A couple weeks ago, I wrote about concerns of the national employment market compared to Texas. The U.S. economy finally recovered all the jobs lost in the 2007-2009 recession in May of this year.
To say it’s been an uneven recovery nationally would be an understatement, with over two-thirds of the nation’s states still short of their peak for total payrolls. The good news is that eighteen states plus the District of Columbia (government growth is good for local economies) had more jobs in May than their peaks before or during the recession. Three states are doing much better than the rest of the nation – Texas, California, and Florida. Seasonally adjusted total nonfarm payrolls are still below their previous peaks in 33 states plus, according to figures released mid July by the Labor Department.
Realize that although we have had a great surge of employment nationally, and the last two months have yielded 200,000 jobs per month, the US is still short about 150,000 jobs a month to keep pace with population growth. We consistently need 300,000 jobs a month to gain ground. Secondly, wage growth has been sadly lacking for the last decade. And this is where this country really needs focus as we see a larger portion of the market left without the benefit of home ownership due to affordability, including in our state. This is an opportunity for equity and landlords, because everyone needs shelter. And presently not much stands in the way of population and employment growth in the state.
The Texas economy has recovered more quickly for several reasons. First, the region lost a smaller portion of its employment during the recession. Second, Texas’s core industries – oil, gas, and technology have boomed for the last 7 years. And third, the region continues to draw residents from other states. This draw pushes Texas’s needs and demand for consumer goods and services, creating jobs and opportunities along the way. Texas added around 5.6 million people since 2000, more than any other state between the Census counts of 2000 and 2014. What’s drawing people to Texas? The region’s low cost of living, low level of regulation on most business, moderately priced housing, mild climate, and growing economy.
After a slow start in 2014, the regional economy picked up pace in the second quarter, with payroll employment growing at a faster rate than in the first quarter. The Texas Business Outlook Surveys by the Federal Reserve show the optimism and point to an uptick in activity in June and July. The years 2nd quarter July Beige Book continued to note healthy growth and optimism in business and consumer outlooks. The energy sector continued strong activity in commercial real estate, and lower economic uncertainty as well as an aggressive group of economic leaders in the region all seem to be helping Texas.
Texas continues to add jobs at a faster clip than the U.S. Texas employment growth accelerated to 4.3 percent in the second quarter, up from 2.4 percent in the first. This is the strongest growth the state has seen since third quarter 2005 and is above the robust 3.9 percent growth seen in first quarter 2012.
In the first half of 2014, the regional job creation was broad based, with the state’s lead over U.S. job growth extending to all major sectors except construction, manufacturing and miscellaneous services. Although manufacturing employment growth has been sluggish year to date, job creation in chemical manufacturing—tied to the booming energy sector—has bucked the trend. The state’s unemployment rate held steady at 5.1 percent in June, the lowest since August 2008 and again better than the national rate for over 7.5 years. Why is this important? We have not seen all channels of regional employment kick in. Even in this state there is still a number of unemployed (656,177+/-) and under employed. Imagine if they begin to contribute to our regional economy.
The point is that Texas and the nation are healthier, yet have plenty of room and opportunity to improve. Whether you look at the Federal Reserve reports or any economic analysis, it is obvious there is a need for skilled workers in high demand sectors such as energy and construction. There are also reports of modest employment needs in airlines, high tech, fabricated metals, primary metals and transportation and equipment manufacturing for the second half of 2014.
With all the positive news, what does Texas need to do to continue to build on our growth? The “good news” is that Texas scores high on overall tax burden, low business regulation, employment in high-tech industries, venture capital, initial public offerings, low unionization, unrestrictive minimum wages, exports, foreign direct investment and percent of population born abroad who come to work.
The bad news: Texas ranks near the bottom in most human capital measures. Texas is dead last in the percent of the adult population that graduated from high school, 37th in percent of population enrolled in degree-granting institutions, 35th in academic research and development, and 41st in science and engineering degrees awarded. Higher education and higher wages leads to a better standard of living.
Besides our primary education, there is a need for more tier one universities. To get a better sense of this, look at the membership list for the Association of American Universities (AAU), which is regarded by most scholars as the definition of the cream of the crop of research universities. The AAU consists of 60 U.S. and two Canadian universities. These 60 U.S. schools garner over 50% of all federal R&D dollars to colleges and universities; they are home to 87% of all elected members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine—the highest recognition in each of those fields. Since 1901, 35% of all Nobel Prizes have gone to individuals affiliated with AAU universities. California has nine AAU members. The New York area also has nine. And Texas? We have three: Rice, UT–Austin, and Texas A&M.
According to the U.S. News & World Report college rankings, Massachusetts has 10 schools ranked in the top 100 universities. The New York area has 11 and California has 13. Texas has only six: Rice, ranked 18th, UT–Austin (52nd), Texas A&M (69th), SMU (60nd), Baylor (75th), and TCU (82nd). We all understand where the focus needs to be. We all admire the Rice Owls, their academic standing and their great band, but we should be embarrassed by having them as the sole university in the nation’s top 20. Texas should have several! The world of today and tomorrow is driven by education. Technology is great, but California and other states continue to lead in the education race for those needs. With the opening of Latin America to business, what state has the most potential? Texas, but only if we stay ahead of the of the competition―not just from other states, but from the world― which will only happen if we are able to nurture and harness Texas brains.
We must begin to focus in each of our cities and schools on the future of growth and its impact. Growth is tied to the ability to stay ahead of the curve and compete in tomorrow’s global marketplace. To do this, Texas must better educate its population. Think about the next school bond election, think about where this state should focus.
Who will drive the economy after the baby boomers are gone? According to the US Census there are more 23 year olds than any other age group in the US. The education of this and future generations is paramount. Compare the lifetime earnings of those with college degrees to those without. $82,720 is the average earnings of full-time, year-round workers 18 and older with an advanced degree (bachelor’s degree or higher) in 2012. Workers whose highest degree was a bachelor’s had mean earnings of $70,432. Mean earnings for full-time, year-round workers with a high school diploma (includes GED certificate) was $41,248, while workers with less than a ninth grade education had $26,679 average earnings. Education has a huge economic impact!
The coming month will be huge for retail – it’s the back to school shopping season. The U.S. Census Bureau estimated that $8.6 billion was spent at family clothing stores in August 2013. Sales at bookstores in August 2013 were estimated at $1.6 billion. The number of children and adults enrolled in school throughout the country in October 2012 was 78 million out of 330+ million. If just less than 24% of our population buys school supplies presently, and we continue to focus on educational improvement, it will help our economy and give those other states less to talk about when they want to diminish the accomplishments of our state.
If you have children, good luck shopping this weekend. If you don’t, you have been warned!