As business activity across the US slowly returns to the levels enjoyed before September 11, the economy of each state comes into focus. Even if the nation is rebounding by the end of the second quarter, those states that depended heavily on tourism, financial services, and manufacturing or those that get much of their revenue from capital gains taxes will struggle to stay afloat—and many will see their budgets dip into the red.
A December analyst report from Moody’s Investors Service identified states whose economies had gone from okay to not-so-okay. Texas dodged the bullet, but Florida, Hawaii, Indiana, Massachusetts, Michigan, Nevada, and Ohio took a bad hit. New Jersey and Washington also got the nod, along with California, North Carolina, and Washington who were fingered earlier in the year.
Even states that have built up large cash reserves are not safe from the crushing aftermath of the terrorists’ attacks. Rising unemployment means expanding needs for social services (such as Medicaid) for the poor and elderly. Given the uncertainty of the next year, governors in many states are practicing belt tightening in an effort to balance their state’s budget—or at least try to get close.
In Texas, our economy is definitely feeling the effects of a slowdown in lowered output of goods and services, but the State is still bringing in enough tax revenue to balance the $114 billion budget for 2002 and 2003—at least so far. Most of Texas’ money is derived from motor vehicle tax collections and sales tax revenues—and they have both increased in the past three months.
That’s not to say we are completely out of the woods. Job losses in the airlines and transportation industries have hurt. And the expenses of the State don’t ever just go away. Texas may be fortunate in that the budget cycle is two years, arguably giving the state some time to weather the shock of the attack. If a shortfall were to arise, the 10-member Legislative Budget Board could cover shortages or a special session could be called. In a worse case scenario, the state has access to its “rainy day fund.” Meanwhile, lawmakers and laypersons alike are all trying to pick up the economy’s momentum and seeming to have some initial success.
To no one’s surprise, Texans are among those Americans who are figuring out how to keep their local economies running through these difficult times. Our newest short-term forecast gives detailed tabular data that tells the story of the state’s regions and metro areas by industry. (We’ve mentioned highlights of the state in previous columns.) Here’s a peek at how the regions will fare.
Three of the state’s 11 economic regions are projected to experience growth in output exceeding 4.0%: Central Texas (4.31%), the Metroplex (4.28%), and the Gulf Coast (4.07%). While all areas of the state are forecast to see notable output expansion, Southeast Texas, the High Plains, the Upper Rio Grande, and Northwest Texas will lag other parts of the state.
Wage and salary growth rates are expected to range from 1.72% to 2.39%. Leading the pace of job growth will be the more populous areas including the Metroplex, the Gulf Coast, and Central Texas. Population growth rates are expected to generally follow wage and salary expansion patterns, with the most rapid gains occurring in the Metroplex, Central Texas, and Gulf Coast regions.
Two smaller metropolitan areas are likely to see economic gains surpassing the state average—the border cities of Laredo and McAllen-Edinburg-Mission. All in all, the border cities are expected to perform quite well as measured by real gross area product. Odessa-Midland is forecast to experience output growth approximately equal to (slightly above) the statewide figure.
That’s good. Really good! Any which way you look at it—from a high rise or a hamlet—the Texas economy is remarkably resilient. The next year will not be without its struggles, but all things considered, should be okay.