Key Point: Texas continues to be a leader in job creation over the last year (chart below by @SoquelCreek) and set employment records across the state, but Texans who are struggling from an affordability crisis would benefit from less spending, regulating, and taxing.
Overview: Texas has been a national leader in the economic recovery since the inappropriate shutdown recession in Spring 2020. This includes reaching a new record high in total nonfarm employment for the 17th straight month, leading exports of technology products for 21 consecutive years, and being home to the most Fortune 500 companies in the country with more than 50. While the 87th Texas Legislature passed a Conservative Texas Budget and passed country’s strongest state spending limit, the current 88th Texas Legislature has more to do to freeze spending and use more than $60 billion in excess taxes collected to put school district maintenance and operations on a path to elimination so Texans can stop renting and start owning their property.
Labor Market: The best path to prosperity is a job, as it helps bring financial self-sufficiency, dignity, hope, and purpose to people so they can earn a living, gain skills, and build social capital. The table below shows Texas’ labor market for February 2023.
The establishment survey shows that net nonfarm jobs in Texas increased by 58,200 last month, resulting in increases for 33 of the last 34 months, to bring record-high employment to 13.8 million. Compared with a year ago, total employment was up by 611,400 (+4.6%)—second fastest growth rate in the country to Nevada—with the private sector adding 560,100 jobs (+5.0) and the government adding 51,300 jobs (+2.6%).
The household survey shows that the labor force participation rate and employment-population rate are slightly lower than in February 2020, but the former is well below June 2009 at the trough of the Great Recession. The private sector now employs 800,000 more people than pre-pandemic. Texans face challenges with a worse unemployment rate, though historically low but higher than U.S. rate of 3.6% though many have dropped out of the labor force elsewhere.
Economic Growth: The U.S. Bureau of Economic Analysis (BEA) reported the real gross domestic product (GDP) by state for Q3:2022. The figure below shows Texas had the second fastest GDP growth (first is Alaska) of +8.2% on an annualized basis to $1.89 trillion (above the U.S. average of +3.2% to $20.05 trillion). In the prior quarter, Texas had the fastest growth with +1.8% growth as the U.S. average declined by -0.6% that quarter. Of course, these followed Texas’ GDP contractions of -7.0% in Q1:2020 and -28.5% in Q2 during the depths of the shutdown recession. Fortunately, GDP rebounded in Q3 and Q4, yet declined overall in 2020 by -2.9% (less than -3.4% decline of U.S. average) but increased by +3.9% in 2021 (below the +5.9% U.S. average). The BEA also reported that personal income in Texas grew at an annualized pace of +6.9% in Q3:2022 (ranked 6th 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 +4.9%) as job creation and inflated income measures found their way across the economy.
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 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.
Free-Market Solutions: In 2023, the Texas Legislature should improve the Texas Model by:
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Vance Ginn, Ph.D.