Short-Term Outlook for the Texas Economy
The Texas economy is coming off a very strong 2018, and the state is attracting more major corporate locations and expansions than any other by a wide margin. At the same time, Texas’ most significant export industry, oil and gas, is growing at a phenomenal pace, and the entire state economy is benefiting.
Texas has the potential to continue to win in the highly competitive market for quality industrial growth, with a favorable combination of resources and a business-friendly mindset. It is imperative to keep pressing forward, however, as past success is not necessarily predictive. Investing in infrastructure and education to ensure future competitiveness is essential.
With multipliers among the highest in the economy, when the energy sector is surging as it is now, it generates a high level of other business activity for companies across the spectrum. Oil and gas jobs generally pay well and royalties are substantial, resulting in high consumer-oriented impacts. Moreover, petroleum products are top export categories. The combination of technological change, rising global energy demand, major new discoveries in the Permian Basin region, continued development of other fields across the state, dramatic cost reductions, and expectations of a favorable market environment and infrastructure development has created a new paradigm in which sustained drilling and extraction programs are beginning to replace the “boom and bust” pattern that has persisted for at least the past century.
The Perryman Group’s most recent short-term forecast indicates growth in Texas real gross product at a 3.82% annual pace over the next five years, resulting in an increase of approximately $364.1 billion (from $1.7 trillion in 2018 to $2.1 trillion in 2023). An estimated 1.4 million net new jobs are expected to be generated over the period, a 2.02% annual rate of increase projected to push total employment from 13.0 million to 14.4 million. Both of these rates of growth are significantly higher than the national rates of 2.61% per year for US real gross product and 1.51% per year for US employment.
A number of factors are contributing to expansion in the Texas economy. A diverse set of industries are growing, including manufacturing, technology, health care, professional services, and others with the potential to generate notable future jobs and opportunities. Oil and natural gas exploration, production, exports, and related activity are expected to remain major sources of stimulus. In short, the state economy is among the most dynamic in the nation.
Although there are challenges which could dampen the pace (such as national economic conditions, workforce shortages, trade wars, or escalating tensions around the globe), The Perryman Group’s most recent short-term Texas forecast is decidedly positive.