By: Dr. M. Ray Perryman
Published in syndication April 13, 2022
The past two years have been difficult, but the path forward is encouraging! Many parts of Texas have now reached or exceeded pre-pandemic employment levels, and unless a new and dangerous variant emerges, we may finally be able to put the worst of COVID-19 behind us. In fact, Texas is now more than 200,000 jobs ahead of its pre-pandemic peak. Supply-chain issues, worker shortages, and other challenges are likely to linger over the coming months, slowing the rate of expansion to some extent in the short term. Nevertheless, the outlook for the state remains highly favorable, and the momentum is palpable.
Technology-oriented industries and advanced manufacturing are key sources of future expansion. Large, high profile locations and expansions in the state are setting the stage for continued development of related and support industries. In fact, as I discussed in a recent column, Texas recently won the Governor's Cup (awarded by Site Selection magazine to the state with the largest number of major corporate locations or expansions) for the tenth time in a row. Emerging industries complement expansion in the state's long-time cornerstone sectors, enhancing future performance.
The Texas economy is quite diverse and becoming more so all the time, but energy remains a major driver of activity, and the outlook for the sector is a critical determinant of future overall performance. Despite uncertainties in the market, it is apparent that oil and gas will remain essential to future energy dynamics for decades and the industry will grow, although the pattern is likely to be uneven (as always). Recent events are stimulating an impressive ramp up at present.
On balance, I expect that we will work through the challenges and see notable expansion over the next few years (and beyond). Our most recent forecast for the Texas economy indicates growth in real gross product at a 3.95% compound annual pace, leading to an increase of approximately $348.26 billion over the next five years, thus approaching $2 trillion. An estimated 1.4 million net new jobs are projected for the Texas economy by 2026, representing a 2.11% annual rate of growth over the period.
Prior to the pandemic, Texas was among the fastest-growing states in the nation. Although the economy suffered a notable setback, the lost ground has been more than regained and the outlook remains positive. There are challenges to be sure, but there are also myriad competitive advantages that have served the state well for decades (including, among others, favorable cost environment, location, available workforce, diverse industrial mix, regulatory climate, and world-class development programs). These forces will remain dominant in the coming years. In short, Texas is likely to remain among the world's strongest economies for the foreseeable future. Stay safe!