Tuesday, August 23, 2011

Two cents (or maybe a nickel) on Texas.

Texas is doing well relative to the country.  Its jobs creation rate is second only to North Dakota, a state whose population is smaller than Austin's.  It has large in-migration because of jobs, and as one blogger points out, wages are rising faster in Texas than [most] other states, so one cannot credibly make the argument that its success is entirely a "race to the bottom outcome."  The fact that Texas only relies a little more than average on construction for its employment base shows that its job performance is not the result of an unsustainable housing construction boom of the Arizona, Florida, Nevada and Central California variety.

In an ideal world, we would run some regressions explaining Texas' growth, but we haven't sufficiently up-to-date data to do that.  We do know that some things matter in general for growth: climate (which I don't think even Rick Perry is claiming credit for); fraction of the population with a BA, and, if I may refer to work I did five years ago, availability of air transportation.

Texas does well in two out of three indicators: since World War II, people and jobs have moved to warmer places such as Texas, and Dallas is a hub for two airlines and Houston is a hub for one.  Texas is below average, however, in the share of adults with BAs and graduate degrees.

So why is Texas doing well?  First, it has managed to maintain its state and local government spending far better than most other states, and has not had the negative stimulus arising from massive layoffs. Over the past decade, government job growth in Texas has outpaced private sector job growth by about 2 to 1.

Second, Texas has among the most stringent consumer protection laws in finance in the country--likely arising from a long-standing Western mistrust of bankers.  As a consequents, consumers were essentially forbidden from using their homes as piggy banks.  As Mike Konczal shows, this means Texans have far less debt to pay off (it also shows how we in California are still in the soup).  So "heavy-handed" regulation helped keep Texas out of trouble.

Finally, it is simply easier to develop everything in Texas--housing, businesses, etc.  This is the one part of the conservative view of Texas that I buy--as one Los Angeles planner said to me, it takes 18 months in LA to do what it takes six weeks to do in Dallas.  LA doesn't even have by-right zoning.  It is here where I think Texas has an enormous advantage for business development over California.

That said, California has a greater share of people with BA's than Texas.  Part of the reason why may be that well-educated people, who can afford to live in a place that takes environmental protection seriously, do so.    There is actually some good reason for California's stringent environmental rules--the air quality here, while much better than it used to be, is still not good enough.  Of the ten cities with the worst air quality in the country, six are in California.  But the cities with the worst air quality outside of California are Houston and Dallas; someday voters in those cities are going to demand better.  I do think California can do a better job of protecting its environment while making business development easier, but that is the subject of another post.


Robert Boyd said...

I think there are two more things that have helped Texas in the past decade. First is that the price of oil has gone up a lot since 2000. In January 2002, the price of WTI was 19.71/bbl. Now it's in the vicinity of $80/bbl. It's had ups and downs in the previous decade, but on average, the direction has been up. Texas's economy is diversified, but there is still a lot of E&P companies here, and perhaps more important, oil field services companies. I live in Houston, and you can't drive down the road without seeing billboards for rigzone.com, an oil industry jobs site. Energy companies are hiring and have been pretty much for the past 10 years.

Second is a related thing--shale gas. The first major shale gas field discovered was the Barnett Shale, near Fort Worth. Significant drilling there did not begin until the late 90s and continues now. So not only was this a major asset for Texas, it also supplied work for drillhands, roughnecks, oil field service personnel, caterers, mechanics, etc. But perhaps more important than the local impact, it started a boom in shale gas production all over the country (and increasingly in Europe) that again, benefited large oil field service companies in Texas.

Rick Perry has no influence over the price of oil or the geology of shale. But his tenure as governor benefited from the rise in oil prices and the development of shale gas, just as Ann Richards had the bad luck to be governor during a period of low (and declining) oil prices.

Kenneth Thomas said...
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Kenneth Thomas said...

Actually, Matthias Shapiro said Texas had the sixth fastest wage growth in the country, not the fastest. His data source was a little odd in that it included all sorts of management jobs in its calculation of "hourly" wages.

His post also conflated changes in the labor force with migration, and told us how many people were added to Texas' labor force since December 2007 (739,000) without mentioning that it had only added 247,000 jobs in the same period.

Meanwhile, 33% of Texas adults (19-64) lack health insurance.

Alex P. said...

What could be the possible reason why most adults in Texas has lack of health insurance? Is it because not information is being given to citizens?

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