|WACO, September 4 - Texas recently extended the streak of consecutive months with employment growth to 46.
Over the past year alone (July 2013 to July 2014), the state added 396,200 new positions, with growth across all major industrial sectors. The unemployment rate now stands at 5.1 percent, well below the US rate of 6.2 percent and even farther below many states.
The numbers of new jobs being generated in Texas are higher than they have been in decades, and the state has been a major force in the national economic recovery. The Lone Star State is well positioned to maintain this strong performance, and is projected to remain one of the top states in the nation in job gains and economic growth.
The oil surge continues to be a strong economic driver, but expansion is broad based. In fact, the trade, transportation, and utilities segment added the most jobs over the July 2013 to July 2014 period with some 92,500 new positions.
The strength of the Texas recovery and the diversity in the sources of growth are positive signals for long-term expansion. The Perryman Group’s latest long-term forecast for the state indicates that we will outperform the national pace of economic growth. Here are some highlights from our most recent projections.
About 13.6 million more people will reside in Texas in 2040, with estimated population at that time of 40.2 million. By 2040, real gross product is forecast to expand by nearly $2.0 trillion to reach almost $3.3 trillion. A 1.72 percent compound annual growth rate is expected in employment over the period, with 6.8 million jobs gained and a total level of employment in 2040 of 18.5 million.
Looking at expected gains by major industry group, the services sector will be the source of the majority of new jobs (4.3 million of the total gain of 6.8 million, which is 2.44 percent annual expansion). Wholesale and retail trade businesses are forecast to add almost 898,000 new positions, an annual growth rate of 1.50 percent over the period. Notable expansion is also forecast for every other industrial sector with the exception of agriculture.
The sector with the largest gain in real gross product (RGP) through 2040 is also expected to be services, with expansion of $575.8 billion expected over the period. Nondurable manufacturing leads the way in the pace of RGP gains, with a compounded annual growth rate of 4.18 percent, followed by services (4.10 percent), information (3.99 percent), and durable manufacturing (3.70 percent).
While growth prospects are favorable, there are challenges to overcome. Past growth is straining Texas’ infrastructure in some areas. Highway congestion is an increasing problem, and more funds are needed for expansion as well as maintenance. There is also a need for investments in ensuring the adequacy of the water supply, with population and economic gains increasing needs for fresh water even as many resources have yet to recover from drought conditions. In addition, it is critical that the state’s workforce is well prepared for success, with quality education (K-12, colleges/universities, and technical schools) and training options.
The state is also subject to the same underlying patterns affecting the nation as a whole. The aging of the population will present challenges, both in terms of filling some occupations and in dealing with expanded social services needs. However, the state does have a generally younger mix of residents than the nation. Also, there are several regions around the world where tensions have the potential to escalate, negatively affecting global growth. Texas would not be immune to such problems.
The Lone Star State is well positioned to continue to be an economic leader in the nation with a diverse economy experiencing notable growth in all non-agricultural sectors. Over the long-term forecast horizon, our baseline forecast indicates real gross product gains at an annual rate of about 3.5 percent and an employment increase of over 6.8 million jobs. However, this expansion assumes that the challenges outlined above are dealt with adequately. The key assets required for long-term prosperity are all here: expansion in a number of sectors, a large and growing workforce, and a favorable environment for doing business.
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.