Despite the constant headwinds, the Texas economy is doing quite well, regaining ground lost during the COVID-19 shutdowns and then some. In fact, job growth in Texas between February 2020 (just before the pandemic) and October 2022 accounted for more than 80% of the net gain nationwide. While the state is well positioned to remain formidable, there are daunting challenges. Let’s take a short look at the long term.
The difficulties facing the national and global economies will clearly affect Texas. After all, the state is responsible for roughly one-sixth of all American exports. Inflation has remained stubbornly high and is just now 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 priced out, builders suspending plans and sellers cutting prices.
Because the Texas economy is on firmer ground than many other areas, it will likely ride out any national slowdown or downturn better than most regions. Furthermore, state housing markets are more tied to underlying growth than to speculation or the temporary relocation of remote workers. While some reduction in prices is likely (and actually a positive development given the lack of affordability), a major crash with long-term consequences is highly unlikely.
Texas’ younger population bodes well for meeting long-term workforce needs, although it is clearly imperative that the state’s young people receive the education and training needed to prepare them for the jobs of the future. Many areas of the United States (and indeed the nation as a whole) are actually experiencing a decline in the number of young people and will face acute labor shortages in the coming decades. Another factor that will prove to be an advantage for Texas is the continued migration to the state.
Long-term economic growth will be affected by future patterns of fossil fuel development. Texas is an essential partner in ensuring sufficient supply to meet demand and ensure energy security. The state will also be a leader in renewable and emerging energy segments.
Our long-term forecast for the Texas economy indicates that nearly 7 million net new jobs are expected to be created between 2021 and 2050, bringing the total to 19.9 million. Real gross product is expected to grow from about $1.6 trillion in 2021 to nearly $3.9 trillion in 2050.
Texas has long been among the nation’s fastest-growing states and was one of the first to return to pre-pandemic employment levels. There are clearly positive and negative factors defining the long-term outlook, many of which are still unknown, but the fundamentals suggest that the state’s economy will perform well through 2050 and beyond.
Dr. M. Ray Perryman is President and CEO of The Perryman Group (www.perrymangroup.com), which has served the needs of more than 3,000 clients over the past four decades.