The Ginn Economic Brief: Texas Economic Situation – August 2023

August 25, 2023
Vance Ginn
Budget Surplus, Corporate Welfare, Property Tax, Spending, State Budget

Texas is a leader in job creation over the last year and since February 2020. But Texas faces major headwinds as the recently ended 88th Legislature looked more like California than what is expected from the free-market bastion of hope and prosperity in Texas.

  • This included the largest spending increase, largest corporate welfare, and subsequent second-largest property tax cut in the state’s history.
  • Texas should pass universal education savings accounts this year during what will likely be the third special session called by Gov. Greg Abbott (R) in October 2023.
  • Texans should expect more from the largest red state in the country.

The best path to let people prosper is free-market capitalism as it is the best economic institution that supports jobs and entrepreneurship for more people to earn a living, gain skills, and build social capital.

Table 1 shows Texas’ labor market for July 2023 from the U.S. Bureau of Labor Statistics.

Table 1. Texas Labor Market Trends

December 2007February 2020April 2020July 2023
Labor force participation rate65.7%63.8%60.3%64.2%
Employment-population ratio62.8%61.6%52.6%61.6%
Unemployment rate (U3)4.4%3.6%12.8%4.1%
Total nonfarm employment10.57M12.97M11.51M13.97M
Private sector employment8.78M10.96M9.56M11.92M
Data compare: 1) June 2009—Dated trough of that U.S. recession,2) February 2020—Dated peak of the last U.S. expansion,
3) April 2020—Dated trough of the last U.S. recession, and 4) July 2023—Latest data available.

The labor market continues to improve in Texas even as there are some weaknesses remaining.

  • The payroll survey shows net nonfarm jobs in Texas increased by 26,300 last month, resulting in increases for 38 of the last 39 months, to bring record-high employment to 13.97 million. Texas has set a new record high in total nonfarm employment for 22 straight months.
  • Compared with a year ago, total employment was up by 441,700 (+3.3%)—the second fastest growth rate in the country—with the private sector adding 392,300 jobs (+3.4%) to 11.92 million and the government adding 49,400 jobs (+2.5%) to 2.05 million.
  • Figure 1 shows that inflation-adjusted average weekly earnings are increasing in most industries in Texas with inflation still running hot at least at 3.2%.

Figure 1. Texas’ Labor Market by Industry

  • The household survey shows that the labor force participation rate is higher and the employment-population rate matches those in February 2020, but the former is well below December 2007 at the start of the Great Recession.
  • The state’s unemployment rate of 4.1% is higher than the U.S. rate of 3.5% but this is a weak indicator as it’s highly volatile based on changes in the labor force.
  • Shortages in the labor market are across the economy as many still sit on the sidelines from profligate safety nets primarily from the federal government over the last three years.

The economy continues to expand in Texas though there are headwinds.

  • The U.S. Bureau of Economic Analysis (BEA) reported the real gross domestic product (GDP) by state for 2022.

Figure 2 shows Texas had the fifteenth fastest real GDP growth of +3.0% to $1.94 trillion (above the U.S. average of +2.0% to $20.28 trillion).

Figure 2. Texas had the 15th Highest Real GDP Growth in 2023:Q1

  • The BEA also reported that personal income in Texas grew by 6.7% to $1.94 trillion in Q1:2023 which was the 22nd highest in the country. This is above the U.S. growth rate of 5.1% (to $22.51 trillion).

As Texans face an affordability crisis from high inflation and high property taxes and an uncertain future with the U.S. economy likely in a deepening recession, the Legislature provided some tax relief but nearly enough because of excessive spending.

  • Other states are cutting, flattening, and phasing out taxes, passing responsible budgets, and passing school choice, so Texas should have made bold reforms to support more opportunities to let people prosper, mitigate the affordability crisis, and withstand destructive policies out of D.C.
  • Figure 3 provides a comparison of the size of government, economic freedom, and economic outcomes among the four largest states and nearby Louisiana.

Figure 3. Comparison of Key States

MeasureU.S.FloridaTexasTennesseeGeorgiaLouisianaCaliforniaNew York
Economic Freedom of North America (2020)7th (World)1st4th4th8th20th49th50th
State Migration Trends, Most Inbound (2022)1st4th11th12th48th41st50th
State Business Tax Climate (2023)4th13th14th32nd39th48th49th
State Economic Outlook (2023)9th13th11th12th26th45th50th
State & Local Spending Per Capita (2022)46th37th45th48th26th4th2nd
S&L Spending on Public Welfare Per Capita (2020)47th44th31st49th12th5th1st
S&L Tax Burden Per Capita (2022)11th6th3rd8th12th46th50th
S&L Property Tax Collections Per Capita (2020)22nd39th4th19th7th36th46th
Composite Cost of Living Index (Q1:2023)31st17th10th12th14th49th48th
Avg. U-3 Unemployment Rate (2003-22)6.0%5.6%5.6%6.0%6.3%5.9%7.3%6.2%
Avg. Labor Force Participation Rate (2003-22)64.0%60.6%65.2%61.8%64.4%60.1%63.5%61.5%
Avg. Annual Nonfarm Payroll Growth (2003-22)0.8%1.4%1.8%1.0%1.1%0.1%1.0%0.6%
Avg. Top 5% Income Shares (2003-18)36.9%44.6%36.8%33.6%34.2%32.2%39.4%47.1%
Official Poverty Measure (2019-21)11.2%12.5%12.9%12.2%13.1%17.2%11.0%12.3%
Supplemental Poverty Measure (2019-21)9.6%11.9%10.4%9.1%10.2%11.7%13.2%12.1%
Note: Dates in parentheses are for that year or the average of that period. Data shaded in blue indicate “best,” and in red indicate “worst” per measure by state.
  • While Texas does relatively well, there is much more to do for more liberty and prosperity.

The Texas Legislature should improve the Texas Model by:

Strengthening the Texas Model will help Texans better resist D.C.’s overreach and flourish more for generations to come.

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