Economic Forecast for Texas’ Smaller Metropolitan Areas

By 2021, I am projecting that the 19 smaller Texas Metropolitan Statistical Areas (MSAs) will add a total of about 215,000 net new jobs to the state. The growth rates over the period, which spans the 2016 to 2021 time horizon, will vary markedly. Some areas will outpace the state rate of expansion, while others will grow more slowly.

The state’s smaller metropolitan areas often serve as centers for business, health care, retail, and other needs for significantly large surrounding areas. They are important to overall growth in the state, and many are performing very well. In fact, four of the top five Texas MSAs, when ranked by unemployment rate, are smaller metropolitan areas. Amarillo and Lubbock are tied with Austin-Round Rock to lead the way with a 3.2% rate of unemployment (as of December 2016), followed by College Station-Bryan (at 3.4%) and Sherman-Denison (3.6%). Several others (Abilene, Midland, Waco, San Angelo, Wichita Falls, Killeen-Temple, Tyler, Laredo, and Texarkana) have unemployment rates at or below the statewide level.

Looking at the job growth rates for 2016, College Station-Bryan, Waco, and Brownsville-Harlingen saw faster hiring than anywhere except for Dallas-Fort Worth-Arlington and McAllen-Edinburg-Mission. Laredo and Killeen-Temple have also been comparing well in terms of growth. On the other hand, five smaller metropolitan areas actually lost jobs last year (Texarkana, Wichita Falls, Beaumont-Port Arthur, Odessa, and Midland—most of which are highly energy dependent).

Every year, we take a detailed look at the economy of each metropolitan area in the state, projecting output and employment by industry, as well as personal income, and other variables. This year, I’m expecting that six of the smaller metropolitan areas will equal or outpace the state rate of employment growth for the five-year time period. For reference, my projections for Texas call for job expansion at a 2.16% annual rate, while output (real gross product) rises at a 4.11% annual pace. All of our growth rates are “compound annual growth rates,” meaning that they reflect changes in the size from which growth is calculated.

The fastest rates of job growth over the five-year period are forecast to be in Midland and Odessa, with 2.45% and 2.42% rates of job expansion, respectively. Of course, these cities were harder hit by the end of the oil surge, so part of the hiring will be recovering from that fallout. In addition, I expect most of the gains to occur in the latter years of the period, when the energy sector is likely to be further along the road to recovery.

I’m also expecting College Station-Bryan to outpace the state, with job expansion at a 2.21% yearly rate. Both Brownsville-Harlingen and Laredo are likely to see gains of 2.18% per annum over the period, while Tyler employment matches the state growth at a 2.16% rate. Victoria is likely to come in at a 2.11% annual rate of job growth, followed by Lubbock (2.0%), Corpus Christi (1.97%), Amarillo (1.94%), Texarkana (1.93%), San Angelo (1.90%), Waco (1.90%), Sherman-Denison (1.88%), Abilene (1.87%), Longview (1.87%), Beaumont-Port Arthur (1.86%), Wichita Falls (1.72%), and Killeen-Temple (1.61%).

Employment expansion is driven by a variety of industries, and the key sectors vary notably by metropolitan area. I am expecting some recovery in oil and gas exploration activity, which will help those cities in the Permian Basin and elsewhere with ties to the industry. Higher education and health care are contributing to expansion in several areas. Cities along the US-Mexico border are benefiting from cross-border trade and other activity (which, by the way, is crucial to the economic health of the rest of the state as well, but that’s a topic for another day).

Over the next five years, the 19 smaller metropolitan statistical areas in Texas will generate more than 15% of total state job growth, according to my latest forecast. I am expecting all of these diverse population centers to add jobs (though some years will of course be better than others). Counties which are not within any of the state’s metropolitan areas are also expected to add jobs; I’m forecasting a gain of nearly 100,200 for them by 2021.

Texas’ smaller population centers are thriving. Many have very active economic development professionals, visionary community and business leadership, and growing industrial bases. Although much of the state’s future growth will be concentrated in the largest metropolitan areas, there is no doubt that the smaller cities will also be contributing to progress and provide vital centers of commerce for large swaths of the state.