12/19/2004: "Looking Ahead for Texas’ Metro Areas"
This fall’s version of our semiannual forecasting effort has been marked with highs and lows. I always enjoy the mental exercise and view with interest the emerging patterns in economic activity across the state. One unpleasant aspect of this round is that we’re in the midst of a major transition in the way economic data is collected and recorded, which had the effect of leaving me with a tedious translation and gap-filling chore. The new method is much improved, but the changeover is anything but seamless.
One of the best parts of this fall’s forecast was the large number of bright spots. From a revival in the tech sector in Austin-San Marcos to the activity generated by the wind farms popping up in rural areas of the Panhandle and West Texas, I’ve seen evidence of resurgence in communities large and small. Most industrial sectors are recovering from the doldrums of recent years, and apart from some lingering uncertainty, things look better than they have in quite some time. I’ll share with you a few high points regarding my expectations for the state’s metro areas.
For comparative purposes, the statewide growth rate (as measured by output or RGP) is expected to total 4.20% during the 2003 to 2008 period. (All of the expansion percentages reported here are compound annual growth rates, meaning they reflect changes in the base from which growth is calculated.) Employment (using the wage and salary measure) is anticipated to expand some 1.97%. To put those in perspective, the past five years saw output up 2.54%, with employment growing by 1.00%. So things are going to improve notably from the recent past, though possibly not at the clip of some periods of the 1990s.
In terms of the state’s largest metro areas, it looks like Austin-San Marcos will be a bright spot in terms of the expansion in business activity. Although portions of the regional economy were hit hard by the tech downturn, the area’s large, stable base continued to gain ground. RGP is projected to grow by some 4.51%, a healthy rate even if somewhat diminished from the late ‘90s.
Dallas is likely to see growth eclipsing the state pace as well, with output expansion over the 2003-2008 period totaling 4.44%. Virtually all segments of the industrial base will contribute to this gain, with particularly notable expansion in the durable manufacturing; transportation, communications, and utilities; wholesale and retail trade; and services sectors.
Fort Worth-Arlington is expected to see RGP trend upward at a rate of 4.41%, somewhat stronger than the Texas pace. Durable manufacturing will likely see expansion in the range of 5.50% per year, with renewed vitality in defense-related concerns as one source of new activity. The area’s wholesale and retail trade sector will also serve as an engine for growth.
The El Paso metro area is projected to slightly underperform the state average; one reason for this is the fact that a disproportionately large percentage of the regional economy is represented by the government sector, which is characterized by stability. Durable manufacturing, together with transportation, communications, and utilities, appears to be a source of significant new opportunity in the years to come.
Houston is poised on the brink of a period of healthy growth. The services segment will likely generate tens of thousands of jobs, with a full third of area workers employed in services-related industries in the near future. With the exception of agriculture, which represents a relatively small fraction of the area economy, all sectors will see output expansion of about 3% or better during the 2003-2008 timeframe.
Growth approximately equal to the Texas pace is forecast for the San Antonio area. Broad-based expansion is likely to characterize the next few years, with durable manufacturing leading the way. As one of the most diverse economies in the state, the region is expected to remain a leader through the years ahead.
Abilene, Amarillo, Beaumont-Port Arthur, Brazoria, Brownsville-Harlingen-San Benito, Bryan-College Station, Corpus Christi, Galveston-Texas City, Killeen-Temple, Laredo, Lubbock, McAllen-Edinburg-Mission, Odessa-Midland, San Angelo, Texarkana, Tyler, Victoria, Waco, and Wichita Falls are all expected to see modest expansion and healthy job gains.
A few smaller metro areas will outpace the statewide average. Longview-Marshall’s strong gains in manufacturing are expected to propel that city’s economy to new heights by 2008. Sherman-Denison is another top performer, with a recovery in nondurable manufacturing augmented by expansion in many areas.
Everywhere I looked I found signs of life, but even so, there remain significant challenges. Many areas continue to struggle with issues of diversification, though the situation is much improved for most. Others face fiscal difficulties. However, the vibrance of the largest metro areas will lead to spin-off activity in areas large and small, and the next few years should prove a welcome relief from the ups and downs of the recent past.