Texas Bucks National Unemployment Trend
27th July 2011
Texas Bucks National Unemployment Trend
Finding work may not be quite that simple, but it sure seems that way. While the nation's job growth has limped along since the economic recovery began two years ago, the Lone Star State is enlarging payrolls in Texas-size fashion.
From June 2009 to June 2011 the state added 262,000 jobs, or half the USA's 524,000 payroll gains, according to the Federal Reserve Bank of Dallas and the Bureau of Labor Statistics. Even by a more conservative estimate that omits states with net job losses, Texas' advances make up 30% of the 1 million additions in the 34 states with net growth.
The stunning showing could play a role in the presidential race. Texas Gov. Rick Perry is signaling he may run for the Republican nomination. If he does, he's likely to ground his campaign in his state's outsized job growth.
Texas' big gains are partly a reflection of its population growth. But the recent job gains are outpacing the rate of population growth in Texas, the nation's second-largest state, with 25 million residents — about 8% of the U.S. population.
The state's payrolls have risen 2.9% since the end of the recession, third behind North Dakota and Alaska and far outpacing the USA's 0.4% growth, according to the BLS. Also, Texas' 8.2% unemployment rate is well below the nation's 9.2%.
"For one large state to grow jobs so much faster than the rest of the nation is very unusual," says Moody's economist Ed Friedman.
Economists point to an array of factors, including high energy prices that set off an oil-drilling frenzy, rising exports and a conservative banking industry that helped the state sidestep the housing crash.
Yet while energy has been a spark — employment in natural gas, oil and other mining sectors rose by 45,000, or 23%, since the recession ended — growth has been broad-based. During the past two years, professional and business services added 74,000 jobs; education and health care gained 91,000; and leisure and hospitality grew by 29,000, according to BLS.
State officials cite a pro-business climate that Perry helped foster that's drawing scores of businesses from high-cost states — a trend that took on urgency for firms that got lean in the economic downturn.
The 10-year Texas governor is "really focused on creating an environment where people can risk their capital and get a return on investment, and that, in turn, creates jobs for Texans," says Lucy Nashed, spokeswoman for the state's economic development office.
Nashed notes Texas has no state or corporate income tax and keeps regulations at a minimum to allow businesses to grow quickly. She says Perry also has worked to develop a skilled workforce by requiring additional public school classes and pushing through tort reform to limit frivolous lawsuits. The state, meantime, has doled out more than $600 million in grants and investments since 2003 to recruit out-of-state companies and help Texas firms expand.
Does Perry really deserve credit?
Yet some question Perry's role in the so-called Texas Miracle.
James Galbraith, a professor of government at the University of Texas-Austin, largely attributes the state's job growth to the energy and export booms. Texas, he notes, has never had an income tax. From 1990 to 2000, before Perry took office, Texas payrolls swelled 36%, compared with 21% for the nation.
"Rick Perry did not come and find a high-tax, high-service state and dismantle it," Galbraith says. "For something to contribute, there (has to be) a change. There's been a change in oil prices."
Others say the state's low tax burdens exact a high cost: fewer state services. Perry, for example, refused to raise taxes to close a $27 billion budget gap last spring. Instead, the Legislature slashed more than $4 billion in funding for public schools the next two years, a move that's likely to lead to tens of thousands of teacher layoffs.
"We're not preparing our children to compete in tomorrow's economy," says Scott McCown, head of Texas' Center for Public Policy Priorities.
Texas ranks 44th in the USA in per-student expenditures and 43rd in high school graduation rates, McCown says. Seventeen percent of Texans lived below the poverty level in 2009, compared with 14% for the nation. The state leads in the percentage of the population with no health insurance and was ninth in income inequality in the mid-2000s, the latest data available, according to McCown and the Economic Policy Institute.
McCown says Texas should not serve as a job-growth paradigm for the rest of the nation.
"If you're saying you want to look like Texas, you're saying you want to be poor and have less health care," he says.
The state's relatively low wages, particularly for low-skilled jobs, stems in part from its status as a right-to-work state with little unionization. That dampens consumer spending and limits economic growth, McCown says. In June, average hourly earnings for private-sector employees in Texas were about 5% lower than the U.S. average.
But Mark Dotzour, chief economist at Texas A&M's Real Estate Center, says the state's lower pay helps it compete in a global economy. "Either you choose to have low-wage jobs or you choose to have no jobs at all," he says.
The state's reasonable cost of living, he adds, makes it possible for many residents to live comfortably on lower salaries. The Dallas area ranks 10th in housing affordability among 82 metro areas with more than 1 million residents, while Houston is 15th, according to the Demographia International Housing Affordability Survey. That's partly because Texas has an abundance of cheap land — another draw for firms looking to relocate.
Oil prices have nearly tripled since early 2009. High prices spark more exploration and production. Meanwhile, technological breakthroughs have let companies extract natural gas embedded in shale deposits. Barnett Shale in Fort Worth is one of the USA's largest gas fields, and drilling began at the Eagle Ford Shale in South Texas in 2008. The number of oil and gas rigs in the state has jumped to 850 from 330 in July 2009, says Ana Orozco, economist for IHS Global Insight. Each rig employs a few dozen workers and leads to hiring by engineering firms, pipeline builders and other services.
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