Much of the economic activity in Texas occurs within the state's largest metropolitan statistical areas (MSAs). These urban centers are the primary leaders in business and trade for individuals and companies across the state, though smaller population centers and rural areas still make a significant contribution.
Taking a long-term view of the outlook for the Texas economy, I am encouraged, yet also cautious. With all of the key ingredients for economic success, the state is well positioned for expansion in business activity and the prosperity that goes with it for decades to come. However, continued economic performance hinges on adapting to the underlying changes in the population and workforce.
The US economy has been performing well, setting the stage for future growth. Much of the slack in the labor market has been eliminated. Total nonfarm payroll employment rose by 261,000 in October, and the unemployment rate is down to 4.1%, according to the US Bureau of Labor Statistics (BLS). The number of unemployed persons was 6.5 million, down 1.1 million since January. About 1.6 million of the unemployed had been jobless for 27 weeks or more.
The clock is ticking on a two-million-job issue: finding a permanent solution to replace Deferred Action for Childhood Arrivals (DACA). The DACA program allows individuals who entered the United States as children to remain here for school or work. Nearly 800,000 persons across the country are enrolled in the program, and approximately 124,300 of these individuals (often called "Dreamers") live in Texas.
I was recently asked by the House Select Committee on Economic Competitiveness to offer a perspective on some of the issues affecting Texas' future performance. The Committee's purpose in the hearing was to address "principles that... should guide the state's pursuit of long-term economic growth." I am pleased that members of the legislature are thinking in these terms, as it is essential to long-term prosperity.
More than 40 million people in the United States identify themselves as Hispanic or Latino, up from fewer than 28 million in 2003 according to data from the US Bureau of Labor Statistics (BLS). Hispanics may be of any race, and include Mexicans, Puerto Ricans, Cubans, Central and South Americans, and others.
President Trump has nominated Jerome H. Powell to be Chairman of the Board of Governors of the Federal Reserve System, succeeding Janet Yellen when her term expires in February. The Federal Reserve Chairmanship is among the most powerful positions in the public sector (or, in fact, anywhere), due to its substantial influence over the US economy and, indeed, the fortunes of nations throughout the world. The Chair serves a four-year term and can then be reappointed. Contrary to the usual pattern, President Trump decided against nominating Janet Yellen for a second term, though he praised her efforts and results. This move was highly unusual, as the Chair is almost invariably reappointed by Presidents in their first term when the economy is doing well.
Manufacturing is a cornerstone of the Texas economy, employing more than 7% of Texans, paying high wages, and producing hundreds of billions in goods for export each year. These businesses also generate opportunities for a broad spectrum of other types of firms ranging from suppliers of needed inputs to those providing business services. In addition, as employees of all of these companies spend their payroll dollars, further economic benefits ensue. All in all, the multiplier (or "ripple") effects of goods-producing business operations greatly magnify their importance to the state economy. In fact, according to an impact assessment by my firm, The Perryman Group, a typical manufacturing job leads to 3.778 additional jobs in the state, with some sectors (such as refining which uses Texas oil) bringing much higher benefits. Viewed in this manner, manufacturing accounts for about 30% of Texas employment and an even larger proportion of gross product.
About nine of 10 new jobs over the next decade will be in services-producing industries, many of them in health care. The US Bureau of Labor Statistics (BLS) recently released projections for growth in jobs through 2026. BLS estimates that US employment will increase by 11.5 million over the 2016-26 decade, somewhat faster than the prior 10 years (which were marred by the Great Recession).
By all standard definitions, the US economy is at "full employment," which loosely means that everyone who wants a job has one. The unemployment rate declined to 4.2% in September, and the number of unemployed persons declined by 331,000. At last count (August), there were more than six million job openings across the United States, up more than 590,000 from a year prior and the highest ever recorded.