The Economist: Where’s the Growth?
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By Dr. M. Ray Perryman
Our latest long-term forecast calls for Texas to continue to outpace the nation in terms of economic performance. Although we will doubtless face business cycles and other unforeseen interruptions along the way, the outlook for the state calls for moderate expansion for decades to come. In this week’s column, we take a look at the sources of this growth, both in terms of geography and industry.
The state’s largest metropolitan statistical areas (MSAs) will continue to serve as the drivers of overall growth, with business activity throughout the state linked to these large centers of commerce. (Ranked by 2011 wage and salary employment in descending order, these are Houston-Sugar Land-Baytown, Dallas-Plano-Irving, San Antonio-New Braunfels, Fort Worth-Arlington, Austin-Round Rock-San Marcos, and El Paso.)
In fact, if you look at it in terms of jobs, about three of every four added through 2040 will be located within Texas six largest metropolitan areas. Together, these large MSAs will generate almost 4.8 million of the total 6.4 million net new jobs added in Texas through 2040. The concentration of state activity in these urban centers is expected to increase over time, continuing a trend that been observed for decades.
Texas’ smaller MSAs are also centers for business activity, with many expected to see moderate long-term growth. As a group, the state’s 20 other MSAs are expected to contribute 18.3% (almost 1.2 million) of the total jobs added in Texas through 2040. McAllen-Edinburg-Mission, Tyler, Brownsville-Harlingen, Waco, Laredo, and Corpus Christi are expected to see the fastest compound annual growth rates in employment over the long-term horizon; all of these are forecast to experience gains at a greater than 1.5% pace.
Smaller cities are especially likely to be affected by particular industries. For example, oil and gas exploration is providing a strong boost to the Midland and Odessa areas, which are among the healthiest economies in the nation. Amarillo currently has the third-lowest unemployment rate in the state at 5.5%, and San Angelo and Abilene round out the top five metropolitan areas in terms of current unemployment. These areas are expected to continue to perform well, though all are subject to gyrations in the energy sector to some degree.
In terms of industries, the state’s large services sector is expected to generate the largest numbers of net new jobs through 2040 (3.9 million of the total 6.4 million). Many of these will be in high-paying professions such as health care and business services. (Actually, there are a lot of misunderstandings about the quality of jobs within the services segment, but that’s a topic for another time.) Wholesale and retail trade is next, with gains of almost 876,000 over the period. All sectors except agriculture are projected to gain jobs over the long term. Output (real gross product) growth rates by sector range from less than 1.7% in agriculture to 4.5% in information.
The Perryman Group’s forecast indicates that some of the fastest compound annual growth in employment will occur in the border region, which has historically been plagued by high rates of joblessness. These prospects are certainly encouraging, particularly in light of the relatively high rates of population increase in this vast area. It’s also a positive sign that industries contributing to ongoing expansion in output include not only cornerstones such as durable manufacturing and services, but also emerging sectors such as information. Of course, many of the sectors that will play a major role over such an extended time horizon likely don’t even exist today (think back to 1984 to get a perspective on what can happen in 28 years). While no area is immune to future setbacks, the Lone Star State is well positioned for sustainable prosperity.
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.