With the media attention on the lack of housing starts and the lukewarm national economy, I felt it was time to revisit why Texas continues to stand out from all the negative news about the national economy. The $1.3 trillion Texas economy has shown a complete recovery from the Great Recession and is getting stronger, with few foreseeable economic hurdles over the next few years. To put that in perspective only 3 states are producing a significant number of jobs, Texas with 375,330 jobs, California 331,000 jobs, and Florida with 218,000 new jobs in the last 12 months. There are 18 other states at prerecession employment numbers. But there are still 32 states that have had yet to regain all the jobs lost in the downturn, based on revised state-level employment data from the Bureau of Labor statistics.
The Texas economy is now larger than those in Michigan, North Carolina, and Georgia combined. The Texas economy has recovered from recession and entered into a phase of expansion. This is different than the majority of states in the nation. Texas has left the stabilization and recovery phase that the rest of the country seems to be stuck in. Not all Texas metros are fully recovered as shown below.
• US – Stabilization – The Federal Reserve lowers rates, then gradually allows increase, as housing and job growth historically follow. When the rates are at zero, the Federal reserve uses other means, such as quantitative easing (QE) to encourage growth. As Fed reduce stimulus, rates should rise.
• Texas – Recovery/Expansion – Supply and demand is in balance, and home and land appreciation meets or beats inflation.
• Austin – Expansion – Economic housing formation as well as other real estate channel demand exceeds supply. Housing and real estate appreciation stronger. Austin is at 111% of prerecession employment numbers.
• Houston – Expansion – Economic housing formation as well as other real estate channel demand exceeds supply. Housing and real estate appreciation stronger. Houston is at 309% employment recovery of prerecession numbers.
• San Antonio – Recovery – Demand has picked up, putting pressure on supply. San Antonio is at 93.2% of prerecession employment numbers.
• Dallas/Fort Worth – Recovery – Demand has picked up, putting pressure on supply. DFW is at 228.6% of prerecession employment numbers.
To see how Texas metros rank against the rest of the national metros we have the following chart from the Bureau of Labor Statistics.
Texas lost 400,000 jobs between 2007 and 2011 during the recession, but has since added more than a million. Those who lost their jobs may not have gotten one of the new ones. The current oil and gas boom is fundamentally different from one in the late 1970s because it is driven by increased demand and production, not just higher prices.
The strength of the regional economy is apparent when you realize Texas unemployment has been at or below the national rate for 90 consecutive months. Non-agricultural employment in Texas expanded over the last month for the 45th straight time with the addition of an estimated 19,100 jobs in June. This growth followed on the heels of gains of 55,500 and 62,400 positions in May and April, respectively. Seven of the eleven major industries in Texas showed employment increases over the month. Total non-agricultural employment ended the last 12 months at an estimated level of 11,550,000 jobs, an increase of 371,000 jobs over the year. The annual growth rate for was nearly unchanged at 3.3 percent in June and has been at or above 3.0 percent for four of six months in 2014. Trade, transportation, and utilities employment continued its expansion with the addition of 7,700 jobs in June. Regional retail trade grew by 3,100 positions, and wholesale trade added 1,200 jobs in June. Trade, transportation, and utilities employment added 90,400 jobs over the year as its annual growth rate reached 4.0 percent, the highest in this regional channel’s history.
With this employment growth, construction has increased in residential and commercial. Regional construction starts and automobile sales also have helped spur the recovery that would not be here if it was not for the other channels employment growth.
Because of this, consumer confidence in Texas is above average, while it remains low nationally and in other regions of the country as evidenced by the chart from the Texas Comptroller’s Monthly Report (a healthy economy traditionally is shown by the index being above 100). When you have strong consumer confidence, the consumer spends more, which in turn helps the regional economic growth.
On top of this, Texas-based companies are blazing new trails in innovation, driving job creation and spurring some new record-setting growth for the Lone Star State.
For the first time, Texas recently surpassed California in technology-related exports, according to a report by the TechAmerica Foundation. Technology now accounts for 17 percent of all exports from our state, and there are plenty of reasons why that trend will increase, not decrease.
A significant amount of credit for this pro-tech, pro-investment environment in Texas must go to state leaders, who have enacted some of the smartest, most forward-looking policies anywhere in the nation. The Governor’s office and staff, and local and state policymakers have been squarely focused on public policy that spurs business and manufacturing investment broadly and that encourages the growth of the tech sector, in particular. And that, of course, means more jobs. Particularly in one of the fastest growing industries in the world.
It’s because of the economic, regulatory, and business climate in Texas that technology companies are willing to invest billions of dollars and create tens of thousands of jobs with confidence. Notably, a sales tax rebate on certain technology manufacturing equipment (House Bill 1133) correlates to $800 million in new broadband network investment by companies every year in our state. Also, passage of House Bill 800 has promoted Texas as a place for research and development activity, a key element of tech innovation.
The state’s public policy decisions have played an integral part in the decisions technology companies make every day on expansion. With only so much capital to invest, companies must decide where the best environments are for investment. A strong, pro-growth climate with policies that reflect a commitment to growing jobs and the economy make Texas standout from the rest.
Last year, weakness in manufacturing and cuts in federal spending (85,00+ jobs just in Texas) contributed to the state’s job growth slowdown. Still, our regional economy continued to expand, with employment in oil and gas, leisure and hospitality, professional and business services, and construction growing strongly. Even with slower job expansion, Texas remained the third-fastest-growing state in 2013, trailing only North Dakota and Florida.
Where is the rest of the year headed? 2014 should be another good year, with many analysts expecting improvement in global and U.S. economic activity, Texas should benefit as demand for its products and services increases. Federal government cuts are unlikely to be any harsher than they were in 2013, nationally as well as regionally. The latter part of this year’s national pickup in job growth suggest that 2014 employment will increase by 2.5 to 3.5 percent. Texas will see the same gains in job growth in 2014 with an increase by 2.5 to 3.5 percent. Texas will likely continue growing faster than the national average and most other states.