06/27/2002: "The Outlook for Texas' Major Metro Areas"
The overall economic development of Texas is significantly influenced by the major Texas metro areas. Together, they represent approximately 72% of the state’s total employment. This week, I highlight key findings from my recent long-term forecast.
Over the next 30 years, the Austin-San Marcos Metropolitan Statistical Area (MSA) is projected to see continued positive economic progress, even though the pace will be slightly less than that experienced during the past several years. The metro area’s expansion in output of 4.57% per annum places it well ahead of the Texas pace of 3.89%. (All growth rates are compound annual growth rates, meaning they reflect changes in the size of the base from which growth is calculated.) The area’s economic strength is expected to be sustained by diverse business activities, especially within the realm of high-tech. Although the recent slowdown in national and global performance has dampened the demand for microelectronic components and computers, leading indicators suggest that these sectors are in the early stages of recovery. Government and higher education sectors, as well as the trade generated along the I-35 Corridor, will provide stability and continue to play highly important roles in future economic expansion.
The Dallas Primary Metropolitan Statistical Area (PMSA) is predicted to experience significant economic expansion over the long term at a 4.24% per year clip, but the annual rates will be not be as high as during the past decade. The synergy of domestic high-tech manufacturing, the area’s position as a financial center for much of the southwest, and the region’s notable presence of high-tech manufacturing firms should greatly enhance the area’s long-term economic growth. The global weakness in electronics and telecommunications equipment demand is dampening near-term performance, but both industries contribute to expansion over the next three decades.
The El Paso MSA is forecast to see considerable economic growth over the long term, expanding by an estimated 3.30% per year. However, the rates will be less than that which Texas and the other major metropolitan statistical areas will experience. NAFTA-related business activity will strengthen as Mexico’s economy resumes its upward swing.
During the years from 2001 to 2030, the Fort Worth-Arlington PMSA is forecast to see positive growth in output (4.04% per annum), though the overall economy will likely climb at a pace somewhat under the growth rate of recent years. The area’s proximity to the I-35 Corridor, a major thoroughfare for NAFTA export-import activity and distribution throughout the US, as well as a continuing trend toward diversification, improve the area’s prospects for prosperity. The ongoing success of Alliance Airport and surrounding developments also bodes well for the area.
The economic environment of the Houston PMSA has continued to experience expansion beyond oil and gas and related industries through the years, but still has strong ties to the energy sector. This metro area will continue to serve as a major trading port, and the expected expansion of the manufacturing, tourism, healthcare, and biotechnology industrial sectors will contribute significantly to its positive long-term outlook. Growth is projected to occur at a 3.85% annual clip.
The economy of the San Antonio MSA has been greatly enriched by the various activities associated with NAFTA, as well as developing trade with other markets to the south. These associations are expected to be strengthened over the long term and be important contributors to the area’s output, leading to a growth pace of 3.67% per year. The military presence, complemented by the growing diversity in business operations and a continued inflow of tourism dollars, will also prove highly beneficial to the area’s overall economy (although anticipated future rounds of base closures generate a degree of uncertainty). The aging of the population of Texas and the US will increase the need for healthcare, providing further stimulus to the area’s substantial healthcare-related industries. Though the growth rates for the region will be healthy, they are expected to be less than those of the previous decade.
In conclusion, overall advancement will maintain a healthy pace, though not as rapid as in the past few years. Particularly strong growth is projected in high-tech manufacturing, computer-related activities, healthcare industries, and tourism. In addition, demands for energy are projected to increase and positively affect the traditional oil-based economies of some regions in Texas. International trade and the growing diversification of business operations will continue to strengthen and expand the state’s economic prosperity over the long-term forecast horizon.