Texas’ Economic, Labor Market,

and Fiscal Situation

Vance Ginn, Ph.D.
Director, Center for Economic Prosperity
& Senior Economist at the
Texas Public Policy Foundation

Updated Monthly – June 2018

Email: vginn@texaspolicy.com
Website: www.texaspolicy.com
Twitter: @vanceginn
 Outline
Information on Texas’ economy, labor market, and
fiscal situation.

Updated monthly with latest jobs data and

periodically with other economic and fiscal data.

Conservative Texas Budget priorities for prosperity.

 Economic & Fiscal Situation
 Texas is 10th largest world economy, excluding CA:
Economy grew faster in 2017 after slower 2015 & 2016
Federal tax & regulatory reforms likely 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 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 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
New
Measure U.S. Texas Florida California
York

Economic Freedom of North America (2017) 11th (World) 2nd 2nd 49th 50th

State Business Tax Climate Index (2017) -- 13th 4th 48th 49th
State-Local Tax Burden (2016) -- 46th 34th 6th 1st
Avg. U-3 Unemployment Rate (2000-17) 6.4% 5.8% 6.3% 7.7% 6.2%
Avg. U-6 Underutilization Rate (2003-17) 11.6% 10.5% 12.0% 14.3% 11.1%
Avg. Labor Force Participation Rate (2000-17) 65.0% 66.1% 61.7% 64.6% 62.1%
Avg. Employment-Population Ratio (2000-17) 61.0% 62.3% 58.0% 59.9% 58.3%
Avg. Emp-Pop 25-54 year old Ratio (2000-17) 77.6% 77.3% 77.5% 75.2% 76.1%
Total Civilian Emp (12/07-12/17), exclude TX +5,723,000 +2,024,000 +979,000 +1,564,000 +132,000
Total Nonfarm Emp (12/07-12/17), exclude TX +7,424,000 +1,790,000 +728,000 +1,523,000 +804,000
Avg. Top 10% Income Shares (2000-15) 47.8% 47.0% 55.0% 50.2% 57.1%
Supplemental Poverty Measure (2014-16) 14.7% 14.7% 18.7% 20.4% 16.0%

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, America’s Jobs Engine
Texas has created 24% of total U.S. employment increase since pre-Great Recession

8,000,000
6,500,000 U.S. MINUS TEXAS:
+7,000,000
5,000,000
TOTAL CIVILIAN EMPLOYMENT

3,500,000
2,000,000
500,000 TEXAS:
+2,201,000
-1,000,000
-2,500,000 U.S. minus Texas civilian
-4,000,000 employment wasn’t
positive until January 2015
-5,500,000
and didn’t surpass Texas
-7,000,000 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 12/2017

DATA ARE CUMULATIVE MONTHLY TOTAL CIVILIAN EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 5/2018.
 Texas has Created 19% of All Nonfarm
Jobs Since Great Recession Started
8,000,000 U.S. MINUS TEXAS:
6,500,000 +8,271,000

5,000,000
TOTAL NONFARM EMPLOYMENT

3,500,000

2,000,000

500,000 TEXAS:
+1,980,000
-1,000,000

-2,500,000
U.S. minus Texas nonfarm
-4,000,000 employment wasn’t
-5,500,000 positive until September
2014 and didn’t surpass
-7,000,000
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 12/2017

DATA ARE CUMULATIVE MONTHLY TOTAL NONFARM EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 5/2018.
 Texas Created 352,100 Net Nonfarm Jobs
During the Last 12 Months
5% 5%

3% 3%
ANNUAL NONFARM JOB GROWTH RATE

1% 1%

-2% -2%

-4% MAY 2018 -4%

U.S.: 1.6% CA: 1.8%
TX: 2.9% FL: 2.1%
-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 2018

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
 Texas' Unemployment Rate At or Below
5% for 46 Straight Months
11% 11%

MAY 2018
UNEMPLOYMENT RATE

U.S.: 3.8% CA: 4.2%

9% 9%
TX: 4.1% FL: 3.8%
NY: 4.5%

7% 7%

5% 5%

3% 3%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

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

Source: Dallas Fed, Texas Economy Starts 2018 Firing on All Cylinders
 Texas’ Labor Force Participation Rate
Remains Above Others Since 2009
68%
MAY 2018 68%
U.S.: 62.7% CA: 62.0%
TX: 63.9% FL: 59.4%
NY: 60.5%
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 2018

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
 Texas' Employed Population Rate
Remains Above Others Since 2008
66% 66%

64%
May 2018 64%
U.S.: 60.4% CA: 59.4%
TX: 61.3% FL: 57.1%
EMPLOYMENT-POPULATION RATIO

62% NY: 57.8% 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 2018

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
 Texas' Prime-Age Employed Population
Higher than Others Since 2009
82% 82%

AVERAGE 2003-17
U.S.: 77.6% CA: 75.2%
Employment Population Ratio: 25-54 Years

80% 80%
TX: 77.3% FL: 77.5%
NY: 76.1%
78% 78%

76% 76%

74% 74%

72% 72%

70% 70%
2003 2005 2007 2009 2011 2013 2015 2017
SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM
THE BUREAU OF LABOR STATISTICS.
Diversified Texas Economy Continues
Creating Jobs in Most Sectors

Source: Dallas Fed, Your Texas Economy.

Texas’ Metros Continue Positive Job Growth

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.
Job Growth Across Wage Quartiles, 2000–14

Source: TPPF, A Labor Market Comparison: Why the

Texas Model Supports Prosperity
 Not Just Low Wage Jobs: Job Growth
Across Wage Quartiles from 2005–2014

Source: Dallas Fed, Annual Report 2015

Real Average Hourly Wages Increase in 2017

Source: Dallas Fed, Texas Economy Finishes the Year

Firing On All Cylinders
Income Inequality Lower in Texas than Other
Large States and U.S. Average
65% 65%
AVERAGE 2000-15
U.S.: 47.8% CA: 50.2%
TX: 47.0% FL: 55.0%
60% NY: 57.1% 60%
TOP 10% INCOME SHARES

55% 55%

50% 50%

45% 45%

40% 40%
2000 2002 2004 2006 2008 2010 2012 2014
Source: Mark Frank, Sam Houston State University
 Texas 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, slower global growth & federal government
policies may be impediments, like trade & debt
But federal cuts in taxes and regulation boost
growth
4 million barrels of oil/day is highest
since at least 1981

Source: Dallas Fed, Your Texas Economy.

 Texas’ Manufacturing Sector
Continues to Expand

Source: Dallas Fed, Your Texas Economy.

 Texas’ Service Sector
Continues to Expand

Source: Dallas Fed, Your Texas Economy.

Record High Texas Median Home Price

Source: Dallas Fed, Your Texas Economy.

 Texas is America’s Export Leader
for 16 Consecutive Years

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 Comptroller’s
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: $94 M expected ending balance

 “Projecting continued modest expansion”
 8% Official Spending Limit by LBB
 $220 All Funds Spending $216 $217
Spending Adjusted for Population Growth and Inflation
$210 $203
$200
$201
$190 $185
$183
$180 $188
Billions

$167 $177
$170
$160 $168 THE BUDGET COULD BE $16 BILLION LESS
UNDER TPPF'S REFORMS, SAVING FAMILIES
$158 OF FOUR ABOUT $2,000 PER YEAR.
$150
$139
$140 $146
$130 $124 $135
$120
2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 2018-19*
Source: Legislative Budget Board's Fiscal Size-Up and authors' calculations. *indicates
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)
Gov’t 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 at the
Texas Public Policy Foundation

Email: vginn@texaspolicy.com
Website: www.texaspolicy.com
Twitter: @vanceginn