The Economist: Long-term forecast for Texas economy
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According to The Perryman Group’s most recent forecast, most cities in Texas are well positioned for long-term growth. Business activity is projected to become increasingly concentrated in the major population centers, and Texas’ six largest metropolitan statistical areas (MSAs) are projected to generate three of every four net new jobs through 2040.
The state’s smaller metropolitan areas are also notable contributors to overall growth, contributing 18% of net new jobs through 2040. The oil-rich Midland MSA is forecast to lead the way in terms of output (real gross product) expansion, with a 3.66% compound annual rate of growth over the 2012 to 2040 timeframe. Odessa is also likely to see gains in output at a rate exceeding the statewide average during the period. A number of other cities are expected to experience relatively strong performance through 2040, with oil and gas exploration and production activity, manufacturing locations and expansions, and foreign trade generating gains in communities across the state.
The Austin-Round Rock-San Marcos Metropolitan Statistical Area’s highly educated workforce and base of growth industries will serve as the foundation for future strong performance. The area is forecast to see compound annual growth of 3.61% in output (real gross product) over the 2012-2040 time period, with annual growth exceeding 4% in the information and services sectors. Durable manufacturing is also a strong contributor to economic vitality. An estimated 558,100 net new jobs are expected for the area, a 1.84% compound annual pace. The area’s large services sector will be the source of most net new jobs, with a gain of 354,540 projected over the 2012-2040 period.
The role of the Dallas-Plano-Irving Metropolitan Division (MD) as a business and financial center positions it well for future stability, with logistics and technology-oriented businesses contributing to growth. The area’s diverse economy is likely to lead to ongoing growth, with expansion in real gross product at a 3.53% compound annual rate over the period. All industrial sectors are forecast to expand, with output growth concentrated in the services and finance, insurance, and real estate segments. Through 2040, an estimated 1.3 million net new wage and salary jobs are expected to be added, with 858,400 net new jobs in the services sector and 161,600 in the wholesale and retail trade industry group.
A central location and competitive logistics position will serve the Fort Worth-Arlington MD well in the decades to come. The area is projected to see growth in real gross product at a 3.52% compound annual rate. All industrial sectors are expected to see real gross product expansion, with gains in the information segment exceeding 4% per annum. Wage and salary employment is likely to expand by 1.65% over the long-term horizon, led by the services, information, and mining sectors.
The El Paso area’s relatively low cost of doing business is a competitive edge, and Fort Bliss and associated activity serve as a source of ongoing stimulus. Expansion in the area continues to be spotty, but our long-term forecast calls for modest growth through 2040. Real gross product in the area is forecast to grow by 3.15% per year over the time period, led by expansion within the services and finance, insurance, and real estate industry groups. The area is likely to add almost 164,000 net new jobs over the period (a 1.48% rate of growth), with the largest numbers forecast for the services, government, and trade segments.
The oil and gas industry will remain a source of substantial business activity through the long-term forecast horizon for the Houston-Sugar Land-Baytown MSA. In addition to serving as a center for the energy segment, the area plays an important role in international trade. Houston has been one of the strongest economic performers in the nation recently, and our forecast indicates that this economic vitality will continue. Real gross product is likely to expand at a 3.54% annual rate, with the services and mining segments projected to experience the highest gains through the long term. Wage and salary employment is forecast to grow at a 1.65% compound annual rate through 2040, with the area’s large services sector generating the greatest number of net new jobs.
The San Antonio-New Braunfels MSA economy benefits from a stable base of education, health care, military, and related activity, and is projected to sustain moderate growth through the long-term horizon. Expansion in output (real gross product) is forecast to occur at a 3.35% annual rate, with the highest gains in the services; finance, insurance, and real estate; and trade segments. Wage and salary employment growth of 1.65% per annum is projected through 2040, with the highest employment growth rates expected to be in the services and information industry groups.
Texas metropolitan areas are likely to experience growth exceeding most parts of the United States over a long-term forecast horizon. With advantages ranging from oil and natural gas resources and industry linkages to low costs of doing business, the state’s population centers will serve as engines for growth. Business cycles are inevitable, but the long-term outlook for Texas’ MSAs is decidedly positive.
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.