|WACO, February 19 - Over the next five years, we are forecasting relatively strong performance for the Texas economy.
The state’s large services sector will continue to drive growth, with the smaller (but faster growing) mining sector generating a substantial increment to the expansion. All industrial segments are forecast to experience gains over the next five years (though not all of the smaller industrial categories will benefit and cycles are inevitable). Here’s a closer look at what I see happening over the next five years.
Total output (real gross product) in Texas is forecast to expand from $1.3 trillion to $1.6 trillion during the 2013 to 2018 time period. This is a fairly healthy 4.59 percent annual growth rate, which is sufficient to generate a $323.6 billion gain over the short term.
Of that output gain, services industries account for $85.0 billion (26.3 percent of the all-industry total). The services sector now comprises about 22.8 percent of real gross product in the state, and over time this proportion will grow slightly larger.
The next largest gain is projected for the mining sector, with an increase in output of $58.9 billion (18.2 percent of the total). Mining is now less than ten percent of total output, so the magnitude of this expansion is particularly notable. Most other industry groups are forecast to expand at rates in the 3-5 percent range.
Texas employment growth is forecast to be 2.33 percent through 2018, pushing the number of jobs up by more than 1.4 million to reach a total of 13.1 million. Services industries are likely to account for some 57.3 percent of the total jobs gained in Texas over the next five years, with an addition of some 817,500. Currently, the services sector employs about 4.7 million Texans, and in 2018, I expect the industry group to involve nearly 5.5 million jobs. We look for some of the largest increases to occur in professional and technical services industries and health care.
The wholesale and retail trade segment is another major source of jobs, with an expected gain of almost 221,200 new positions over the next five years. The wholesale piece of the industry group is likely to see the addition of nearly 69,000 jobs, thanks in part to Texas’ advantages as a center for distribution and logistics. Among retail businesses, food and beverage stores are the top category for job growth, but all of the various types of retailers are also projected to expand.
Manufacturing job gains are likely, with an increase of more than 47,500 over the short term. Durable goods account for a majority of the new hires, with fabricated metal products, machinery manufacturing, and computer and electronic products all forecast to expand. Chemical manufacturing leads the way within the nondurable group.
We expect the finance, insurance, and real estate (FIRE) sector to expand employment by upwards of 57,500. Insurance carriers and related business look to be an important source of new jobs, with real estate also set for significant hiring.
The rate of growth in the mining sector is forecast to be the fastest of all segments at 3.35 percent. Given its smaller size, the industry’s share of the total employment gain is less than four percent but these high value-added jobs tend to pay well and generate higher-than-average levels of economic activity and consumer spending.
Some of these patterns (such as the increasing importance of services industries) are continuations of what we’ve been observing for many years across the United States. In other cases (including oil and gas), market conditions are generating demand for a product Texas is uniquely able to supply. Not every industry will grow; that’s the nature of progress. However, Texas has a number of strengths to draw from for future economic expansion, and that is what sets the Lone Star State apart.
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.