The Ginn Economic Brief: Texas Economic Situation – June 2023

​Key Point: Texas is a leader in job creation over the last year and since February 2020. But Texas faces major headwinds as the recently ended 88th Legislature looked more like California than what is expected from the free-market bastion of hope and prosperity in Texas, which could change during special sessions but nothing certain yet. The path forward must be one of free-market capitalism instead of expanding the size and scope of government to let people prosper.
 
Overview: Texas has reached a new record high in total nonfarm employment for the 20 straight months. The 88th Legislature ended on May 29 and went straight into a special session to provide property tax relief but that hasn’t happened yet, and the second special session ends on June 27. Instead, the Legislature passed the largest spending increase in the state’s history, the most money for corporate welfare, one of the largest expansions of safety nets, and no 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 for flourishing which combined will stop the Lone Star State from being a leader in the country.
 
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 May 2023.

​The payroll survey shows net nonfarm jobs in Texas increased by 51,000 last month, resulting in increases for 36 of the last 37 months, to bring record-high employment to 13.9 million. Compared with a year ago, total employment was up by 529,800 (+4.0%)--fastest growth rate in the country—with the private sector adding 472,000 jobs (+4.1%) to 11.9 million and the government adding 57,800 jobs (+2.9%) to 2.0 million. But there continued declining inflation-adjusted average weekly earnings in most industries in Texas (see Figure 1).

​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 4.1% is higher than the U.S. rate of 3.7% but this is weak indicator as it’s highly volatile based on changes in the labor force.
 
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).
 
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, passing responsible budgets, and passing school choice, so Texas should have made bold reforms to support more opportunities to let people prosper, mitigate the affordability crisis, and withstand destructive policies out of D.C. Figure 3 provides a comparison of the size of government, economic freedom, and economic outcomes among the four largest states, Tennessee, Georgia, and 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 (R) called them back to provide property tax relief which hasn’t yet so will have to call them back again for this along with passing school choice and should bring them back to eliminate corporate welfare and expansion of safety net programs.
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Free-Market Solutions: The Texas Legislature should improve the Texas Model by:

• Passing pro-growth policies to:
  • Spend Less: Lower state government spending and pass responsible local spending limit.
  • Tax Less: Start eliminating local property taxes with historic surpluses at the state and local levels.
  • Regulate Less: Improve workforce development, remove barriers to work, reduce occupational licensing, reform safety nets, and enact school choice.
• Strengthening the Texas Model, which recently ranked as the 4th best in economic freedom, will help Texans better resist D.C.’s overreach and flourish more for generations to come.