Key Point: Texas is a leader in job creation over the last year and since February 2020 (Figure 1 by @SoquelCreek). But Texas will struggle to compete with other states or prosper more as the 88th Legislature passed the largest budget increase in the state’s history, passed the largest corporate welfare increases in the state’s history, passed the largest safety net increases in the state’s history, didn’t pass property tax relief, and didn’t pass school choice. Governor Greg Abbott called a special session to tackle property tax relief and border security with more special sessions likely to come.
Overview: Texas has been a leader in the country’s economic recovery since the costly shutdown recession in Spring 2020. This includes reaching a new record high in total nonfarm employment for the 19th straight month. The current 88th Legislature ended the regular session on May 29 with a record surplus but chose to pass the largest spending and welfare increases in the state’s history without passing tax relief or school choice. This was a huge, missed opportunity for Texas that will set up a fiscal cliff with so much spending, less competition with fiscally conservative states, and less opportunity to let people prosper which combined will stop the Lone Star State from being a leader in the country. Fortunately, Governor Abbott called what is likely the first of multiple special sessions to tackle property tax relief (and border security).
Labor Market: The best path to let people prosper is free-market capitalism as it is the best system that supports jobs and entrepreneurship for more people to earn a living, gain skills, and build social capital. Table 1 shows Texas’ labor market for April 2023.
The establishment survey shows net nonfarm jobs in Texas increased by 33,300 last month, resulting in increases for 35 of the last 36 months, to bring record-high employment to 13.8 million. Compared with a year ago, total employment was up by 534,600 (+4.0%)--second fastest growth rate in the country to Nevada (+4.2%)—with the private sector adding 476,800 jobs (+4.2%) and the government adding 57,800 jobs (+2.9%).
The household survey shows that the labor force participation rate is higher and employment-population rate is slightly lower than in February 2020, but the former is well below June 2009 at the trough of the Great Recession. The state’s unemployment rate of 4.0% is higher than the U.S. rate of 3.4% but this is weak indicator as it’s highly volatile based on changes in the labor force. There is also continued declining inflation-adjusted average earnings in Texas.
Economic Growth: The U.S. Bureau of Economic Analysis (BEA) reported the real gross domestic product (GDP) by state for 2022. Figure 2 shows Texas had the fifth fastest real GDP growth of +3.4% to $1.9 trillion (above the U.S. average of +2.1% to $20.0 trillion).
The BEA also reported that personal income in Texas grew by 5.3% to $1.9 trillion in 2022 which was the third highest in the country. This is behind Idaho (+6.2%) and Colorado (+5.4%) but well above the U.S. growth rate of 2.4% (to $21.8 trillion). Figure 3 shows personal income growth across the country.
Bottom Line: As Texans struggle from high inflation and high property taxes and an uncertain future with the U.S. economy likely in a deepening recession, they need substantial relief to help make ends meet. Other states are cutting, flattening, and phasing out taxes, passing responsible budgets, and passing school choice, so Texas must make bold reforms to support more opportunities to let people prosper, mitigate the affordability crisis, and withstand destructive policies out of D.C. Figure 4 provides a comparison of the size of government, economic freedom, and economic outcomes among the four largest states and nearby Louisiana. While Texas does relatively well, there is much more to do for more liberty and prosperity. Unfortunately, the Texas Legislature failed to achieve these needed policy objectives in the regular session of 2023 so Governor Greg Abbott is calling them back where the Legislature should spend less, provide more in property tax relief, pass school choice, and reduce or eliminate corporate welfare and expansions of safety net programs.
Free-Market Solutions: The Texas Legislature should improve the Texas Model by:
Vance Ginn, Ph.D.