By Vance Ginn and Owen Smitherman
On Tuesday, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) released the real gross domestic product (GDP) growth numbers for all 50 states in the fourth quarter of 2015. Along with revised figures for the previous three quarters, the BEA also released updated GDP growth for all of 2015.
One conclusion is remarkably evident from these data: the Texas miracle is still alive and well.
Despite the massive drop in oil prices (the average price of oil dropped from $105.78 in June 2014 to $37.34 in December 2015), the Texas economy has continued to grow rapidly, outpacing the national trend and most of its economic contemporaries. In the face of lower commodity prices, diversified industries, a fiscally responsible government, and a lessened dependence on production in the oil and gas sector have enabled the state to prosper.
Table 1 illustrates that the nationwide economic trend was generally positive, with some negative outliers. United States GDP grew 2.4 percent in 2015, a slight uptick from 2.2 percent in 2014.
Regionally, the Far West states grew the most (3.8 percent) and the Plains and New England economies barely advanced (1.3 percent). California, Oregon, and Texas had the greatest growth while Alaska, North Dakota, and West Virginia had the least.
At first glance, Texas growth in the most recent quarter looks unimpressive; the state GDP only grew 1.4 percent in the fourth quarter of 2015, which ranked as only the 29th highest of 50 states. However, robust growth of 7 percent in the first quarter compensated for weak performances of -2.3 percent and 1.3 percent in the 2nd and 3rd quarters, respectively. Accordingly, the growth rate for the entire year of 2015 was much better; Texas GDP grew a strong 3.8 percent, which ranked 3rd in the nation, only behind Oregon and California. This growth is remarkable considering that the state also grew 3.8 percent in 2014, when oil prices began to collapse.
Texas also outperformed many of its economic competitors in 2015. Among states that have a significant amount of oil and gas production, Texas grew the fastest (3.8 percent), outperforming Oklahoma (1.3 percent), Alaska (-0.5 percent), and North Dakota (-2.2 percent). Among states with largest four economies, Texas surpassed both New York (1.4 percent) and Florida (3.1 percent) and was only slightly below California (4.1 percent).
Texas has grown more than any other state since 2013, except Colorado (the two states are virtually tied at increases around 7.7 percent). The tales of the state’s demise are greatly exaggerated; Texas is not a petrostate solely dependent on the sale of fossil fuels. Rather, economic diversification and limited government have empowered the Texas economy to continue prospering, irrespective of oil prices.