Staying Put – Dr. M. Ray Perryman

The number of people moving to Texas from other states is slowing markedly. The primary reason is that the national economy has become stronger over the past few years and most areas are at or near full employment, diminishing the comparative advantage and some of the rush to the Lone Star State. Given the current relatively low Texas unemployment rate, this could create greater workforce challenges.

Texas entered the Great Recession later than most parts of the country and exited sooner. The state’s real estate market wasn’t unscathed, but the problems were far more manageable here than elsewhere. As economies across the nation and around the world struggled to regain footing, Texas emerged as a place where jobs were more plentiful, leading people to flock to the state.

This trend continued for a number of years, with lackluster performance in many parts of the country generating few opportunities. Simultaneously, the Texas energy sector was kicking into high gear and basically revolutionizing not only the areas proximate to production regions, but also spawning growth in the thousands of companies across the state related to or supporting the industry.

Employment growth is maintaining a strong pace. Between August 2018 and August 2019, Texas gained 303,500 net new jobs, more than any other state except for California (which is significantly larger in terms of population and employment). The 2.4% expansion rate compares well with most of the United States. In addition, Texas continues to chalk up wins in terms of major corporate locations and expansions.

All good news, but only as long as the balance doesn’t shift to the point where a lack of available workers constrains growth. There are some indications we are already there or getting close, with various researchers (including me) already expressing the opinion that a lack of workers is hampering growth. More restrictive immigration policies only make the situation worse.

Over the past two years, unemployment rates in Texas and the US have been basically the same. Clearly, there are reasons to move to the Lone Star State besides jobs (such as cost of living, business climate, weather, more affordable housing, and the lack of an income tax). Even so, many people want to stay put due to family and friends, moving expenses, and other factors.

The aging US population and the ongoing retirement of Baby Boomers in large numbers will contribute to tighter labor markets across the nation. With economic strength in numerous parts of the nation, the flow of workers to Texas is unlikely to increase substantially. Dealing with worker shortages will require innovative solutions ranging from enhanced flexibility to better training to more effective use of technology. The good news – markets work!!

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