The Long‑Term Outlook for the Texas Economy
By: Dr. M. Ray Perryman
Published in syndication November 20, 2019
The Texas economy is among the strongest in the nation, and the state continues to chalk up wins in terms of major corporate locations. Recent growth and the ongoing stream of new and expanding businesses is signaling an upward trend over the long term. In fact, in the latest release of output data by the Bureau of Economic Analysis, Texas ranked first in percentage increase, a remarkable achievement for such a large state (but one that occurs frequently).
The economy has diversified and is experiencing growth in most sectors, but oil and gas will remain an important source of jobs and economic stimulus. Investments in pipelines, export facilities, storage capacity, and related infrastructure are positively affecting economic conditions not only in major production areas, but also in communities across the state. Dramatic changes in recent years have created a new future for the oil and gas industry that will, while certainly cyclical, likely be much less volatile than before.
A challenge to growth Texas will face is adjusting to workforce changes. As the national economy has become stronger over the past few years and most areas are at or near full employment, the number of people moving to Texas from other states has slowed markedly. The aging population and ongoing retirement of Baby Boomers will contribute to tighter labor markets, as will restrictive immigration policies. A combination of solutions will likely be needed, ranging from technology enhancements to improved training (and retraining) programs.
On balance, Texas is well-positioned to deal with the coming challenges. Our long-term forecast for the Texas economy indicates growth in real gross product at a 3.09% annual pace, leading to an increase from $1.7 trillion in 2018 to $4.0 trillion in 2045. For purposes of comparison, we're projecting US real gross product to see a 2.45% annual rate of growth over the same period. Close to 7.0 million net new jobs will be generated in Texas by 2045, a 1.61% annual rate of increase leading to total employment of more than 20.0 million (significantly faster than the 1.34% we are projecting for the US).
The largest numbers of net new jobs are projected to be generated within the services and wholesale and retail trade segments of the economy. Real gross product expansion is expected to be concentrated in services, manufacturing, and mining (oil and gas).
The Lone Star State is anticipated to be an economic leader in the nation over an extended time horizon. Business cycles are inevitable and notable challenges await in education, infrastructure, water, and health care, but Texas is likely to be among the strongest states for job creation and economic growth for the foreseeable future.