Texas’ Economic Engines
Often when people think of Texas, images of wide-open spaces, large farms and ranches, oil rigs, and cowboys come to mind. For those a bit more knowledgeable about the state, images conjured up might include space programs, international trade activities, and high-tech manufacturing, along with heavy rush hour traffic in bustling metropolitan centers.
So which view or views are correct? Not to equivocate, but the answer is both!
When it comes to what makes Texas tick, however, the answer can be found in the metropolitan areas. That’s not to say that endeavors in the wide open spaces don’t count, for they truly do (and their ongoing viability and prosperity are crucial), but the engines that drive our state’s economy are generally headquartered in urban centers.
Metropolitan statistical areas (MSAs) are centers of population and commerce with specified parameters. Texas has 25 metros that fall into this category. Each has a substantial population hub of at least 50,000 people with core census tract or block groups with densities of 1,000 persons or more per square mile.
The Census, which is taken every 10 years, determines those areas eligible for such groupings. Prior to 2004, the Lone Star State had 27 metropolitan statistical areas encompassing 58 counties. In the recent redefining of the MSAs, the Census Bureau dropped 3 counties and added 22. As a result, Texas now has 25 MSAs. Though the metro count has fallen, the outreach has expanded to 77 of the state’s 254 counties.
The five major metros include the largest population centers in the state. These MSAs together have about 15.10 million residents, which represents 65.87% of the total population of Texas. The smaller metros have a combined population of some 4.76 million or approximately 20.78% of the state’s total residents. The remaining 13.35% live in the other 177 counties.
The strategic value of the metro areas is easily recognizable when you consider that the major portion of the state’s real gross product (RGP or output) is generated by the 25 MSAs.
Over the next five years, Texas is forecast to achieve output expansion of about $199.25 billion. Of that amount, the five largest MSAs will likely account for $162.38 billion or 84.49%, and the 20 smaller metros are expected to generate $25.14 billion, or 12.55% of the state total output.
The compound annual growth rate (CAGR) for Texas RGP over the 2005-2010 timeframe is forecast to be 4.34%. Three of the major metros are predicted to achieve per annum increases that exceed the state’s aggregate yearly growth—Austin-Round Rock; Dallas-Fort Worth-Arlington, and Houston-Baytown-Sugar Land. The other two major MSAs, El Paso and San Antonio, are expected to experience a CAGR of 4.28% over the five-year period. During these years, the smaller metros’ per annum expansion rates will likely range from 3.64% to 4.35%, with the Tyler MSA achieving the highest CAGR.
With regard to where the jobs are in the state, it’s clear when looking at the data that the urban centers offer the greatest opportunities. The number of people employed in the services industries far exceeds those working in the other major industrial sectors. Nearly 422,000 new jobs are forecast to be created in the services sector over the next five years. That’s almost 45% of the state’s overall gain in the number of jobs for this period.
The employment CAGRs for the major MSAs from 2005 to 2010 are projected to range from 1.81% to 2.02%, all of which are higher than the state’s 1.80% annual rate. Four of the smaller metros are anticipated to achieve higher yearly wage and salary worker percentage growth rates than the state as a whole. These MSAs—Laredo; McAllen-Edinburg-Pharr; Brownsville-Harlingen; and Tyler—will likely have CAGRs ranging from 1.82% to 1.87%. The remaining 16 small metros per annum gains should vary from 1.18% to 1.78%.
Wide-open spaces, large farms and ranches, oil rigs, and cowboys still come to the minds of many people when they think of Texas—and well they should! It is nonetheless clear that in today’s global economy, the metropolitan areas are likely to drive the state’s future growth and development.
posted @ 08:10 AM CST [link]
Friday, February 17, 2006
The Demise of the First Internet
With little fanfare, Western Union sent its last telegram a couple of weeks ago. The last few that were sent were hardly of earthshaking significance; in fact, most of them were sent by people trying to be a footnote in history as the originator of the last such message. This situation was a far cry from 150 years ago when Western Union sent its first. That little combination of dots and dashes was a harbinger of a new era.
Most of us grew up or at least spent most of our development in an era when virtually universal telephone service was taken for granted. In recent years, long-distance rates have fallen precipitously, and the Internet has become a primary source of instantaneous and inexpensive communication around the globe. In such an environment, it is difficult for us to imagine just how revolutionary the telegraph really was.
In 1856, when Western Union sent its first telegram, there were very active stock exchanges in numerous major cities across a sprawling new country, only 80 years from its founding and in the midst of a cosmic struggle that would erupt into Civil War five years later. Stocks often traded at quite different prices on the various regional exchanges as transactions were based on local supply and demand with no knowledge of what was taking place a few hundred miles up or down the Atlantic Coast or just over the mountains.
Once the telegraph came into widespread use, this situation changed radically. The ability to communicate quickly (by the standards of the day) across large geographic areas brought arbitrage to the markets. Savvy investors who could buy in one market and simultaneously sell in another narrowed the price gaps drastically and, in essence, created a national market (as an interesting aside, noted British economist John Maynard Keynes made a fortune decades later by engaging in similar practices with currencies using one of the first international telephones). As a result, the US stock market was essentially concentrated in New York, and the other exchanges ceased to be significant. The emergence of a single dominant center of financial activity was an early, but entirely essential step in the journey toward today’s global monetary system in which trillions of dollars routinely change hands in the blink of an eye.
The telegraph also facilitated other fundamental changes which shaped the continent. The development of the railroads and the settlement of the American West would have been much more protracted and difficult without this communications network. Even the American Industrial Revolution owes much of its initial strength to the supplier and customer linkages made possible by the telegraph.
Simply stated, the telegraph was the Internet of its day. Like the Internet, it accelerated many facets of economic activity and fostered efficiency gains that were unimaginable in a prior era. It may be obsolete and an anachronism in the modern world, but it facilitated a process that ultimately led us to a vast global communications system. Its demise is part of the inevitable and inexorable flow of technology, the process that economist Joseph Schumpeter long ago dubbed “creative destruction.”
Just as the telegraph came to be essential some time ago and now is quietly fading away, the same will occur with subsequent generations of new and seemingly indispensable innovations. More than likely, however, the life cycle will be far less than 150 years. The speed with which traditional cameras were supplanted by digital cameras only to be upstaged by photo-swapping cell phones is a case in point. The rapid integration of audio and video delivery mechanisms is another. As remarkable as modern communications are, we are still in the early stages of a long and fascinating trek. Unlike those who sent telegrams (and took advantage of the fact that punctuation was more expensive than words), we cannot and should not say “STOP!”
posted @ 07:56 AM CST [link]
Friday, February 10, 2006
The Budget Debate—An American Reality Show
Over the past several years, we have been blessed or cursed, depending on your personal opinion, with television reality shows. Some are quite popular and have promise of continuing success. Others didn’t even make it through their first season.
Regardless of whether you liked or disliked any of these TV programs, few of us were directly affected by the challenges and opportunities which the contestants faced. About the only real involvement most of us had with these reality shows were the conversations we had about them with friends and co-workers.
In other words, it didn’t really make that much difference in our lives who became the survivor, apprentice, or American idol or who won the great race, became the biggest loser, or was the best dancer. Even so, millions tuned in weekly to watch and pull for their personal favorites. We wanted to see who got voted off, received the red rose, or had the least fear, and we wanted to witness the changes wrought by a complete makeover or a new wardrobe. In the final analysis, however, the shows are recognized for what they are—entertainment.
Now there’s a new show in town, and this one could personally affect millions by significantly impacting their daily lives. Actually, it’s not really a show because the subject is quite serious, and the format doesn’t fit within the entertainment genre. Still, many people might consider it somewhat akin to a reality television spectacular. One could even give it a name, perhaps something like “The Great Debate.”
I’m referring, of course, to the new budget introduced this week by President Bush. It’s as thick as the phone book of a major metropolitan area and is filled with hundreds, perhaps even thousands, of intricate calculations designed to enhance the overall American experience.
The President’s proposed budget calls for expenditures of some $2.77 trillion, with renewed emphasis (read that “money”) given to the military and domestic security and suggested decreases in such areas as education, farm subsidies, and national parks. That’s where the great debate comes in. Not everyone agrees with the administration’s recommendations.
Some are saying it’s flawed or foolish; others call it brilliant and bold. Take your pick—the adjectives people are choosing to describe the budget plan could probably run the gamut of the alphabet—from “abstract” to “zany.” Over the next few months as discussions and deliberations are conducted in an effort to discern the merits of the proposed budget, we will undoubtedly encounter a variety of terms used by partisans and pundits in their predictions about particular aspects of the plan.
The process by which the budget of the federal government is created and adopted is usually long and complex. The President, guided by knowledgeable people in his administration, makes recommendations to Congress to appropriate certain amount of funds for specific causes for a 12-month period. The members of Congress, backed by their own economic experts and the views of their constituents, must decide what parts of the President’s budget to support and what they wish changed. After agreements are reached, money is then allocated. Many times, the fiscal year is almost over before the budget is approved, with everyone functioning in the interim in the bizarre world of “continuing resolutions.”
The President’s proposal calls for keeping taxes low, reducing federal spending, and focusing on national priorities. These are goals with which countless individuals agree, though the best way to achieve them is intensely debated. How many of these matters can the US afford, and which are the most important or most deserving? What are the best methods for protecting our country, enhancing our economy, and strengthening our global position? Questions similar to these are already being bantered about as Congress begins seeking answers and solutions.
One problem is that the lion’s share of the budget is either set by law (such as Social Security, Medicare, Medicaid and other entitlements, and interest on the federal debt) or difficult to notably cut (such as defense). Therefore, most of the time utilized in the great debate will probably involve decisions on how much money goes for those areas which are negotiable—basically the “everything else” category.
Whatever the result, this unique American reality show goes on and on. If you are an insomniac, tune into C-Span and watch it happen.
posted @ 08:12 AM CST [link]
Friday, February 3, 2006
The Economic Super Bowl
As I am sitting down to pen this column, worldwide attention is now focused on the upcoming Super Bowl at which the Pittsburg Steelers and Seattle Seahawks will vie for the Vince Lombardi Trophy, the National Football League’s most prized possession. The 22-inch tall sterling silver trophy will be presented Sunday evening to the winning team in recognition of its accomplishments in achieving world-champion status.
While this meeting will take place in Detroit, the participants of the economic “Super Bowl,” the World Economic Forum (WEF), met last week in Davos, Switzerland to search for ways to implement new initiatives and enhance previously established ones related to world disaster relief, hunger, anti-corruption, and financing for development and public-private partnerships.
The results of the Detroit game will be known after only a few hours (many of you will know by the time you read this little epistle); the results of the WEF will take much longer to ascertain, principally because underlying the decisions made by the hundreds of business and government leaders who participated in the annual economic forum were foundational desires to advance global commerce, secure world peace, and ensure prosperity for everyone. These are definitely noble and worthwhile goals, but certainly ones that cannot be reached quickly.
The interaction between countries has always been economically important, but this kind of network of involvement has progressed extensively since 1971 when Klaus Schwab founded the WEC to bring corporate and government leaders together to foster social responsibility and strengthen economic stability.
The subjects addressed at the forum included practically everything from agricultural reform to nuclear proliferation. Cultivating trade ties between various nations and providing assistance in the wake of natural disasters also received a significant amount of attention, as did ideas to prevent the spread of AIDS.
The rapidly expanding need for improving healthcare and increasing its accessibility to wider portions of the world population was considered of extreme importance. Another matter of strategic significance that was evaluated was how greater collaboration between businesses could be a key method to improve market access and enrich opportunities.
The challenges societies face in forging changes to long-held traditions, as well as recasting and diversifying labor forces, were frequently topics among the forum participants, as were various suggestions for facilitating these moves. Creativity and determination seemed to be the key to success in most areas of interest.
Business leaders who participated in the forum acknowledged the value of defining strategies for expanding private-sector relationships with governments, agencies, and non-profit groups to address many of the more severe troubles facing developing nations. Business expertise and skills were considered that might be applied to programs designed to tackle various world problems.
After nearly a week, the World Economic Forum’s Annual Meeting 2006 concluded with much agreement relating to projects—both practical and idealistic. Although the recommendations emanating from forum members were basically suggestions, participants’ discussion and examination of issues were eye-opening to many people.
Thus, the real value of the World Economic Forum was that it provided unique opportunities for creative thinking and offered a platform for future collaborative endeavors that could eventually prove highly beneficial to the economy and people of the entire world. Admittedly, such cerebral activities do not generate the same drama as a long touchdown pass or, for that matter, even a plunge into the line for no gain, or the latest 30-second, multi-million dollar ad. Over time, however, their impact can be much more profound.
posted @ 08:35 AM CST [link]