Key Point: Texas remains a leader in job creation over the last year (chart below by @SoquelCreek) and set employment records across the state (see Figure 1) but Texans who are struggling from an affordability crisis would benefit from less spending, taxes, and regulations.
Overview: Texas is 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 18th straight month, leading exports of technology products for 21 consecutive years, and being home to the most Fortune 500 companies in the country. The current 88th Texas Legislature is winding down as legislator are spending too much, providing too little in property tax relief (see Figure 2), throwing taxpayer money at corporate welfare, and wavering on passing universal school choice. There’s a historic opportunity to ensure taxpayers have a bright future, Texas must lead and there’s time to do it but they must act quickly.
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 March 2023.
The establishment survey shows that net nonfarm jobs in Texas increased by 28,600 last month, resulting in increases for 34 of the last 35 months, to bring record-high employment to 13.8 million. Compared with a year ago, total employment was up by 575,100 (+4.3%)--third fastest growth rate in the country to Nevada (+5.0%) and Florida (+4.5%)—with the private sector adding 517,900 jobs (+4.6%) and the government adding 57,200 jobs (+2.9%). Figure 3 (h/t John Phelan) shows which states have created new jobs since February 2020, which red states are leading the way.
The household survey shows that the labor force participation rate and employment-population rate are now slightly higher than in February 2020, but the former is well below June 2009 at the trough of the Great Recession as there aren’t as many people in the labor force as a share of the working-age population. The state’s unemployment rate of 4.0% is higher than the U.S. rate of 3.5% 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 Q4:2022 and 2022. Figure 4 below shows Texas had the fastest real GDP growth of +7.0% on an annualized basis to $1.92 trillion (above the U.S. average of +2.6% to $20.18 trillion).
For the third straight quarter in 2022, Texas had one of the fastest growth rates in the country. For all of 2022, Texas’ real GDP growth rate was +3.4%, which was the fifth highest. The BEA also reported that personal income in Texas grew at an annualized pace of +7.7% in Q4:2022 (ranked 15th highest and faster than the U.S. average of +5.3%) but slower than the robust +8.4% in Q2:2022 (ranked 6th best and above the U.S. average of +7.4%) as job creation and inflated income measures found their way across the economy. Personal income growth in 2022 in Texas was +5.3% making it the third fastest in the country (Idaho with +6.2% and Colorado with +5.4%) with the U.S. growth of +2.4%.
Bottom Line: As Texans face an affordability crisis 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, 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 5 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.
Free-Market Solutions: In 2023, the Texas Legislature should improve the Texas Model by:
Vance Ginn, Ph.D.