The Texas economy has been among the fastest growing in the nation for a number of years. With more major corporate relocations and expansions than any other state, Texas is expected to continue to outperform most areas. Here is a look at key patterns affecting performance and a summary of my latest long-term forecast.
The United States is currently in the process of negotiating or renegotiating several trade agreements which are vitally important. The fewer impediments to trade, the better the Texas economy will perform. About $1 of every $6 of US trade is from Texas; the future of trade and the future of Texas are inextricably linked.
Long-term demographic trends indicate that labor shortages will remain an issue in the future. While Texas is certainly not immune to the overall trend, the state’s population is significantly younger than the nation as a whole and, over time, this youth will provide an edge in terms of worker availability. The degree to which this workforce is prepared with quality educational programs (from public school through post-graduate) and needed training will determine the extent to which this advantage is realized.
Some of the most prolific oil producing regions in the country are in Texas, including the enormous Permian Basin. Current estimates indicate that recoverable reserves are far larger than the amounts produced to date, and production will likely expand rapidly in the near future. Billions are being invested in pipelines and infrastructure ranging from natural gas liquefaction trains to petrochemical plants and port facilities. Energy industries will remain a driver of long-term prosperity in the state.
The Perryman Group’s long-term forecast for the Texas economy indicates growth in real gross product at a 3.21% annual pace, leading to an increase from almost $1.7 trillion in 2017 to over $4.0 trillion in 2045. Approximately 7.2 million net new jobs will be generated over the period, a 1.62% annual rate of increase which leads to a 2045 total level of employment of 19.8 million.
The largest numbers of net new jobs are projected to be generated within the services and wholesale and retail trade segments, with strong hiring also expected in mining. Real gross product (output) expansion will likely be concentrated in services, manufacturing, and mining.
The Texas economy is well positioned for healthy expansion over an extended time horizon. Business cycles are inevitable and the state is facing challenges such as the need for additional infrastructure, water, safety net, and education investment. Nonetheless, Texas is likely to remain among the strongest states for job creation and economic growth for the foreseeable future. If we make enlightened policy decisions, it can be even better.