The Ginn Economic Brief: Texas Economic Situation – November 2023

November 28, 2023
Vance Ginn
Budget Surplus, Corporate Welfare, Property Tax, Spending, State Budget

Texas lost jobs in October and faces major headwinds with a weak U.S. economy and a poor performance by this year’s 88th Legislature. There is a better way.

  • This included the largest spending increase, largest corporate welfare increase, largest amount passed in constitutional amendments, and subsequent second-largest property tax cut in the state’s history.
  • Texas has yet to pass universal education savings accounts during the ongoing fourth special session called by Gov. Greg Abbott (R), and likely will not pass them until at least 2025.
  • Texans expect more from the largest red state in the country.

Free-market capitalism is the best path to let people prosper, 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 October 2023 from the U.S. Bureau of Labor Statistics. These data compare the following important dates: 1) June 2009—Dated trough of that U.S. recession, 2) February 2020—Dated peak of the last U.S. expansion before the COVID-19 shutdowns, 3) April 2020—Dated trough of the last U.S. recession, and 4) October 2023—Latest data available.

December 2007February 2020April 2020October 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 employment10.57M12.97M11.51M14.05M
Private sector employment8.78M10.96M9.56M11.98M

The labor market declined last month continuing a weakening trend in Texas.

  • The payroll survey shows net nonfarm jobs in Texas declined by 1,300 last month, resulting in the first decline after employment increases in 40 of the prior 41 months. This brings employment down to 14.04 million, breaking the streak of record highs for 24 straight months.
  • Compared with a year ago, total employment was up by 391,500 (+2.9%)—the third fastest growth rate in the country—with the private sector adding 339,400 jobs (+2.9%) to 11.98 million and the government adding 52,100 jobs (+2.6%) to 2.07 million.
  • Figure 1 shows that inflation-adjusted average weekly earnings are increasing in some industries in Texas, with inflation still running hot at least at 3.2%. Many Texans are struggling to keep up with less purchasing power from excessive spending by Congress, excessive regulations by President Biden, and excessive money printing by the Federal Reserve. But these are exacerbated by excessive state and local spending, high local property taxes, restrictive local zoning, and other factors in Texas.

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 3.9% but this is a weak indicator as it’s highly volatile based on changes in the labor force, and the labor force continues to increase in Texas unlike in many states.
  • 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 in 2023:Q1 (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 2023:Q1 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 not nearly enough because of excessive spending.

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.FloridaTennesseeTexasGeorgiaLouisianaCaliforniaNew York
Economic Freedom of North America (2021)5th (World)2nd3rd4th8th20th49th50th
State Migration Trends, Most Inbound (2022)1st11th4th12th48th41st50th
State Business Tax Climate (2024)4th15th13th32nd40th48th49th
State Economic Outlook (2023)9th11th13th12th26th45th50th
State & Local Spending Per Capita (2022)46th37th37th48th26th4th2nd
S&L Spending on Public Welfare Per Capita (2020)47th44th44th49th12th5th1st
S&L Tax Burden Per Capita (2022)11th3rd6th8th12th46th50th
S&L Property Tax Collections Per Capita (2020)22nd4th39th19th7th36th46th
Composite Cost of Living Index (Q3:2023)31st9th18th11th10th48th47th
Avg. U-3 Unemployment Rate (2003-22)6.0%5.6%6.0%5.6%6.3%5.9%7.3%6.2%
Avg. Labor Force Participation Rate (2003-22)64.0%60.6%61.8%65.2%64.4%60.1%63.5%61.5%
Avg. Annual Nonfarm Payroll Growth (2003-22)0.8%1.4%1.0%1.8%1.1%0.1%1.0%0.6%
Avg. Top 5% Income Shares (2003-18)36.9%44.6%33.6%36.8%34.2%32.2%39.4%47.1%
Official Poverty Measure (2019-21)11.2%12.5%12.2%12.9%13.1%17.2%11.0%12.3%
Supplemental Poverty Measure (2019-21)9.6%11.9%9.1%10.4%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, be more competitive with other states, and, more importantly, flourish more for generations to come.

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