share of whether Houston won the battle dies. This system would con- these funds for rail subsidies, and Galveston lost or whether verge on Houston, making the so did Lorenzo Sherwood, a geography and technical change city the center of the Texas rail Galvestonian who in the early ultimately made a Houston vic- network. Corporate railroad 1850s devised a plan to use tory inevitable. They do agree, promoters demanded govern- these surpluses to finance a however, that Galveston never ment subsidies, mostly in the 1,000-mile, state-owned rail recovered from the 1900 hurri- form of land grants and loans, network in Texas. cane, at least in terms of its arguing they were necessary to The plan was politically dream of becoming a major promote railroads in a region attractive in populist Texas, but (Figure 1). devoid of native capital and both the plan and Sherwood’s The hurricane made the logic lacking the population base nonconformist ways ultimately of an inland port on the Texas and industry needed to support proved unpopular with Galves- Gulf Coast clear to all. heavy rail traffic. ton’s leadership. Sherwood was This article tracks the Houston Galvestonians, in turn, driven from the Texas Legisla- –Galveston rivalry from its in- advocated a rail system fanning ture in 1856 for his abolitionist ception in the 1850s to its end at out from their city and running views, and a month later the the start of the 20th century. north to south. The initial legislature authorized a $6,000 The story is of interest as an advocate of this plan was loan, backed by the U.S. bonds, economic . Galveston News editor Willard for every mile of railroad track But it also illustrates how geog- Richardson, a combative and laid in Texas. With this legis- raphy can build economies and persuasive person how changing transportation devoted to the technology can enhance or city and various Figure 1 erode a city’s competitive posi- Southern causes. Population of Galveston and Houston, 1860–1940 tion over time. The leadership The system’s Thousands of both cities sought to parlay advantage, he 400 geographic advantage in this argued, was that 350 Houston civic rivalry. it would keep Texas goods 300 Roots of the Rivalry within the state, 250 The first skirmish between whereas connec- 200 Houston and Galveston came tion to an east– in the 1850s, and it was fought west grid would 150 over the orientation of Texas divert Texas 100 railroads.3 Both cities recog- to New 50 nized that the coming of the Orleans and St. Galveston rails would largely end river Louis. 0 1860 1870 1880 1890 1900 1910 1920 1930 1940

SOURCE: U.S. Census Bureau. 2 lation, plus a state subsidy The first railroad to reach and trading firms operated pri- authorized in 1854 of 16 sections the island was the Galveston, vate wharves. Led by Menard of land for each mile of track Houston and Henderson, char- and other key investors in the laid, the transcontinental plan tered in 1853 with initial sup- Galveston City Co., Galveston cleared its final obstacle. port from both Houston and Wharf Co. began buying and The decision was critical for Galveston. Both cities bought a consolidating wharves under Houston because the railroads token subscription of $300,000 common management. By 1859, provided a much-needed coun- in capital stock in 1855, but the 10 wharves and their associated terweight to Galveston’s advan- majority of the capital came warehouses and terminal facili- tages as a Gulf harbor. The first from European and Galveston ties had fallen under control of Texas railroad was the Buffalo investors. Construction began the wharf company, giving it a Bayou, Brazos and Colorado, on the mainland opposite the monopoly over the state’s most which opened in 1853 and island and reached the outskirts important export facilities. reached Houston in 1856. By of Houston in 1859. Initially, In 1867, the city sued the the time began, freight moving from Houston wharf company over street Houston had captured the rail to the island was transferred by access to the wharves, having network along the Texas Gulf; ferryboat, but in 1860 a 10,000- already lost a previous battle of the 492 miles of track in foot trestle (the longest in the over public versus private Texas, 350 led to Houston.4 hemisphere at that time) con- ownership of the waterfront Galveston was slower to nected the island and mainland. itself. The resulting settlement take an active interest in rail- The Houston depot for the merged all the docks and rele- roads on the assumption that Galveston, Houston and Hen- vant waterfront facilities, includ- Galveston was Houston’s port derson was to be located at the ing streets, into the wharf com- and that what was good for corner of Main and McKinney. pany. In exchange for tighten- Houston was generally good But by the time the railroad ing the company’s monopoly for Galveston. For example, the arrived, the city fathers had grip, Galveston received undi- Houston and Texas Central rethought the value of a direct vided one-third ownership of Railway Co. added more than rail connection to the sea. Fear- the docks and a nonvoting any other line to Houston’s rail ing that cotton would simply voice on the company’s board presence, ultimately becoming flow straight through Houston of owners and directors. a major link in the Southern and on to Galveston without In 1869, brothers John and Pacific’s transcontinental sys- stopping, the City Council George Sealy, George Ball and tem. However, the railroad located the depot on the south John H. Hutchings purchased had originally been chartered side of Main Street, denying the the one railroad serving Galves- in 1848 by a Galvestonian, railroad any link to the Texas ton, the Galveston, Houston Ebenezer Allen, to run north and and Houston Central Railway. and Henderson. All of these east from Galveston through During the Civil War the Galves- men were major investors in cotton, sugar and timber coun- ton–Houston connection was the Galveston Wharf Co., and try. The plan was opposed and imposed by military authorities, in 1870 they received permis- openly ridiculed in Galveston, and it became permanent in sion from the and Houston merchant Paul 1865. However, historian David to integrate the railroad into Bremond eventually purchased McComb cites this as the first Galveston’s wharves and termi- the charter. overt action in the coming eco- nals. The result was once more A similar story can be told nomic struggle between Hous- to tighten the company’s con- for the Texas and New Orleans ton and Galveston.5 trol of local export facilities. Railroad, which ran east from The extent of Galveston Houston to Beaumont and Galveston’s Wharf Company Wharf Co.’s misdeeds remains Port Arthur, with plans for Galveston Wharf and Cotton a matter of historical debate,6 connection to New Orleans. Compress Co. was founded in but there is no question that it The original 1856 charter was 1854. Its name was shortened earned a statewide reputation for a railroad from Galveston to Galveston Wharf Co. in 1860. for excessive charges, quaran- to Beaumont, but by 1858 it Commercial wharves had oper- tine fees and a cavalier attitude had transformed itself into a ated in Galveston since 1854, toward customers. It was an Houston–New Orleans line. and a number of mercantile irritant to cotton farmers, cotton

3 shippers and steamship lines. for rivalry. The perception of minimize the problems posed The Texas Grange singled out high and unreasonable charges by sandbars, but with a clear- Galveston Wharf Co. (along provoked efforts to get around ance of only 8 feet even Mor- with the Houston and Texas the Galveston docks, and Buf- gan’s specially designed ships Central Railway) for special falo Bayou seemed to offer an had to wait for high tide to wrath among those institutions alternative path to the sea. cross the bar. Ships that could it saw as systematically robbing Navigation on Buffalo not enter the harbor had to the state’s farmers. At home, Bayou had always been impor- unload their cargo into shallow- Willard Richardson of the Gal- tant to Houston. draft barges or smaller ships to veston News was an outspoken Co. was formed in 1839. It col- be carried ashore, a process opponent, labeling Galveston lected $200 from local merchants called “lightering” that was Wharf Co. the “octopus of the and contracted to have five common to the Gulf Coast. Gulf.” miles of Buffalo Bayou cleared In the 1850s, as the wharf Controlling the wharves was of dangerous snags and debris. company’s reputation spread critical because Galveston was The first local docks were built and as cooperation between the best single outlet for cotton in 1840 upon authorization by Houston and Galveston deteri- and other goods for Texas, the state legislature. In June orated, Houston shipping inter- and Kansas. After 1842, a city ordinance estab- ests had the simple idea of the Civil War, the cotton trade lished the , bypassing Galveston altogether. resumed its normal pattern, authorizing it to control wharves If cargo had to be moved to with Houston and Galveston and landings along Buffalo smaller vessels anyway, why serving as the chief outlet. As Bayou, collect wharf fees and not bring the barges or boats the rail network spread north invest in navigation improve- directly up Buffalo Bayou, to the Blackland Prairie and ments. Throughout the Civil where rail connections were increased access to agricultural War, only small, shallow-draft better? Traffic on Buffalo Bayou trade, the importance of Hous- vessels could navigate Buffalo in the 1850s was largely monop- ton and Galveston multiplied. Bayou. olized by Houston and Galves- It would not be until 1873 that Meanwhile, Galveston faced ton Navigation Co., and in the the Houston and Texas Central navigation problems of its own. late 1850s the company began would connect with the Mis- To say that it was home to the soliciting shippers to anchor in souri, Kansas and Texas near finest harbor between New the channel outside the harbor the Oklahoma border and open Orleans and Vera Cruz did not and bring cargo directly to up markets such as mean it was immune to the Houston. and St. Louis for Texas cotton. shifting channels and shallow After the Civil War, the eco- Until that time, all trade fun- sandbars of all Gulf ports. The nomic battle between Houston neled south throughGalveston, 27-mile-long island parallels and Galveston resumed in and Galveston Wharf Co. levied the Texas coast, with the harbor earnest. Houston and Galveston a toll for virtually every bale, between the island and the Navigation Co. failed to survive barrel or crate that left the coast. A sandbar lay across the war. It was replaced in state. The Grange, for example, the harbor entrance just below 1866 by Houston Direct Navi- claimed that while dray charges the water’s surface. In 1837, gation Co. Privately owned but to move a bale of cotton from the sandbar had a depth of actively promoted by Houston rail to outbound steamer were 12 feet, but shoaling had caused authorities, the new company only 15 cents, the wharf com- it to grow, and by 1869 the was specifically chartered to pany collected 40 cents per bale harbor depth was reduced to promote trade on the bayou and pocketed the difference. only 8 feet. by avoiding wharf charges at The presence of the sand- Galveston. The company - Competing with Galveston bar meant that no sizable ship pered. In 1869, it reported carry- With Houston increasingly could enter the port, particu- ing 11,544 passengers and secure in its control of the rail- larly the -draft sailing 815,466 barrels of freight. By ways, the competition between ships of the day. Early innova- 1872, the company operated Houston and Galveston moved tors in Texas shipping, such as four steamers, 18 barges and to the waterways. Galveston Charles Morgan, had begun to three tugs.7 Galveston Wharf Co. Wharf Co. became a catalyst use shallow-draft steamships to retaliated by levying a surcharge

4 on any ship that lightered in Corps were making slow pro- but could not stop the arbitrary the channel to deliver goods gress when outside events quarantines. In 1874, long-term to Houston and then sought a intervened. rebates offered to Morgan by return cargo out of Galveston Through its manipulation the wharf company expired Harbor. of facilities and rates, Galveston and were not renewed, placing Wharf Co. had alienated the him at a rate disadvantage rela- Infrastructure Improvements dominant shipper in the Gulf tive to Mallory Lines. The next stage of the eco- of Mexico by placing his ships In July 1874, Morgan joined nomic battle involved infra- at a competitive disadvantage. forces with Houston. He pur- structure improvements. Deep- Charles Morgan and his Morgan chased the assets and improve- ening Galveston’s harbor would Lines turned to Houston to ments of both Houston Direct stop Houston’s poaching of make a major investment— Navigation Co. and Buffalo freight in midchannel, and deep- building Houston’s first ship Bayou Ship Channel Co. By ening and widening Buffalo channel at his own expense.8 mid-1875, eight dredges were Bayou could offer shippers The wharf company had working around the clock, and deepwater access to the state’s apparently angered Morgan in April 1876, a 9-foot channel rail center. Both sides sought and damaged his business in was complete as far as Clinton, the advantage. several ways. Morgan had where Morgan established a Following the Civil War, opened Galveston–New Orleans terminal. The first ship to dock Galveston established a board shipping in 1837 and virtually at Clinton was a Morgan ship of harbor improvements, raised monopolized Gulf routes prior loaded with railroad construc- $15,000 through a bond issue to the Civil War, pioneering the tion supplies, and Morgan and adopted a plan to deepen use of shallow hulls, holding immediately built a seven-mile the channel across the sandbar. postal contracts and offering a spur to connect his Clinton This was done by sinking cedar high level of service. He was terminal to the Houston and pilings below water level, using a good customer of both Gal- Texas Central Railroad. Morgan the pilings to direct the current veston Wharf Co. and Houston assumed control of the Hous- in such a way that it scoured Direct Navigation Co. ton and Texas Central in 1877; out the sandbar and deepened Around 1870, the wharf he had bypassed Galveston the channel. After several stops company sought to reduce its and was again in control of his and starts and with help from dependence on trade with New own destiny. the federal government, the Orleans and to enhance trade Galveston then raised its technique returned the bar to its with New York, specifically with sights to clearing a channel 20 earlier 12-foot depth by 1873. the Mallory steamship line. or more feet deep. New Orleans In 1869, Houston organized The owner, Charles H. Mallory, had succeeded in opening a Buffalo Bayou Ship Channel agreed to build four shallow- channel more than 26 feet Co. to make the ship channel a hulled steamers to serve Galves- deep, the standard of the day reality. Supported partly with ton and to arrange direct and for a first-class port, by build- initial public funding and partly through rates with the Galves- ing jetties to concentrate the by wharfage and tonnage taxes, ton, Houston and Henderson current and scour away sand the company sought to create Railroad. Ball, Hutchings and barriers. The Army Corps of a 9-foot-deep channel from John Sealy agreed to put up Engineers undertook similar Houston to the . one-fourth of the capital for the projects in Galveston in both In 1870, Congress was per- four new Mallory ships. 1874 and 1880, aiming to suaded to make Houston a port By late 1870, Morgan’s rela- achieve a 25-foot-deep channel, of entry, and the Army Corps of tionship with the wharf com- but both endeavors failed. Engineers conducted a survey pany was deteriorating rapidly. Finally, in 1890, Congress of ship channel possibilities. He found his ships subject to authorized $6.2 million to do The Corps concluded that a quarantines and the job right. The funds were 6-foot-deep, 100-foot-wide sent for long stays at the quar- appropriated to build five miles channel was possible but that antine station in Galveston, of protective granite and sand- improvements above Harrisburg where a heavy tax was levied. stone jetties and clear a 22-foot would be difficult. Both the In 1873, Morgan successfully channel. In October 1896, the ship channel company and the sued to have the tax removed British steamer Algoa, the largest

5 in the world and drawing 21 took most of the remainder of charge to transfer a bale from feet, docked at Galveston. The the decade for Texas railroads to rail to channel steamer in Hous- days of lightering in open water convert their track to standard ton and ship it to Galveston. were over for ships with Gal- gauge. Among the last to con- This meant the shipper was veston cargoes. vert—in 1879—was the Hous- neutral between a Houston and Meanwhile, Houston had ton, Galveston and Henderson. Galveston market, but Galves- fallen behind again. Morgan Because rates and profits were ton saw it as unfair because died in 1878, and Southern higher for short hauls and with the 7 cents was well above the Pacific Co. absorbed most of cars interchanged among rail- marginal cost of the last 50 his rail and steamship holdings roads, Galveston Wharf Co. miles by rail into Galveston. by 1885. The Clinton terminal resisted the idea of a railcar Further, in the minds of Galves- was abandoned in 1880 when a rolling from anywhere in the ton supporters was the nagging railroad was finally completed straight onto issue of how the rate would and opened between Houston Galveston docks. benefit Houston if the city and New Orleans. Barge traffic A second rail line out of achieved deepwater access. continued along Buffalo Bayou, Galveston was finally begun in The Texas Railroad Commission but under a monopoly toll 1873, but the railroad was bank- supported the tariff in 1894, levied by Morgan’s heirs, and rupt by 1875. George Sealy, but complaints, hearings and the waterway slowly became again joining with Hutchings, court battles dragged on until less important. In 1892, after Ball and other Galveston in- 1933, when the differential lengthy negotiations, the federal vestors, purchased the Gulf, was eliminated. The Houston– government bought Morgan’s Colorado and Santa Fe Railway. Galveston Equalization Agree- improvements to Buffalo Bayou. By 1881 they had completed a ment finally ended the contro- Efforts to upgrade the channel railroad that bypassed Houston, versy by equalizing the rates to a 25-foot depth were pro- passing through Brenham, between the two cities on moted by Houston, but the Waco and Fort Worth. The pop- export and import items, plus Corps of Engineers, which ular version of the motive for rates on most coastal traffic. argued that recent investments the railroad is that it was built in the nearby Galveston Harbor to get around periodic yellow The Hurricane and After were sufficient for the region, fever quarantines imposed by By 1900, Galveston held a opposed extensive improve- Houston, which were almost clear edge in port facilities but ments. Efforts to appeal directly always put in force at the peak found itself at the terminus of a to Congress were blocked by of cotton-marketing season to poorly developed rail network. the chair of the strategic Harbors prevent cotton from flowing to Houston was the regional rail and Rivers Committee. Galveston without stopping in hub but could not demonstrate Houston. In fact, it was recog- the logic of a second port only Railroads Again nition—perhaps belated—that 50 miles from Galveston. The In retrospect, the best long- to be successful in a national hurricane of 1900, however, term strategy for Galveston rail network, Galveston needed dramatically demonstrated might have been to build a net- direct rail access into the Brazos Galveston’s vulnerability to work of north–south rail con- Valley and the Blackland Prairie storms. With 6,000 dead and nections, such as that proposed cotton-growing regions. 3,600 homes lost, the great by the Galveston plan, to facili- A significant rail controversy storm of September 1900 still tate rail access to the docks raged between the two cities ranks as the greatest natural from the largest region possible. for more than 40 years over the disaster in U.S. history. The connection of the Texas Houston–Galveston differen- Houston Congressman and Houston Central to the tial, the difference in the rail Thomas H. Ball had proposed Missouri, Kansas and Texas in tariff paid for shipping to one an 18-foot channel for Buffalo 1873 marked the opening of city versus the other. Railroad Bayou in 1896, but the Army Texas markets to the rest of the companies in the late 19th Corps of Engineers, which had United States via rail. Suddenly century set the rate for a bale just finished its work on the Chicago and St. Louis were of cotton shipped to Galveston Galveston jetties, opposed the Galveston’s competitors, where as the rate to Houston plus legislation and it failed. In 1902, there had been none before. It 7 cents; the 7 cents was the after the storm, opposition

6 Table 1 Distribution of Occupations in Texas Cities, 1910 Dallas Galveston Houston Texas,” The Online Agriculture .8 1.3 1.1 2.4 (Austin: Texas State Historical Associa- Mining .1 0 .2 .3 tion, 2002), www.tsha.utexas.edu/ Manufacturing 26.8 22.5 27.0 28.1 handbook/online. Transportation 8.3 21.9 12.1 9.6 4 Richard G. Boehm, Exporting Cotton in Trade 21.6 13.3 16.7 18.5 Texas: Relationships of Ports and Inland Public service 1.7 2.8 1.6 5.0 Supply Points (Austin: University of Personal service 23.0 22.6 25.7 22.5 Texas Bureau of Economic Research, Clerical 11.0 10.1 9.6 6.8 1975), p. 12. 5 SOURCE: Census of Population, 1910. McComb, p. 51. 6 Galveston Wharf Co. exhibited monop- olistic behavior in reported fees, rebates and constraints on rail capacity. The evaporated, and Congress allo- lation would allow all Texas extent of the monopolistic abuses is cated $1 million for a ship cities to create navigation dis- presented differently by different authors. Wheeler (pp. 87– 88) and channel with a turning basin at tricts, with voter approval, for James P. Baughman, in Charles Morgan Long Reach, four miles from the improvement of rivers, and the Development of Southern . In 1914, the chan- bays, streams and other water- Transportation (Nashville: Vanderbilt nel would be dredged to 25 ways. By 1937, Orange, Beau- University Press, 1968, pp. 193–195) feet, allowing Houston to fully mont, Port Neches, Corpus paint a negative picture, while a lesser pattern of abuses is offered by engage in Gulf trade. Christi, Port Isabel and Browns- McComb (p. 56), Edward Coyle Sealy, Galveston responded posi- ville all had 25- to 30-foot in “Galveston Wharves,” The Hand- tively to the storm in a number channels, compared with 34 feet book of Texas Online (2002), and of ways. It reopened its wharves at Houston and Galveston. Harold M. Hyman, in Oleander Odyssey: only two weeks after the storm, Galveston’s one-time monopoly The Kempners of Galveston, Texas, 1854 –1880s (College Station: Texas built a 17-foot seawall and on Gulf shipping was gone. A&M University Press, 1990, pp. 45–46). raised the island’s elevation to For Houston, in contrast, 7 “Houston Direct Navigation Co.,” The reduce future flooding. How- oil would bring manufacturing, Handbook of Texas Online (2002), and ever, at a time when the rest of and the combination of rail- Marilyn McAdams Sibley, The Port of the state was poised to develop roads and deep water would Houston: A History (Austin: University of Texas Press, 1968), p. 89. a significant manufacturing make Houston Texas’ leading 8 See Baughman (pp. 191–200) for more base, Galveston’s reputation for port. Houston would become details on the circumstances of Morgan’s storms and flooding deterred the dominant city in the South- decision to ally himself with Houston. investors. In 1900, investment west in the 1930 census and 9 Census of Manufactures, 1899. in Galveston manufacturing hold that position for the rest ($6.1 million) was not much of the 20th century. Its rival different from that of Houston through the century would be ($7 million), Dallas ($6.9 mil- not Galveston, but Dallas. lion) and San Antonio ($4.5 million). But Galveston would Notes never compete successfully 1 For a more detailed discussion of the with these cities again.9 importance of river transportation Table 1 shows the distribu- before the arrival of the railroads, see Part 1 of this series of three articles, tion of occupations in Galves- “Houston in 1900: Part 1. The Rise of ton and other Texas cities in the Regional City,” Federal Reserve 1910, a decade after the storm. Bank of Dallas Houston Business, The two figures that stand out June 2002. for Galveston are its weakness 2 David G. McComb, Galveston: A History (Austin: University of Texas Press, in manufacturing and its depen- 1986), p. 47. dence on transportation. More- 3 General background on the contro- over, its strength in transporta- versy over the orientation of Texas tion was under attack by this railroads can be found in Kenneth W. time, and not just by Houston. Wheeler, To Wear a City’s Crown: The Beginnings of Urban Growth in Texas, In 1904, nearby Texas City 1836–1865 (Cambridge: Harvard opened its own deepwater University Press, 1968), pp. 93–96, and facilities, and subsequent legis- Randolph B. Campbell, “Antebellum

7 Houston BeigeBook November 2002

The pattern of no job homes were up sharply in Sep- America and improvement in growth continues in Houston, tember compared with last Europe—picked up a notch. much as it does in the rest of year. But more important, con- Oil service and machinery the state and nation. The period tacts report sales have been companies express frustration of flat employment now stretches steady and strong over the last over not seeing better drilling back over 18 months. The un- three months. Low interest conditions with energy prices employment rate was 5.9 per- rates continue to work their as strong as they have been cent in September, and it has magic in keeping sales moving. recently. Major companies con- held steady near 6 percent since Office occupancy rates in tinue to steer a steady course July. After four months showing Houston have been falling for in drilling, but independents moderate growth, the Houston four quarters, especially down- seem reluctant to accelerate Purchasing Managers Index town. With roughly 1.5 million exploration activity—their turned weaker, indicating mod- square feet coming back onto normal pattern when prices erate contraction in September the market due to , Arthur are this high. and October. The latest October Andersen and the Chevron– reading is 49, just under the Texaco merger, plus another Petrochemicals and Refining break-even point of 50. 2 million square feet scheduled Petrochemical activity on to be completed soon, the the Ship Channel seems to have Retail and Auto Sales central business district faces taken a page from the rest of Retailers report that condi- continued times. How- the industrial sector. Demand tions improved in October but ever, the softness is not limited slowed significantly over the sales are still weak. October- to downtown; and summer. It has become difficult to-October sales comparisons Westchase areas have also regis- to pass through price increases, are much more favorable than tered negative absorption in and prices of polyvinyl chloride those of August and September, recent months. and polyethylene actually fell although they are not nearly as in recent weeks. High feed- strong as retailers would like. Energy Prices and Drilling stock prices have hurt profit Colder weather seemed to work Crude oil prices have weak- margins. in favor of department stores, ened in recent weeks, as OPEC Back-to-back hurricanes and strong home sales are overproduction and a deflated coming ashore from the Gulf helping furniture retailers. war premium pulled the price limited production briefly and Year-over-year auto sales of Intermediate pulled down inventories of are difficult to judge because of down to $25 per barrel. Simi- crude and oil products. Com- the effects last year of Tropical larly, natural gas prices pulled bined with very strong demand Storm Allison. However, they back under $4 per thousand for , refiner profit mar- definitely weakened in October. cubic feet as gas inventories gins have improved moderately October sales hit their lowest entered the storage season at in recent weeks. Gasoline de- level locally since 1997, even record high levels. mand, strong all year, has failed though rebates and incentives Domestic drilling activity to put much upward pressure remain in full force. stayed near its 26-week average on pump prices because of high of 850 working rigs, and inter- levels of imports, especially Real Estate national drilling—led by stabi- from Europe. Home sales are similarly lization of activity in Latin difficult to judge because both new and existing home sales in Houston were hit hard last For more information or copies of this publication, contact Bill Gilmer at year by the (713) 652-1546 or [email protected], or write Bill Gilmer, Houston Branch, events. Not surprisingly, sales of Dallas, P.O. Box 2578, Houston, TX 77252. This publication is of both new and existing also available on the Internet at www.dallasfed.org. The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or the Federal Reserve System.