Houston’s Slowdown Stark Reminder of Nation’s Economic Ills : Recession: Despite a successful recovery after the oil bust, the city is reeling from a recent round of layoffs that has fueled rising unemployment.

As Republican delegates are ferried around this sprawling convention city, a quick look out the window provides a vivid illustration of why their candidate, George Bush, is in a fight for his political life.

On building after building, signs speak of empty office space inside, a reminder of the bad old days when Houston was vastly overbuilt by fortune-seeking speculators--and the banks that abetted them--during the freewheeling spending spree of the Republican 1980s.

In a metropolis where new subdivisions and commercial complexes seemed to spring up overnight and the skyline was silhouetted with construction cranes, building activity has slowed to a crawl and new homes attract only a handful of lookers.

And a city that took pride in its painful transition from an economy based on oil to a more diversified employment base is now reeling from a series of recent layoffs affecting workers and executives in even the most leading-edge, high-tech industries.

“Eighteen months ago, I would not have forecast what is going on today,” said Mitch Pearl, a commercial real estate broker. “Back then, things were positive. It’s not that way today. . . . Houston is in the doldrums just like the rest of the country.”

Indeed, as Republicans try to chart a course here that will keep them in control of the White House for another four years, Houston has become an uncomfortable reminder of the economic problems bedeviling the Bush campaign throughout the nation.

Only last week, the government agency in charge of selling off assets from failed savings and loan associations auctioned off 53 tracts of land here for $17.9 million, less than a third of their estimated market value.

And there is still much work ahead for the Resolution Trust Corp. before it can close its doors here: The agency must dispose of assets worth a combined total of $6 billion, including 5,643 pieces of real estate.

Such is the legacy of the 49 Houston-area savings and loans whose assets were inherited by the federal government.

The bad news does not end there. Unemployment in Houston has crept higher with each new round of layoffs. And the rising joblessness does not reflect any major jolt in the energy industry, which until the last decade drove the city’s economy almost single-handedly.

Houston, after all those years of struggling through the devastating oil bust, actually made a strong recovery before it fell in line with the rest of the country’s lagging economy last year. The rest of the nation is only now experiencing the kind of financial problems that dogged this city for so long. Houston’s role today is to suffer just like everyone else.

Despite the latest downturn, officials here say that the city is much further along than other areas of the country in picking up the pieces after the S&L; debacle. “This office is way ahead of the rest of the U.S.,” said Hunter Smith, spokesman for the RTC’s Houston operation. “The collapse around here happened a lot sooner than the West and East coasts.”

For the benefit of Republican convention-goers, Houston boosters have tried to paint a positive picture of the local economy. They note, for example, that 271,000 jobs have been added since the oil bust recovery began in 1987.

Bill Gilmer, an economist with the Federal Reserve Board in Houston, said that such figures fail to convey the full story: Houston emerged from its darkest days, he said, diversified its economy away from oil, became more like the rest of the nation--and ran straight into the national recession.

“Over the past 12 months, we’ve lost 7,000 jobs,” said Gilmer. “We haven’t lost as much as the rest of the country but we started later.”

In recent months, such major Houston-area employers as Exxon, Houston Lighting & Power and Texas Instruments have announced large layoffs, both white- and blue-collar. The local unemployment rate stands at 7.9%, compared to 5.3% a year earlier.

Friendswood Development Corp., the largest land owner in Harris County, has no plans to embark on any new projects, and is drawing only meager crowds at the model homes it has already built.

Pearl, the commercial real estate broker, said that businesses large and small are engaging in a process known as “right-sizing,” a euphemistic term coined to take the place of “down-sizing.”

Pearl said that he has walked through offices in which whole floors have been left vacant by cutbacks. Some energy-related companies have cut their staffs in half, while desperate lawyers work for free at some firms in hopes of eventually being hired.

Stephen Klineberg, a Rice University sociologist, cited an annual poll in which Houston residents are asked whether difficult times are ahead. Three years ago, 45% of respondents said they thought tougher times were coming. When the poll was taken this year, the figure soared to 67%.

The findings seem even more telling because Houston traditionally has been a place where Republican ideas have played well, a place where people believed that working hard meant getting ahead and where government interference was the last thing anyone wanted. Zoning, for instance, was only introduced in Houston this year.

“The kind of Reagan rhetoric that worked so well here doesn’t resonate quite so well now,” Klineberg said. “It’s a crossroads year for the United States. People are saying we’ve got to get our house in order.”