Despite the ongoing headwinds, the Texas economy has performed reasonably well, making up ground lost during the COVID-19 shutdowns and more. In fact, between February 2020 (just before the pandemic) and October 2022, the increase in Texas jobs accounted for more than 80% of the net increase nationwide. While the state is well positioned to remain impressive, there are daunting challenges. Let’s take a quick look at the long-term horizon.
The difficulties facing national and global economies will clearly affect Texas. After all, the state is responsible for around a sixth of all US exports. Inflation has remained stubbornly high and is only just beginning to ease, and the Federal Reserve’s response has fueled rising interest rates and recession fears. Housing markets are also reacting, with some buyers being priced out of the market, builders pausing plans and sellers cutting prices.
Because the Texas economy is on stronger ground than many regions, it will likely weather any national slowdown or downturn better than most regions. In addition, government housing markets are more closely tied to underlying growth than speculation or temporary teleworker relocations. While some price decline is likely (and is actually a positive development given the lack of affordability), a major crash with any lasting impact is highly unlikely.
Texas’ younger population bodes well to meet long-term labor needs, although it is clearly imperative that young people in the state receive the education and training needed to prepare for the jobs of the future. Indeed, many areas of the United States (and indeed the nation as a whole) are seeing declining numbers of young people and will face acute labor shortages for decades to come. Another factor that will prove to be in Texas’ favor is continued immigration to the state.
Long-term economic growth will be influenced by future patterns in fossil fuel development. Texas is a key partner to ensure sufficient supply to meet demand and ensure energy security. The state will also be a leader in the renewable and emerging energy segments.
Our long-term forecast for the Texas economy shows that nearly 7 million net new jobs are expected to be created between 2021 and 2050, with the total reaching 19.9 million. Real gross product is expected to increase from about $1.6 trillion in 2021 to almost $3.9 trillion in 2050.
Texas has long been among the fastest growing states in the nation and was one of the first to return to pre-pandemic employment levels. There are clearly positive and negative factors driving the long-term outlook, many of which are still unknown, but fundamentals suggest the government economy will do well into 2050 and beyond.
dr M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 customers for the past four decades.