For the past several years, the economy of Texas has expanded at a faster rate than the United States as a whole. While still in the process of rebounding from the traumatic events of September 2001, the Lone Star State is experiencing significant progress, and the positive momentum now underway is projected to sustain economic expansion through the long-term forecast horizon (2001-2030). Although a few key sectors are lagging in the aggregate economy at present, the pattern of growth is again well established. Here are some key findings from our recent forecasting effort.
A key factor in Texas’ future economic path is demographics. Currently the second most populous state, the number of Texans is predicted to reach about 32.75 million in 2030, an expansion of some 11.53 million. Hispanics will account for much of this growth, and by 2020 Hispanics will outnumber non-Hispanic whites. The population is forecast to become increasingly more diverse, with minorities anticipated to represent some 63% of the state’s total population by 2030. No ethnic/racial group will be a majority.
A predominantly urban state, approximately 85% of Texans reside in metropolitan areas. During the last ten years (1991-2001), the state’s 24 MSAs accounted for some 91% of the population growth. By 2030, Houston is expected to comprise 20.42% of the total number of Texans. Dallas will be the second largest city, with 18.11% of the aggregate population. In general, most population growth in the future will occur in areas along the I-35 Corridor.
In terms of the employment picture, Texas will continue to shift toward a services orientation, despite solid growth in myriad other segments of the economy. Over the 30-year forecast horizon, the number of workers in Texas will likely climb to 17.50 million (using the wage and salary measure of employment), a 1.88% CAGR and an increase of about 7.30 million over the current 10.19 million. By 2030, approximately 33.84% of all jobs (5.9 million workers) are expected to be in the services industry, reflecting a 2.40% CAGR in that sector.
Texas is predicted to have about 24.22% of the total number of wage and salary workers in the wholesale and retail trade sector in 2030. This percentage represents some 4.2 million jobs and an annual expansion rate of 2.06%. The third largest sectoral employer over the long-term is projected to be government with 14.55% of the total workers, reflecting a 1.34% yearly rise.
Export-related activity will be an important generator of business activity. As the nation’s second largest exporting state behind California and the leading trading partner with Mexico, as well as the sixth ranked state in exports to Canada, global trends are expected to contribute substantially to state economic growth. Key trading partners (in addition to Mexico and Canada) over the next 30 years are predicted to be the United Kingdom, Japan, Taiwan, and various South American countries.
With the fastest growing job categories in the Texas economy forecast to be concentrated among electronic and computer specialists, as well as the medical and teaching fields, the need to expand educational opportunities and enhance skilled worker training will remain highly important. Technological advancements are expected to continue at a rapid pace in most business arenas resulting in an increase in productivity and more efficient use of resources.
Looking to specific growth rates, healthy expansion for the state is forecast over the long-term horizon. All growth rates are compound annual growth rates—CAGR—meaning that they reflect changes in the base from which growth is calculated.
Real gross product (RGP or output, as measured in 1996 dollars) is forecast to advance about 3.89% per year over the long-term horizon (2001-2030) and reach $2.21 trillion by 2030. The state’s population will likely grow at a CAGR of 1.51% over the 30-year span, expanding to approximately 32.75 million in 2030.
Employment in the Lone Star State is expected to see a 1.88% rise per annum with the number of jobs increasing to 17.50 million by the end of the forecast horizon. Texas retail sales totals are anticipated to exceed $1.64 trillion (in nominal terms) by 2030, reflecting a compound annual growth rate of 6.02%. Real personal income is predicted to climb at a yearly clip of 3.59% over the long term. By 2030, it should reach $1.54 trillion.
These growth rates are indicative of the positive outlook forecast for most industrial sectors throughout the state. The continuing implementation of aggressive economic development strategies across the various sectors and regions will likely enhance the current environment and provide the foundation for future expansion.