Reports of Texas’ “economic stumble” were an exaggeration

This commentary originally appeared in Forbes on June 26, 2015.

“The report of my death was an exaggeration.” Samuel Langhorne Clemens (Mark Twain)

“I’ve been meaning to write about the Texas economic stumble…” Paul Krugman

When the New York Times columnist Paul Krugman wrote about “the Texas economic stumble” on June 4, 2015, he was doing so after Texas’ nonfarm employment took a hit, losing 25,200 jobs in March for a total January to April loss of 7,100 jobs. In the wake of a significant decline in oil and gas prices, Krugman might be excused to think that what he dubbed the “The Texas Unmiracle” back in 2011 truly was all about oil and raw population growth as he claimed at the time.

But, 15 days after Krugman gloated about Texas’ stumble, the U.S. Bureau of Labor Statistics reported that Texas added 33,200 jobs in May, the third-largest monthly increase among the states, putting Texas firmly back in the growth column.

Significantly, the price of the benchmark West Texas Intermediate crude was $55 per barrel in May, 2015; about half of what it was only 10 months earlier.

So, how important are oil and gas jobs to the Texas economy? The answer is, not as much as the claims of those who seek to discount Texas’ economic success.

From 1990 to May 2015, Texas added 4.8 million nonfarm jobs, expanding employment by 68.5 percent. In the same period, the mining and logging subset of nonfarm jobs, the vast majority of which in Texas are oil and gas jobs, grew by 137,100, or 87.4 percent. Subtracting these jobs from the nonfarm total yields job gains of 4.7 million, or 68.1 percent.

Looking at this job growth another way, nonfarm jobs, less mining and logging jobs, grew at an annual average rate of 2 percent per year in Texas from 1990 to 2014. Over the same period, employment in Texas’ mining and logging sector averaged 1.96 percent of total nonfarm employment. In other words, Texans employed in the extractive sector of the economy averaged less than the annual growth of jobs outside that sector of the economy—one year’s average job growth in Texas more than equaled the average total employment within the mining and logging sector of which oil and gas extraction was the main part.

The graphic below charts jobs in the oil and gas sector as a percentage of total nonfarm employment as well as oil and gas extraction’s share of Texas’ private economy from 1980 to present. It shows that Texas’ economy has diversified significantly, through its lower taxes, lighter regulatory burden (including on housing, which contributes to lower housing costs), and lawsuit reform.

To drive the point home as to of how diversified the Texas economy is, in 2012, Texas surpassed California in the value of its technology exports. That year, Texas exported $45 billion in technology products supporting 331,000 jobs, 24 percent more than employment in the mining (oil and gas) and logging sector that year.

Discounting traditional energy jobs, California’s boosters counter by touting “green” jobs, with that loosely-defined sector employing 360,245 people in the Golden State in 2011—about 2.5 percent of nonfarm employment—as compared to 227,532 in Texas. To boost employment counts in this in vogue sector of the economy, government statisticians counted jobs at recycling centers, landfills, and battery plants. Even so, green employment in Texas in 2011 was only 6,000 fewer than in the mining and logging sector.

Ironically, even with the charitably loose definition of green jobs artificially boosting employment numbers, the Obama Administration saw fit to discontinue its short experiment in counting them. In doing so, it cited the need to save $30 million from the Bureau of Labor Statistics budget due to Sequestration. As a result, the administration was saved the embarrassment of trying to tout anemic growth of an inflated but still tiny green jobs base.

Summarizing Texas’ job picture over the last 12 months, the state shed 9,300 jobs in the mining (oil and gas) and logging sector but added 295,700 jobs in the rest of the economy, for a net gain of 286,400 jobs.

Perhaps reports of Texas’ “economic stumble” were an exaggeration.

Chuck DeVore is Vice President of Policy at the Texas Public Policy Foundation. He served as a California State Assemblyman. He is a lieutenant colonel in the U.S. Army (retired) Reserve.