Texas Economic, Labor Market,

and Fiscal Situation

Vance Ginn, Ph.D.
Director, Center for Economic Prosperity
Senior Economist

Updated Monthly November 2017

Email: [email protected]
Website: www.texaspolicy.com
Twitter: @vanceginn
 Outline
Information about the state of Texas economy,
labor market, and fiscal situation.

Updated monthly to include the latest jobs data

and periodically when other economic and fiscal
data are updated.

Conservative Texas Budget priorities for prosperity.

 Economic & Fiscal Situation to Prosperity
Texas is 11th largest world economy, including CA:
Economy growing faster after slower 2015 & 2016
Federal pro-growth reforms could boost growth
Federal Reserve tightening credit: rates too low for too long
Low oil prices (~10% of real private economy/+20% in 80s)

2015 Texas Legislature:

Passed a 2016-17 conservative budget
Left billions of dollars on table & $10 B in Rainy Day Fund
Passed $4 B in tax and fee relief

2017 Texas Legislature:

Sustained 2016-17 conservative budget with supplemental
Passed a 2018-19 conservative budget
Spent $1 B in RDF & Delayed $1.8 B transportation funds
Did not raise major taxes or fees
 Institutions Matter: Texas Model Works

Source: TPPF, A Labor Market Comparison: Why the Texas Model

Supports Prosperity (updated)
 U.S. Labor Market Sends Mixed Signals
68% 11%

66%
9%

64%
7%

62%

5%
60%

Labor Force Participation Rate

3%
58% Employment-Population Ratio
Unemployment Rate (right axis)

56% 1%
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Source: BLS, https://www.bls.gov/news.release/empsit.nr0.htm

 Texas, Americas Jobs Engine
Texas has created 25% of total U.S. employment increase since pre-Great Recession
6,500,000
U.S. MINUS TEXAS:
5,000,000
+5,675,000
3,500,000
TOTAL CIVILIAN EMPLOYMENT

2,000,000

500,000 TEXAS:
+1,913,000
-1,000,000

-2,500,000
U.S. minus Texas civilian
-4,000,000
employment wasnt
-5,500,000 positive until January 2015
-7,000,000 and didnt surpass Texas
until November 2015.
-8,500,000
N
12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016

DATA ARE CUMULATIVE MONTHLY TOTAL CIVILIAN EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 10/2017.
 Texas has Created 21% of All Nonfarm
Jobs Since Great Recession Started
6,500,000 U.S. MINUS TEXAS:
5,000,000 +6,764,000
3,500,000
TOTAL NONFARM EMPLOYMENT

2,000,000

500,000 TEXAS:
-1,000,000 +1,833,000

-2,500,000

-4,000,000
U.S. minus Texas nonfarm
employment wasnt
-5,500,000 positive until September
-7,000,000 2014 and didnt surpass
Texas until March 2015.
N
-8,500,000
12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016

DATA ARE CUMULATIVE MONTHLY TOTAL NONFARM EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 10/2017.
 Texas Created 316,100 Net Nonfarm Jobs
During the Last 12 Months
6% 6%

4% 4%
ANNUAL NONFARM JOB GROWTH RATE

2% 2%

0% 0%

-2% -2%

-4% OCTOBER 2017 -4%

U.S.: 1.4% CA: 1.5%
TX: 2.6% FL: 2.3%
-6% NY: 1.1% -6%

-8% -8%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
 Texas' Unemployment Rate At or Below
5% for 40 Consecutive Months
13% 13%

11% 11%

OCTOBER 2017
UNEMPLOYMENT RATE

9% U.S.: 4.1% CA: 4.9% 9%

TX: 3.9% FL: 3.6%
NY: 4.8%

7% 7%

5% 5%

3% 3%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
Lower Unemployment Rates in Texas
Since Great Recession

Source: Dallas Fed, Less Involuntary Part-Time Work

Suggests Texas Economic Strength, Third Quarter 2016.
 Texas' Employed Population Rate
Remains Above Others Since 2008
66% 66%

64% October 2017 64%

U.S.: 60.2% CA: 59.4%
TX: 60.6% FL: 57.3%
EMPLOYMENT-POPULATION RATIO

NY: 58.2%
62% 62%

60% 60%

58% 58%

56% 56%

54% 54%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM
THE BUREAU OF LABOR STATISTICS.
 Texas Labor Force Participation Rate
Remains At/Above Others Since 2009
OCTOBER 2017
68% U.S.: 62.7% CA: 62.4% 68%
TX: 63.0% FL: 59.4%
NY: 61.2%
66% 66%
LABOR FORCE PARTICIPATION RATE

64% 64%

62% 62%

60% 60%

58% 58%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
Texas Job Creation Positive in Most Sectors
in 2017, Energy Sector Rebounds

Source: Dallas Fed, Your Texas Economy.

 Texas Metro Areas have Positive Job
Creation in 2017, Houston Rebounds

Source: Dallas Fed, Your Texas Economy.

Texas has Smaller Share of Part-Time
Workers than Rest of U.S.

Source: Dallas Fed, Less Involuntary Part-Time Work

Suggests Texas Economic Strength, Third Quarter 2016.
 Not Just Low Wage Jobs: Job Growth
Across Wage Quartiles from 20052014

Source: Dallas Fed, Annual Report 2015

Job Growth Across Wage Quartiles, 200014

Source: TPPF, A Labor Market Comparison: Why the

Texas Model Supports Prosperity
 Economic Challenges
Mining industry 1980s:
21% of real private economy; 5% of labor force
Mining industry today:
~10% of real private economy; ~2% of labor force
More diversification from market activity, NAFTA,
pro-growth policies
Still, lower oil prices, slower global growth, &
federal government policies may be impediments
TX will one day have another recession
 Oil prod/day down only 3% in Texas since
March 15 high despite 55% drop in oil prices

Source: Energy Information Administration &

Dallas Fed, Your Texas Economy.
 Texas Manufacturing Sector
Continues to Expand

Source: Dallas Fed, Your Texas Economy.

 Texas Exports Rebound
as Energy Sector Rebounds

Source: Dallas Fed, Your Texas Economy.

 Fiscal Prospects Support Opportunity
No recent examples of consecutive conservative
budgets, defined as growth less than pop+inf:
2003 dealt with a $10 billion shortfall and passed a
conservative budget but massive spending increase in 2005
2011 passed a budget below pop+inf but delayed payments
for Medicaid & education led to a large increase in 2013

2015: Passed potential 2016-17 conservative budget,

provided tax relief, and left money on the table

2017: Sustained 2016-17 conservative budget, passed

potential 2018-19 conservative budget, and did not
raise major taxes or fees
Revenue Problem in 17? More GR Available
Excluding Lege Priority on Transportation

Source: Texas Comptroller, Biennial Revenue Estimate

 Footprint of Government: Total Revenue
Estimated Up 7.5% Above 2016-17 Approps

Source: Texas Comptroller, Biennial Revenue Estimate

CRE Higher Than BRE Primarily Because
Legislature Delayed Transportation Funds

Source: Texas Comptroller, Certification Revenue Estimate

 Texas Comptrollers
Certification Revenue Estimate 2018-19
FY2016 (CRE) FY2017 (CRE) FY2018 (CRE) FY2019 (CRE)
$ in Thousands
Actual Estimated Estimated Estimated
Real GDP 0.3% 3.0% 3.7% 3.2%
Nonfarm Employment 1.4% 2.0% 2.1% 2.0%
Unemployment Rate 4.6% 4.7% 4.4% 4.1%
Taxable Oil Price $41.40 $48.77 $50.00 $53.00
Sales Tax $28,245,801 $28,900,035 $30,490,044 $32,040,056
Franchise Tax $3,881,176 $3,242,219 $3,581,406 $3,792,687
Total Tax Collections $48,476,226 $49,643,422 $52,300,554 $54,813,042
Total Net Revenue $111,280,871 $111,195,221 $111,468,208 $113,080,421

2018-19: $940 M expected ending balance

Projecting continued modest expansion
8% Official Spending Limit by LBB
 $209
$210 $203
All Funds Spending
$200
Spending Adjusted for Population Growth and Inflation
$190 $185
$183
$180 $187
$167
Billions

$170 $177

$160 $168

$150 $158
$139
$140 $146
$130 $124 $135
$120
2004-05 2006-07 2008-09 2010-11 2012-13 2014-15* 2016-17*
Note: Find explanation here.
*Includes delayed $1.8 billion Proposition 7 transportation payment
Note: Find explanation here.
 2018-19 Total Approps: $218.4 B
with $1.8 B transportation fund delay
(4.46% increase)
$58.5 B,
$71.8 B, Other $79.5 B,
Federal Health &
Funds $106.6 B, Human
General Services
Revenue

$6.4 B, GR- $80.4 B,

Dedicated $33.6 B, Education
Other
 Rainy Day Fund: CRE $11.2 billion
85th Legislature Appropriated $990 M

Source: Texas Comptroller, Legislative Budget Board, and TPPF

*Includes delayed $1.8 billion Proposition 7 transportation payment
Note: Find explanation here.
 Conservative Texas Budget Coalition:
Fiscal Recap of the 2017 Legislative Session
Passed a conservative budget at this stage with the
2018-19 budget increase of 4.46% < pop+inf of 4.5%
Failed to eliminate the business margin tax
May provide meaningful property tax reform (Special)
May reform weak tax and expenditure limit (Special)
Failed to create the Sales Tax Reduction (STaR) Fund
Passed increase in budget transparency (need more)
Govt spending is ultimately paid for by taxation,
so we must control spending to have the best
opportunity for Texans to prosper.
Taking these steps now and in the future will
secure that the American Dream is not dead
it has simply moved to the Lone Star State.
Texas Economic, Labor Market,
and Fiscal Situation
Vance Ginn, Ph.D.
Director, Center for Economic Prosperity
Senior Economist
[email protected]
www.texaspolicy.com
@vanceginn