|WACO, September 24 - The Texas economy is driven by the state’s largest Metropolitan Statistical Areas (MSAs). While smaller population centers and rural areas are significant contributors, the biggest urban centers serve as the primary nexus for business and opportunity for individuals and companies across the state.
Through 2040, about three of every four new jobs will be in one of Texas’ six largest MSAs. Some highlights from our most recent long-term forecast for these areas and the smaller metropolitan areas are summarized below.
The Austin-Round Rock-San Marcos MSA has long been among the strongest performers in the nation and the state, with workforce advantages and a presence in key emerging sectors. The area is expected to continue its strong performance over the forecast horizon, led by expansion in the services, durable manufacturing, and trade sectors. The Austin area is projected to see a $155.7 billion increase in real gross product (RGP) by 2040, growing 3.66 percent yearly. Over 619,000 new jobs are expected to be added, a 1.97 percent annual growth rate. The services sectors is expected to experience the largest number of net new jobs over the period (almost 426,500), while several sectors see RGP gains of more than four percent per annum.
The Dallas-Plano-Irving Metropolitan Division has been performing very well and is projected to continue to do so. Through 2040, a 3.55 percent annual growth rate is forecast for the area’s real gross product, an increase of more than $467.4 billion over the period. The population is expected to reach 6.9 million, up from 4.5 million in 2013. The most significant employment expansion is projected in the services and trade sectors, with 2.54 percent and 1.53 percent annual growth rates, respectively.
The Fort Worth-Arlington Metropolitan Division has recently experienced spotty growth. The information and financial activities sectors shed jobs, while professional and business services and leisure and hospitality have led job growth. The region’s notable defense-oriented manufacturing base will continue to leave the area vulnerable to federal budget cuts, but as the national economy continues to improve, so too will the Fort Worth-Arlington area. As a center for logistics, the area is well-positioned to capitalize on future expansion in freight. Our long-term forecast indicates growth at rates similar to the state as a whole, with the area’s output (real gross product) reaching $244.8 billion by 2040, a growth rate of 3.48 percent per year. Employment is expected to increase by 564,000 jobs, a 1.71 percent yearly expansion. The largest output gains will be in the services and finance, insurance, and real estate (FIRE) sectors.
The El Paso MSA has been one of the slower performing economies in the state. Like all areas strongly linked to the federal government through military bases and other activity, El Paso has struggled with budget cuts. However, the area has recently experienced some expansion. El Paso will benefit as the U.S. economy improves, but will remain vulnerable to military funding cuts. On balance, we project that the area will see modest growth over the long-term forecast horizon, though at rates somewhat slower than other parts of the state. An increase of $31.2 billion in real gross product by 2040 is projected, with employment growth at a rate of 1.49 percent yearly (for an increase of over 160,100 jobs).
The Houston-Sugar Land-Baytown MSA economy has been very strong, with all major sectors experiencing at least some job gains and mining and logging being the leader in percentage growth. Through 2040, real gross product in the Houston area is forecast to grow 3.63 percent yearly, for a total increase of over $671.8 billion. Population is expected to increase by 3.6 million to reach 9.9 million. The fastest job growth in the area is projected to be in the services, trade, mining, and information sectors, with employment in each expanding by more than 1.5 percent annually.
The San Antonio-New Braunfels MSA economy has been experiencing moderate growth in employment, with the bulk of recent job gains in the trade, transportation, and utilities and leisure and hospitality sectors. The area remains strong in health care, higher education, and hospitality, which are expected to see notable growth through the forecast horizon. The area is also benefitting from the spillover effects of the nearby Eagle Ford Shale drilling activity. The San Antonio area is likely to experience moderate growth comparable to the state as a whole over the long-term forecast horizon. Through 2040, we are forecasting the San Antonio-New Braunfels MSA to see real gross product increase by $115.9 billion, a 3.31% annual growth rate. Employment is expected to grow at a 1.64 percent yearly rate, generating an increase of 520,900 jobs. The services sector will show significant employment growth of 2.28 percent yearly, while several sectors experience RGP gains at rates in the four percent range.
The state’s smaller MSAs will also be a notable source of job gains, with an addition of almost 1.2 million jobs by 2040. The state’s rural areas are projected to see employment expansion of just over 0.5 million. Business cycles are inevitable, but Texas’ population centers will likely see relatively strong growth through 2040 and beyond.
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.