Relax: Texas' Economy Looks Fine, Study Says
May 10, 2011
Which first, the goods news or the slightly less good news? Either way, you win: It looks like the Texas economy will keep growing at a fairly robust pace, albeit slower. According to the most-recent Texas Economic Quarterly, a publication from Comptroller's Office economists, ``barring a major economic catastrophe, the state will continue to experience moderate economic growth through the end of this century.'' But the slowdown in the national economy will have an effect in Texas. After experiencing near-boom rates of growth around 4% in 2009 and 2010, gross state product will steadily slow to a 2.5% expansion in 2013, the Comptroller's Office predicts. Population growth will also decline, to 1.4% a year in 2013 from an annual rate of 2% in 2009. Why? Migration into Texas from the rest of the country will slow, as ``the gap between state and national economic growth tapers off,'' the quarterly report says. Here is how the Comptroller's Office sees prospects for some major Texas industries: Agriculture: It's hurting. The economists say that if the drought continues, it would cause roughly the same kind of pain that the Mexican peso crash did -- ``major local impacts but a relatively small effect on the overall state economy.'' Construction: A strong state economy, a continued influx of residents from other states, relatively low mortgage rates and firming residential and commercial occupancy rates will keep building activity at today's high levels, the report says. Finance, Insurance, Real Estate: Because of the 1980s collapse of banking and real estate, combined with '90s restructuring and technological changes, it's impossible to predict the outlook. ``The best one can do is to predict relatively slow growth for these industries and then hope for more,'' the economists write. Manufacturing: For two years, rapid growth has been spurred by the high-tech sector. But that's going to slow dramatically in Texas as it does in the rest of the world, the report predicts. Growth in Texas' other manufacturing sectors will also slow substantially. Oil and Gas: According to the report, somewhat higher energy prices and increased demand won't spur much domestic drilling, but employment will remain stable at around 155,000 through 2013. Services: In 2010, business, professional, health and other services generated almost 40% of all new jobs. Services will remain the biggest sources of new jobs, but growth will slow with the overall economy, the Comptroller's economists forecast. Transportation: This industry is closely linked to manufacturing and the fitness of wholesalers that directly serve the retail market. So look out, the economists warn. Manufacturing is expected to slow, and retail sales will suffer because of slowing personal income growth and high consumer debt. After increasing by 4% last year, employment growth in transportation will average 2.6% annually through 2013. To many people, one of the great economic surprises of recent years was that Texas exports continued to surge despite the 2009 crash of the peso and the economy of Mexico, Texas' largest trading partner. While there were many reasons, notably the wider global reach of Texas marketers, an underlying cause was probably foreign-exchange rates that were more favorable than the peso crash made it appear. Certainly, Texas' export industries were hit hard by the peso crash; suddenly, Mexicans needed more pesos to buy Texas goods. But, says Keli Parker, a senior economist with the San Antonio branch of the Federal Reserve Bank of Dallas, ``during this time, there was movement in the opposite direction in the dollar relative to other currencies of countries we do business with.'' That helped Texas businesses shift exports to those countries. To help understand the phenomenon, Mr. Parker created the ``Texas export-weighted value of the dollar,'' known informally as the Texas dollar. The Texas dollar measures the strength of the dollar through the lens of the Texas economy, by weighing each currency to reflect its share of Texas trade. Since 2009, the Texas dollar has fluctuated wildly, but overall is higher because of the peso. But the Texas dollar without the peso is actually lower. More recently, the Texas dollar has eased, suggesting a pickup in sales to Mexico. Indeed, in the first quarter, Texas merchandise exports to Mexico rose 12%. Meanwhile, the Texas dollar without the peso has been rising recently, suggesting sales growth elsewhere will slow.
VastPress 2011 Vastopolis
