Recently, the U.S. Bureau of Labor Statistics’ released the regional and state employment report for December 2013. This report provides valuable data that supports the strong labor market over the last year in Texas. In fact, these data show the state’s labor market strength compared with the national average and other states, providing reason to call the last decade “The Texas Decade.”
According to the report, last month the Lone Star State had the highest net nonfarm payroll job gains (+17,600) to bring the total employed to 11.3 million. Florida (+14,100) and California (+13,600) round out the top three.
The increase in employment in Texas dropped the state’s unemployment rate to 6 percent-the fifth consecutive monthly decline. The state’s unemployment rate has now been at or below the national average (currently 6.7 percent) since January 2007, or 84 months! And compared with its big-government counterpart, California (currently 8.3 percent), Texas’ rate has been at or below for 89 consecutive months (see unemployment rate figure).
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Unfortunately, with so many individuals dropping out of the labor market nationwide and a large increase in a state’s labor force compared with others states, the unemployment rate tends to poorly signal the health of a state’s or the nation’s labor market.
For example, if an unemployed person drops out of the labor force, this reduces the numerator (unemployed) and the denominator (labor force), lowering the unemployment rate without an improvement in the labor market.
Since the last economic recession ended in June 2009, California’s and the national average’s unemployment rates have declined, but this follows a dramatic decline in their labor force participation rates (see labor force figure), contributing to lower unemployment rates than they otherwise would be.
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However, with a huge net in-migration from other states to the Lone Star State, Texas’ labor force participation rate is roughly unchanged over this period, making the state’s lower unemployment rate even more impressive!
How has Texas kept its unemployment rate low despite a large increase in its population and not much change in its labor force participation rate? Relatively high employment growth rates.
In 2013, the employment growth rate in Texas (+2.3 percent) is fourth best in the nation after North Dakota (+4 percent), Florida (+2.6 percent), and Oregon (+2.4 percent) and ranks far ahead of California (+1.6 percent) and the U.S. average (+1.6 percent). Over the last decade, Texas’ annual job growth rate has been much higher than California and the U.S. average (see annual job growth figure).
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In 2013, employers in Texas added the most jobs (+252,400), which is +16,700 more than the next highest job-producing state, California. With California having a much larger population and fewer people moving there compared with Texas, these employment numbers are remarkable.
A better measure of employment at the national and state levels is the employment-population ratio. This ratio allows a clearer signal about those who are employed (numerator) relative to the population (denominator) and accounts for those who have dropped out of the labor market. From the employment-population figure, there is little doubt that the last decade should be considered the “Texas Decade” for job creation.
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A declining labor force participation rate in California and across the nation have contributed to a large decline in their employment-population ratios, but Texas’s rate has been near or above these rates every month since January 2004 and remains substantially above them since the end of the last recession.
The Texas Model of low taxes, government spending, and regulation is often touted here at the Foundation; but with success stories such as this last year’s and last decade’s labor market story, there is reason to brag!
With all this success, there remain steps the Texas Legislature should take to provide more transparency, more accountability, and less government to reap another decade of labor market success.
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