This commentary appeared in Texas Scorecard in February, 2015.
The U.S. Bureau of Labor Statistics released the Regional and State Employment and Unemployment Summary for December 2014. The figures below provide illustrations of the Texas model’s success story.
The first figure shows data indicating that December marked the 96th consecutive month that the Lone Star State’s unemployment rate has been at or below the national average. Texas’ rate has also been well below the other three states with the largest economies and populations. In fact, Texas has had a lower rate than California since August 2006— that’s 101 consecutive months.
The second figure notes that this unemployment rate feat is even more impressive when you consider how many people have stopped looking for work. While the nation’s reported 5.6 percent unemployment rate is near what some consider “full employment,” it doesn’t tell the whole story as noted by the drop in the labor force participation rate. If you include the unemployed, underemployed, and discouraged workers, the U-6 rate is closer to 11 percent. This more realistic rate is why many still consider the labor market depressed.
The third figure presents data showing that Texas’ share of the population employed has rebounded since the 2008-09 recession and is substantially higher than the national average and other states. These data also provide a better picture of the true state of labor markets instead of the false signal of a lower unemployment rate from people stopping their job search, which relative to these other entities has not been the case in Texas.
The fourth figure shows that annual job creation in Texas has been robust relative to these other rates. Instead of people dropping out of the labor force or leaving the state, like in California, people are flocking to Texas. By creating net nonfarm jobs at a record-breaking clip of 457,900 in 2014, Texas has continued to add jobs faster than those entering the labor force. This job growth translates into a 4 percent annual pace statewide and an even faster rate of 4.4 percent for the productive private sector
Despite a 55 percent drop in oil prices since last June, even the mining and logging sector added 4,900 net jobs in December for a net gain of 2,600 over the last two months. Texas is a much more diversified economy than it was in the 1980s. The mining industry, which is dominated by oil and gas activity, was 21 percent of the state’s private economy in the early 1980s; today it is about 15 percent. The mining industry is less than 3 percent of labor force today compared with 5 percent then. Though the state is more resilient to oil price fluctuations, this is an area to watch in upcoming months if oil prices remain subdued for a prolonged period.
Similar to a fireworks show, I save the last two figures for the grand finale. These figures show that Texas has been the nation’s primary job creator since the last national recession started in December 2007. Also notice that total employment didn’t decline during the 2008-09 recession when oil prices dropped substantially more than they have in the last seven months— another indication that the current oil price drop may not cause severe consequences. Even the nonfarm job losses were merely a blip compared with the rest of the nation.
At the end of the day, lower oil prices help Texans pay less at the pump. The statewide price of regular gas at $1.84 is half what it was last summer. This leaves more money in Texans’ pockets to spend as they see fit, helping boost the economy, job growth, and sales tax revenue. To build on the Texas model’s success, extra funds available to the 84th Texas Legislature should go to provide tax relief. Along with potential tax relief, today’s employment report should help keep the working poor and all Texans upbeat about their future.