The Economist: The Long-Term Outlook for the Texas Metropolitan Areas
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By M. Ray Perryman
The state’s largest metropolitan statistical areas (MSAs) serve as the drivers of overall economic growth, with business activity throughout the state linked to these centers of commerce. The Perryman Group’s recent long-term outlook calls for growth for these areas, though there will likely be the inevitable bumps along the way. Here are a few forecast highlights. (All of our growth projections are presented as compound annual rates, meaning that they reflect changes in the base from which growth is calculated.)
The Austin-Round Rock-San Marcos Metropolitan Statistical Area economy is performing relatively well as it recovers from the recession, with employment growth gaining momentum. Output (real gross product) is forecast to increase at a 3.55% annual rate over the next 29 years, higher than that of Texas or the US. The information segment will see the largest compound annual growth rate in output at 4.53%, closely followed by services at 4.17%. Employment growth is projected to be 1.82% during the period, resulting in the addition of some 563,000 new jobs. The services sector is expected to experience the highest growth rate in employment, with expansion at a 2.49% compound annual pace through the forecast horizon.
Over the next three decades, the Dallas-Plano-Irving Metropolitan Division (MD) economy is also likely to outperform the state and nation, with sources of growth ranging from technology-oriented manufacturing to business and financial services.
The long-term forecast for the Dallas-Plano-Irving MD calls for growth in output (real gross product) at a 3.43% rate. The largest gain in output is projected to occur in the services sector, with expansion of $138.7 billion (representing a 3.98% compound annual rate) during the period. Information and durable manufacturing should also exhibit notable growth. Approximately 1,344,830 net new wage and salary jobs are expected to be created over the forecast horizon; some 865,000 of them in the services segment.
As a cost-effective place to live and to work with growth across a spectrum of industrial sectors, the Fort Worth-Arlington area is likely to remain a strong performer for decades to come. Although cyclical by nature, exploration and production in the Barnett Shale will be a source of economic stimulus for many years. The area should continue to serve as a center for logistics and wholesale operations, as well as aviation-related manufacturing, for the foreseeable future. Tourism is another source of business activity, with visitors drawn to the area’s many attractions.
Real gross product is expected to see a 3.37% compound annual growth rate, with several segments forecast to experience output growth exceeding 3.9% (information, durable manufacturing, and services). Wage and salary employment is projected to expand by 1.63% (almost 541,800 jobs) over the long-term horizon.
The El Paso MSA is a low-cost location for businesses with strong bases in military operations and export/import activity and other ties with Mexico. The area has experienced improvement in its economy over the last year, although its unemployment rates remain higher than other large cities and the state as a whole. The Perryman Group’s most recent long-term forecast calls for modest growth.
From 2011 to 2040, the El Paso MSA is projected to see expansion in real gross product at a 3.08% compound annual rate, while wage and salary employment is expected to grow at a 1.48% pace. The area is likely to see the fastest rates of output growth (above 3.6%) in the information, services, and durable manufacturing segments. The services, information, and trade industry groups are forecast to experience growth in employment at or exceeding 1.3%, and the area is projected to gain some 164,500 net new jobs through 2040.
The Houston-Sugar Land-Baytown Metropolitan Statistical Area is expected to see growth in wage and salary employment at a 1.60% compound annual rate during the 2011-2040 period, according to The Perryman Group’s latest forecast. Real gross product is projected to expand at a 3.25% annual rate, with the information and durable manufacturing sectors each growing at a pace exceeding 4.0% per annum through the long term. Employment gains are likely to total almost 1.6 million. The services, information, and trade segments are all expected to have 1.5% or greater growth rates in employment.
The San Antonio-New Braunfels Metropolitan Statistical Area has been among the strongest performing metropolitan areas in the country in recent years. Stability and growth in the decades to come will stem from traditional strengths for the area such as education, health care, military, and related activity. Tourism also continues to serve as a source of stimulus. The Perryman Group’s most recent long-term (2011-2040) forecast calls for expansion in output (real gross product) in the San Antonio area at a 3.28% annual compound rate, while wage and salary employment is likely to grow at a 1.64% pace.
Sectors expected to have the highest output growth rates are information and durable manufacturing, with rates projected above 4.0%. The largest dollar gains in output will likely be services (with $40.6 billion) and finance, insurance, and real estate (with $18.2 billion). Employment expansion is projected to be highest in the services, information, and trade segments; each will grow at over a 1.4% pace. The total employment gain during the period is forecast to be more than 558,100.
Like all parts of the United States, these cities remain vulnerable to challenges ranging from the possibility of the “fiscal cliff” at the end of this year to the potential for escalation of European debt problems, and business cycles are inevitable. Even so, The Perryman Group’s outlook for Texas’ metropolitan areas calls for moderate expansion at a clip outpacing most of the United States over an extended time horizon.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.