Metros to be Major Contributors to State’s Long-Term Economic Prosperity
Over the long term (2003 to 2030), Texas is projected to experience substantial economic growth. The 58 counties in the 27 metropolitan statistical areas (MSAs), which constitute about 85% of the current population, are expected to be the backbone of this advancement. Below is a brief summary of our current outlook for these dynamic urban centers.
Through the 27-year forecast timeframe, the six major metro areas—Austin-San Marcos, Dallas, El Paso, Fort Worth-Arlington, Houston, and San Antonio—are likely to accumulate approximately 72% of the 12.34 million population increase anticipated for Texas. The 21 smaller MSAs are predicted to contribute about 20% to the state’s total growth. The remainder will be spread across the other 196 Texas counties.
During the years from 2003 to 2030, the Houston metro area is expected to add over 2.7 million persons to reach 7.2 million, a 62% hike. The Dallas metro population of almost 3.8 million in 2003 should see an additional 2.5 million people in 2030, reflecting a near 67% gain.
The five-county Austin-San Marcos MSA is expected to experience a population expansion of some 1.1 million and approach 2.5 million in 2030, an 82% climb and the highest percentage increase of the six major metro areas. The lowest growth percentage will likely be seen in the one-county El Paso metro, with less than 44%. This percentage reflects an addition of some 312,000 to the 712,250 current residents.
The San Antonio metro area, incorporating four counties, is forecast to climb 59%, from almost 1.7 million in 2003 to near 2.7 million by 2030. The four counties that compose the Fort Worth-Arlington MSA are predicted to see population growth of nearly 1.2 million and exceed 3.0 million in 2030. This gain represents approximately a 65% increase.
The projected percentages of the total state population that the six larger MSAs will have in 2030 are: Houston, 21%; Dallas, 18%; Fort Worth-Arlington, 9%; San Antonio, 8%; Austin-San Marcos, 7%; and El Paso, 3%.
The combined Houston and Dallas metros, where four out of every ten Texans are expected to reside in 2030, will likely contribute some 54% of the state’s total real gross product (RGP or output) that year.
The Austin and Fort Worth-Arlington metro areas are forecast to run a close race for third in total output among the major metros, each producing about 8% of Texas RGP in 2030. The San Antonio MSA is projected is provide 7% of the state’s output in 2030 with the El Paso metro generating 2%.
The number of wage and salary workers in Texas is predicted to climb approximately 5.42 million during the 2003-2030 period. Some 72% of this employment gain should be in the six major MSAs, while 20% is anticipated to be in the other 21 metro areas. In 2030, the Houston and Dallas MSAs together are anticipated to account for slightly less than 43% of all wage and salary jobs in the state.
Much of the long-term economic expansion projected for the Lone Star State will be attributable to a favorable mix of emerging industries and fruitful efforts to attract quality corporate locations as well as population growth, enhancement of skilled laborers, and relatively low business and housing costs. The state’s MSAs are expected to play leading roles in all these matters and be the major source of future vitality of Texas.
posted @ 08:08 AM CST [link]
Friday, June 18, 2004
The Long-Term Future of Texas Looks Promising
The recent, prolonged sluggishness of the worldwide economy greatly reduced demand for many Texas goods and services, and the various terrorist-related activities and other concerns significantly weakened the state economy. Various industries, particularly those involving transportation, tourism, and manufacturing saw significant drops. However, more recently, the state economy has taken a definite turn for the better.
During the next few years, the Texas economy is projected to experience moderate expansion, with the momentum for considerable improvement increasing. These advancements should enable the economy of the Lone Star State to outpace the growth percentage of the US economy over the long term (2003-2030).
The population of the state is projected to achieve a compound annual growth rate (CAGR) of 1.66% over the 28-year period and reach 34.43 million in 2030. Real gross product is forecast to climb at a yearly hike of 3.63% to top $1.88 trillion at the end of the forecast horizon. The number of wage and salary jobs should see a CAGR of 1.62% with 15.41 million workers in 2030, a 5.42 million gain from the 2003 employment total.
Texas’ largest industrial sector in 2030 (as measured by employment) should be services, with 33.61% of the jobs. This percentage represents about 5.18 million workers. The trade and government sectors are expected to follow with 22.88% and 16.32% of all wage and salary jobs, respectively.
Recent indications of rapid recovery in key industries bode well for the state’s future. The transportation and tourism sectors are showing signs of new life, and demand for products and services are growing. Employment in Texas is experiencing solid growth, and manufacturing is continuing to gain strength.
The outlook for high-tech manufacturing is positive, as worldwide requirements rise. The retail sales, construction, and real estate sectors are cautiously optimistic as market conditions improve and solidify.
Although some sectors are experiencing difficulties because of high energy prices, the overall strength of the state’s economy has not been dramatically affected. Business spending continues to be fairly constant, and interest in investment opportunities is being sustained.
Much of the economic expansion expected for Texas is attributable to a favorable mix of emerging industries and fruitful efforts to attract quality corporate locations. In addition, population growth, enhanced educational opportunities, and skilled worker training, along with relatively low business and housing costs will likely lead to future vitality.
In addition, technological advancements and greater efficiency in the use of resources in various business arenas are projected to result in significant productivity gains. Internet commerce is anticipated to see major growth and thereby open doors for new entrepreneurial and investment opportunities.
The ongoing diversification of business operations and the strengthening of international trade will also substantially improve the state’s growth and economic prosperity in the future.
As the national and state economies gain momentum over the next few years, significant increases in business activity are forecast for high-tech manufacturing, computer-related activities, healthcare industries, and tourism. Over the long term, the Texas economy is prepared to experience positive performance.
posted @ 08:12 AM CST [link]
Friday, June 11, 2004
Reagan’s Large Shadow
Ronald Reagan’s death this past week marked the passing of an individual who will undoubtedly be remembered as one of the giant figures of the past century. He casts a large shadow, which continues to be seen today. He was born well before John Kennedy, at a time when Babe Ruth was the star pitcher at St. Mary’s School for Boys. He was a teenager when the Great Depression began and is in many ways a bridge across American generations.
I did not know him well, although I did work with him closely on a couple of occasions. He also gave me my first presidential citation, for which I am very grateful. He was certainly a gracious and likable individual, but it is more appropriate for those who knew him best to speak on those matters. I will confine myself to his economic legacy which, like other facets of his life, was large (but mixed).
On the positive side, it is necessary to turn our memory banks back to a most unpleasant time—just before he took office in 1981. I remember it well, as I was in the midst of completing the first iteration of the Texas Econometric Model. The prime rate of interest had spiked above 20% on two occasions, inflation was at 13%, and we were teetering on the edge of recession. There was a general feeling of despair (which was not helped by nightly reports on the plight of a group of American hostages held in Iran for more than a year). Ronald Reagan was able to effectively communicate a sense of calm and hope which, given the importance of expectations in driving economic behavior, was quite beneficial.
The next few years were painful, as the inflationary spiral was broken at the expense of very high unemployment. This change was primarily the handiwork of the Federal Reserve under Paul Volcker’s leadership, but it would have been difficult to achieve in the absence of tacit approval from the White House.
Another cornerstone of the Reagan Presidency was a move toward economic deregulation. The benefits of this trend, which continues to move forward, are enormous and undeniable. Along the way, however, some serious and unnecessary disruptions were meted out. In the financial sector, for example, the transition to an open market (coupled with the first round of Reagan tax policy) led to massive overbuilding, the failure of thousands of financial institutions, and a gargantuan federal bailout. Much of this debacle could have been avoided with more careful and coordinated policy. (It must be recognized that the fine details of legislation tend to be within the purview of Congress).
In a similar vein, his push for free trade and open markets was definitely needed, and the world continues to benefit from his impetus. His foreign policy on other fronts, however, had some negative consequences. The demise of the Soviet Union may well be his greatest legacy, and it was a momentous achievement by any standard. His strategy, however, involved destroying the export base of the area (primarily oil and gold). In the process, he also devastated the US petroleum sector, causing great hardships for Texas and diminishing our prospects for ever achieving energy efficiency and less dependence on volatile Middle Eastern suppliers. (There were, of course, other factors involved.) While the US economy enjoyed a substantial boom in the mid to late 1980s, Texas, Louisiana, Oklahoma, and Colorado were plundered.
The Reagan tax policy was always something of an anomaly. He preached “supply side” economics, but his major impact was through “demand side” tax cuts. The details of his two major tax initiatives first helped to create the real estate bubble and then made the recovery more difficult. His bold “Star Wars” spending plan, coupled with tax reductions, brought spiraling budget deficits. At the same time, his domestic policy exacerbated the plight of some less fortunate individuals in ways that continue to defy remedy. There is no question, however, that his policy did stimulate spending in the economy and support much needed innovations.
Like virtually every President, Ronald Reagan’s economic legacy is mixed. Like virtually everything about Ronald Reagan, it is also large. We are at one of those times when it is appropriate to offer an overall perspective, but we shouldn’t dwell on it. It is best to mourn the passing and celebrate the life of one of the most important and endearing figures of the 20th Century. His lingering shadow is giant indeed.
The US Economic Outlook
Every year at about this time, I embark on my annual forecasting mission. Projecting the path of the economy is always difficult, and has been particularly so in recent years. In some ways the long-term view is even more challenging because it becomes necessary to factor in sweeping changes which are difficult to imagine at this moment in time. (The Internet, for example, changed the economy in ways that few in the early 1980s could have conceived possible.) However, certain underlying trends, such as demographics, are somewhat more predictable, and other emerging patterns can be factored into the projections. This year’s effort to view our likely economic path has left me feeling refreshingly optimistic.
Although the United States economy experienced a roller-coaster ride during the early years of this century, there has been extensive recovery recently, and economic news is increasingly positive. Output has expanded consistently, and job growth is rising rapidly. Thus far, inflationary pressures have been limited to selected segments (particularly energy), and the Fed is already poised to move into action.
Consumer confidence has held steady and displayed a high level of optimism in most parts of the nation. Numerous businesses are contributing to the advancement of the stock market by boosting capital spending, and the manufacturing sector is resurging, both in the US and abroad, because of the rebuilding of inventories necessitated by consumer purchases and the waning of prolonged skittishness.
Technology industries are experiencing growing demand, and technology investment is on the rise, albeit at a cautious pace. Business fixed investment, especially in computers and structures and capital goods investment are also trending upward.
While the US trade deficit remains high ($489.40 billion imbalance in 2003), an upswing in exports, particularly capital goods, automobiles, industrial supplies, and civilian aircraft is helping to stabilize the domestic economy. The interconnected nature of the economies of nations around the world continues to be an important facet of the future development of the US economy, and trade-related activity is forecast to gradually augment its share of the gross domestic product.
The housing market, a bright feature of the nation’s economic recovery for the past few years, will likely experience a slight decline in the near term, and mortgage rates will probably see moderate increases. Over the long term, however, the housing industry is expected to continue to play an important role in the nation’s economic growth.
Airline travel has picked up and price competition is increasing, especially for domestic flights, which are being affected by the growing presence of discount carriers. The airline industry is likely to remain relatively cyclical in the decades to come, with higher fuel prices causing financial challenges at present.
Concerns linger regarding the war on terror and the extent of future involvement of US military forces in Iraq and elsewhere. Energy prices are also cutting into profits in several industries. However, the US economy is far more insulated from oil price swings than in the past; elevated prices are unlikely to stall the current recovery to any substantial degree. These matters, along with various other uncertainties, have the potential to dampen the short-term resurgence of business activity.
The upswing in business investment and hiring will contribute to growth in the years to come. In addition, the positioning of US firms at the forefront of many areas of emerging technologies can be anticipated to spur future expansion.
Specifically, over the long-term forecast horizon (2003-2030), the US is expected to achieve growth in output (real gross product or RGP) of some 3.14% per annum. (I use compound annual growth rates, meaning they reflect changes in the base from which growth is calculated.) RGP will likely total $22.46 trillion by 2030. Population can be expected by achieve a 0.82% rate of growth per year and reach 363.56 million by 2030. Employment is anticipated to expand to 185.16 million (a 1.32% per year clip).
Although some uncertainties remain at various levels, anxieties are lessening substantially as the US economic recovery continues and the momentum for more extensive expansion in the future picks up pace. Over the long term, the path to growth lies in innovation and high value added business activity. Overall, the outlook for the nation’s economy appears extremely positive.