Economic Outlook for Smaller Metropolitan Areas

By: Dr. M. Ray Perryman
Published in syndication July 20, 2016

Texas' smaller metropolitan areas will likely be the source for one of every six net new jobs over the long term, and are an important contributor to overall economic growth. These 20 metropolitan statistical areas (MSAs) range in population size from less than 100,000 to almost 850,000 residents, serving as centers for business activity for the surrounding smaller communities and rural areas.

We at The Perryman Group produce projections for each metropolitan area as part of our forecasting process, looking at both key indicators such as output, employment, and other variables and the detailed projections of those. Through 2040, I expect the economies of the smaller MSAs to expand significantly, though most won't reach the rate of growth in some of the state's largest population centers with rapidly emerging suburbs.

As a group, the 20 smaller MSAs are expected to account for more than a million net new jobs through 2040, which is almost 17% of the gain expected for Texas over the timeframe. To put that in perspective, Houston-The Woodlands-Sugar Land is forecast to generate 1.6 million jobs through 2040, while Dallas-Plano-Irving is likely to produce another 1.3 million net new jobs over the same period. Even so, the smaller MSAs play an important role in overall prosperity.

The McAllen-Edinburg-Mission MSA is projected to lead the pace, with wage and salary employment growth at a 1.75% annual pace through 2040. That rate is significantly faster than the state as a whole (1.64% per annum), equal to Dallas-Plano-Irving, and second only to Austin-Round Rock (2.02% per year). The area's business ties with Mexico and the future growth in manufacturing expected on both sides of the border are primary reasons for my positive outlook.

Another strong performer is likely to be Tyler, which I also think will perform better than the statewide pace. Tyler has a nice blend of stable industries (such as health and education) and growing businesses. It will also get a boost from the energy segment once prices recover. I'm projecting 1.66% yearly employment growth for Tyler.

Several metropolitan areas are forecast to experience job gains exceeding 1.50% per year. These include Brownsville-Harlingen (1.58%), Laredo (1.56%), and Abilene (1.55%). The first two are helped by border proximity given likely improvement in Mexico, and Abilene will benefit from a diversified economy and nearby energy-industry activity.

Employment expansion in College Station-Bryan is projected to be 1.48% per year, with higher education and biosciences continuing to serve as cornerstones of the economy. Lubbock also benefits from higher education, and I'm forecasting 1.48% long-term job growth for the MSA. For Midland, I'm projecting expansion of 1.47% per year through 2040, with 1.46% for Corpus Christi and 1.43% for Odessa. These areas are heavily concentrated in the energy segment and will be subjected to the inevitable business cycles, but solid overall expansion is likely over the long term. Sherman-Denison also comes in at 1.43% annual employment growth.

Currently one of the lowest unemployment metropolitan areas in Texas, Amarillo is forecast to experience employment expansion at a 1.42% annual pace. Longview and Victoria also come in at 1.42% and San Angelo at 1.41%; these cities will see varying growth rates over time given cycles in oil-related businesses.

For Killeen-Temple, I'm forecasting employment growth of 1.39% per year through 2040, with similar gains for Waco (1.38%). Some job gains are also expected in Beaumont-Port Arthur (1.31% per year expansion), Wichita Falls (1.21%), and Texarkana (1.20%).

Texas' smaller metropolitan areas are home to major universities and other sources of higher education and training. They provide top-quality health care and professional services. The businesses located in these population centers cover the spectrum from leading edge information technology to distribution and logistics. Cultural opportunities can also be found, with museums, symphonies, ballets, sports venues, and other options.

Through 2040, I expect all of the state's metropolitan areas to experience job growth (though business cycles are inevitable), with rates of expansion that will vary depending on attributes such as economic development efforts, the industrial base, demographics, and location.