I came across a great article called “50 Reasons We’re Living Through the Greatest Period in World History”. The article in my estimation is worth reading and should make us appreciate where we are and when we are living. In reading it, I felt the challenge to state why Texas is presently one of the best places to live and raise a family. California in the early 1950’s was the land of opportunity with many families and corporations moving there. In recent times, the pendulum has moved to Texas. Why?
Instead of government, the big drivers of growth now appear to be three basic sectors: energy, technology and, most welcome all, manufacturing. Energy-rich Texas cities dominate. The state has added some 200,000 generally high-paying oil and gas jobs over the past decade — but Texas is also leading in industrial job growth, technology, and services.
The best prospects for the future lie in places that both experience income and employment gains but remain relatively affordable. When the consumer is looking at affordability, Texas is the state that boasts the most effective pay and cost of living for the dollar. With wages staying stagnant, many consumers are looking to Texas because their paycheck stretches farther. If you are just looking at income, Texas is just above average; cities on both coasts will far outweigh total pay. But when you compare to where your paycheck goes the farthest, Texas metros and cities are constantly in the top 10 in most categories.
Texas boasts warm weather, lots of land, no state income tax, and a cost of living that is lower than the national average. The strong economy is led by low unemployment and a relatively robust housing market. The Texas metros that rank highly on most lists have enjoyed rapid population growth and strong domestic in-migration. Houston, Dallas-Fort Worth, and Austin all have been among the leaders the nation in both domestic migration and overall growth.
Texas job creation
Texas has far outpaced the national average. The number of jobs in Texas has grown by a truly impressive 31.5 percent since 1995, compared with just 12 percent nationwide, according to Bureau of Labor Statistics data. When the consumer thinks of Texas, they think of energy, but the technology sector has also seen strong growth.
When we think of Texas and technology, Dell, Texas Instruments, and Compaq/ HP are what commonly comes to mind. However over the last 10 years the social media craze and a surge in private-equity investment has created much more. Homeaway, Bazaarvoice, Rackspace, etc have helped lead the way away from hardware manufacturing to the next level of the technology landscape.
And yet it is not just energy and technology that have helped lead this state to its current economic strength. As stated before in this forum, the demand for teachers, doctors nurses and other positions that require a four year degree have seen over a 42+% growth since 2000. Finance, insurance, real estate, legal, engineering, consulting also have ranked high in the contributing the high wage growth in Texas.
Texas did better than the rest of the United States from 2002 through 2011 in wage growth. For industries paying over 150 percent of the average American wage, Texas could claim 216,000 extra jobs; the rest of the country added 495,000. In other words, the Lone Star State, with 8 percent of the U.S. population, created nearly a third of the country’s highest-paying positions. Texas also added 49,000 positions paying 125 percent to 150 percent of the U.S. average; the rest of the country lost 174,000 jobs in that category.
Not to avoid the lower quartile of jobs, Texas metros also added hundreds of thousands of positions in food services, health care, and other lower-paid fields, in addition to the more lucrative jobs. Texas did lose 10,000 construction jobs, but that was a modest downturn, in light of the massive national slowdown in building caused by the crisis of 2008. Texas is at about 40% of prerecession jobs in construction. So, most job channels continue to look good going into the next few years.
There’s a lot of good news about the current Texas economy. Let’s now discuss some new economic developments that will benefit Texas’s future.
Opening oil exploration in Mexico
How big could these oil reforms be for Texas’s as well as Mexico’s economy? Based on current estimations it could be bigger than the revolution in shale drilling and fracking, and it could end up being one of the most significant changes in Mexico’s economic policy in 100 years. Why would the oil and gas reforms be so significant to Mexico? Because of all the oil and gas it could unlock, and the vast wealth that could be created in the process. How much? Well, according to government estimates Mexico contains proven, probable and possible reserves of more than 45 billion barrels of oil and in excess of 500 trillion cubic feet of natural gas.
Under Pemex, the national Mexican oil company, the oil and gas would simply remains locked in the ground.
Why can’t Pemex get it out? Because Pemex, despite being one of the world’s biggest oil companies, does not have sufficient technical expertise to explore and develop promising prospects such as in the deepwater Gulf of Mexico or in the tricky shale layers just south of the border from Texas’ booming Eagle Ford shale. What’s more, Pemex has virtually no hope of acquiring or borrowing such expertise under the current status quo, which allows the company to only enter into service contracts.
That’s enough to attract the likes of most major energy giants such as a Halliburton or Schlumberger to Mexico. But the Big Oil companies with real expertise and giant balance sheets like ExxonMobil or Chevron wouldn’t even consider taking on the massive risks of drilling wells if they weren’t guaranteed a strong cut of whatever oil and gas they found. Couldn’t Pemex develop that expertise in-house? No. With Mexico relying on Pemex revenues to fund a third of the federal budget, the company has been starved of the capital it needs to drill, develop and grow. Big business and oil could supply that.
What state benefits most from that play? Texas.
Repealing the crude oil exportation ban
Since 2008, U.S. oil production has increased over 55 percent, and our imports have correspondingly fallen to the lowest level since the mid-1990s. In response to this oil boom, refineries have been exporting at record amounts gasoline, diesel, and other products refined from oil, which do not face the same federal restrictions as crude oil.
In response to this trend and the broader oil and natural-gas boom, legislators and many companies including Exxon Mobil and others are calling on Congress to lift the ban.
The ban dates back to the 1973 OPEC oil embargo, which sent domestic oil prices soaring. In the wake of that incident, Congress decided to restrict exports of crude in most cases as a means to limit future oil-price shocks. In the few cases exports are allowed—mostly to Canada—companies must obtain a specific license from the Commerce Department in order to do so. These policies that limit energy exports have limited job creation, economic growth, as well as progress in reversing our trade imbalance, according to the pro-repeal sector. The latest Census data shows the oil and natural gas sector accounted for 8.9 percent of the total balance of exports in the first 11 months of 2013 – contributing more than $129 billion in exports and leading all other sectors. Our trade imbalance is at a four-year low thanks to the 16 percent trade deficit reduction provided by the oil and natural gas industry.
For those that fear that the open market would raise prices, the latest forecast from the Energy Information Administration demonstrates that surging U.S. production will continue to exert downward pressure on fuel prices – even under increased export scenarios.
If the free market is allowed to work in this arena, we could see even more progress toward the Obama Administration’s goal of doubling U.S. exports. And that means jobs. In America’s oil and natural gas industry, good-paying jobs abound – with the average upstream job paying roughly seven times the federal minimum wage. And the state that would probably benefit most is Texas.
Alternative energy economic impact in Texas
We all have heard of the large wind farms throughout the Southwest, but one of the more exciting announcements with short term economic impact is the announcement of Tesla’s electric battery factory. Tesla Motors has said that it plans to invest about $2 billion in a large-scale factory to produce cheaper batteries for their mass-market electric car within three years. The company, which makes all-electric luxury sedans, indicated that it would build the factory in the American Southwest, without specifying which state. Nor would it name its partners, who it said would invest up to another $3 billion in the factory through 2020.
This innovative factory would allow Tesla to develop and cut the costs of its batteries for its vehicles quickly, in part by producing finished batteries from metal ore instead of from components. Sales of its Model S sedan, which costs $70,000 and higher, have been constrained by a battery shortage. Analysts said that Tesla needs more batteries if it is to make its third-generation vehicle, an electric sedan that will be sold for less than $40,000. By building its own factory, Tesla would have more control over the supply and cost of its batteries.
Nevada, Arizona, New Mexico and Texas are among the states Tesla said it was considering for the factory. The finished batteries would be shipped to Tesla’s assembly plant in Fremont, Calif. The factory will cover 500 to 1,000 acres and employ up to 6,500 workers. Texas is a good candidate for this opportunity, with the confluence of multiple transportation lines to easily ship between states. That, coupled with cheap land and low taxes make Texas a contender. That said also realize, that all four states under consideration currently have unfriendly laws towards Tesla’s direct sales model. Any change by any state one would think would have a positive influence to recruiting the battery factory to their state. Once a unique product and factory starts like this, the additional industry attracted would have huge benefits to that region.
Besides energy, the greatest growth areas in Texas are the health, medical, and technology fields. All of the major metros have a national, if not global, presence in these industries.
San Antonio–New Braunfels
Home to one of the largest medical facilities in the nation, San Antonio has seen strong job growth from military medical operations. Ambulatory health-care services combined with new technology has created more than 12,000 jobs over the last five years and looks to continue for a while.
Medical isn’t the only thing driving development. San Antonio is also home to the largest oil and gas development in the world in the Eagle Ford Shale. Record drilling levels and high-yield wells are pumping new jobs into energy and related sectors.
The technology strength is obvious to those that live in San Antonio, with the explosive growth of Rackspace and Geekdom.
The city was ninth in job growth over the last five years. A nationwide restructuring of military bases could lead to many new jobs. So on many fronts those looking to find opportunity have a lot of options in the Alamo city.
Growth in Houston has been fueled by the strength in oil and gas exploration and the supporting technologies. The shale gas exploration in particular is creating jobs in multiple areas. It’s led to 10,500 jobs in professional and scientific services, while administrative, machinery, and manufacturing industries have also seen job gains. Job growth is the seventh strongest in the country over the last five years, largely because Houston’s energy infrastructure is only getting more developed. Multiple companies are building export terminals, fractionaters, and ethane crackers. Expect a huge increase in engineering and construction jobs as a result.
But remember that Houston is also home to one the largest medical centers in the world. The innovation and leadership generated from Houston leads most of the country and world in the industry. This area will continue to be one of the major employers and leaders for the Texas economy.
Last, numerous large energy operations, such as Exxon, Conoco /Phillips, and Occidental and are consolidating their headquarters in this city which in turn has continued to the strong construction and economic growth of the area.
The DFW metro area continues to have one of the most diverse economies in the U.S., with strong establishments in tech, aerospace, telecoms, and financial services. Population growth is strong, housing sales are rising, financial services added 5,000 jobs from 2011-13, and employment at corporate headquarters increased by more than 4,000 works over the last five years.
Look for Dallas’s job growth to get even stronger as American Airlines, Southwest Airlines, and Lockheed Martin look to expand their presence.
The Austin metro area has gotten plenty of positive press over the last few years. Nationally, Austin has come in the top five major metros in the country job growth over the last five years, due in large part to a more diversified economic base. Homegrown tech companies like Dell, National Instruments as well as foreign investment such as Samsung ( with the largest foreign investment in the US) and others complement incoming companies like Apple and IBM (which both now have large bases in Austin), as well as startups coming out of the University of Texas. When you look at the explosive growth of new tech companies such as Homeaway, Bazzarvoice, Invoto and many others, the economic future is obvious.
Austin’s decision to back a new medical school that will open in the fall of 2016 will help attract many more in the medical field, research as well as practitioners. Partnering with the university and the strength of the other medical centers in Texas will allow the state to become much more attractive on a global scale to many. Couple that with the aging demographic nationally as well as world wide of the population, you can see the strength of the economic argument.
Austin business leaders plan is to maintain its high-flying output over the next number of years as it focuses on clean technology, data centers, digital media, biosciences, and other industries.
The state is extremely business-friendly with a low tax, low regulation environment that makes it attractive to out-of-state firms. All of the tech hustle and bustle has led to an influx of young professionals, which has led to a boom in construction in all metros. To consider that the state has put its focus on too few industries for a strong future is a weak argument, when looking at the facts. Again realize that we are lucky, blessed to be living in Texas, at one of the best times in history.