Texas’ Economic, Labor Market,

and Fiscal Situation

Vance Ginn, Ph.D.Economist, Center for Fiscal Policy

Updated Monthly – May 2017

Email: vginn@texaspolicy.com

Website: www.texaspolicy.com

Twitter: @vanceginn

Outline

Information about the state of Texas’ economy, labor market, and fiscal situation.

Updated monthly to include the latest jobs data and periodically when other economic and fiscal data are updated.

Conservative Texas Budget Coalition’s key priorities for the 2017 Session to promote prosperity.

Economic & Fiscal Challenges to Prosperity

11th largest world economy possibly hampered by:Slower global economic growthFederal Reserve tightening credit: rates too low for too longLow oil prices (~15% of real private economy/+20% in 80s)First major recession in 30+ years? Unlikely in near term

Revenue picture tighter in 2017 Session than previous

Fortunately, 2015 Texas Legislature:Passed a conservative 2016-17 budget: 4.3% increaseLeft billions of dollars on table & $10 B in Rainy Day Fund Passed $4 B in tax and fee relief

Economic Opportunity to Prosper is Key:

Texas Model Leads the Way

Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity (updated)

Texas, America’s Jobs Engine

DATA ARE CUMULATIVE MONTHLY TOTAL CIVILIAN EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 4/2017.

Texas has created 27% of total U.S. employment increase since pre-Great Recession

TEXAS: +1,875,000

U.S. MINUS TEXAS: +5,009,000

-8,500,000

-7,000,000

-5,500,000

-4,000,000

-2,500,000

-1,000,000

500,000

2,000,000

3,500,000

5,000,000

12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016

TOTA

LC

IVIL

IAN

EMP

LOYM

ENT

N

U.S. minus Texas civilian employment wasn’t positive until January 2015 and didn’t surpass Texas until November 2015.

Texas has Created 22% of All Nonfarm

Jobs Since Great Recession Started

DATA ARE CUMULATIVE MONTHLY TOTAL NONFARM EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 4/2017.

TEXAS: +1,686,000

U.S. MINUS TEXAS: +5,964,000

-8,500,000

-7,000,000

-5,500,000

-4,000,000

-2,500,000

-1,000,000

500,000

2,000,000

3,500,000

5,000,000

12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016

TOTA

LN

ON

FAR

MEM

PLO

YMEN

T

N

U.S. minus Texas nonfarm employment wasn’t positive until September 2014 and didn’t surpass Texas until March 2015.

Texas Created 258,900 Net Nonfarm Jobs

During the Last 12 Months

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

-8%

-6%

-4%

-2%

0%

2%

4%

6%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

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

AN

NU

AL

NO

NFA

RM

JOB

GR

OW

THR

ATE

U.S.: 1.6% CA: 1.4%TX: 2.2% FL: 2.6%NY: 1.0%

APRIL 2017

Texas' Unemployment Rate At or Below

5% for 34 Consecutive Months

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

3%

5%

7%

9%

11%

13%

3%

5%

7%

9%

11%

13%

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

UN

EMP

LOYM

ENT

RAT

E

U.S.: 4.4% CA: 4.8%

TX: 5.0% FL: 4.5%

NY: 4.3%

APRIL 2017

Lower Unemployment Rates in Texas

Since Great Recession

Source: Dallas Fed, Less Involuntary Part-Time WorkSuggests Texas Economic Strength, Third Quarter 2016.

Texas' Employed Population Rate

Remains Above Others

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

54%

56%

58%

60%

62%

64%

66%

54%

56%

58%

60%

62%

64%

66%

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

EMP

LOYM

ENT-

PO

PU

LATI

ON

RAT

IO

U.S.: 60.2% CA: 59.1%

TX: 60.9% FL: 57.4%

NY: 58.3%

April 2017

Texas’ Labor Force Participation Rate

Increasing Above Others

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

58%

60%

62%

64%

66%

68%

58%

60%

62%

64%

66%

68%

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

LAB

OR

FOR

CE

PAR

TIC

IPAT

ION

RAT

E

U.S.: 62.9% CA: 62.1%TX: 64.1% FL: 60.2%NY: 61.0%

APRIL 2017

Texas Job Creation was Positive in Most

Industries from 2014 to 2016

Source: Dallas Fed, Texas Economy Shifting Into Second Gear In 2017, First Quarter 2017.

Texas’ Metro Areas had Relatively Strong

Job Creation Except Houston: 2014 to 2016

Source: Dallas Fed, Texas Economy Shifting Into Second Gear In 2017, First Quarter 2017.

Texas has Smaller Share of Part-Time

Workers than Rest of U.S.

Source: Dallas Fed, Less Involuntary Part-Time WorkSuggests Texas Economic Strength, Third Quarter 2016.

Not Just Low Wage Jobs: Job Growth

Across Wage Quartiles from 2005–2014

Source: Dallas Fed, Annual Report 2015

Job Growth Across Wage Quartiles, 2000–14

Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity

Economic Challenges

Mining industry 1980s:21% of real private economy; 5% of labor force

Mining industry today:15% of real private economy; 2% of labor force

More diversification from market activity, NAFTA, pro-growth policies

Still, lower oil prices, slower global growth, &federal government policies may be impediments

TX will one day have another recession

Oil prod/day down only 8% in Texas since

March ‘15 high despite 55% drop in oil prices

Source: Energy Information Administration

Future of Oil Prices Remain Uncertain

Source: Dallas Fed, Texas Economy Shifting Into Second Gear In 2017, First Quarter 2017.

Fiscal Challenges Reduce Opportunity

No recent examples of consecutive conservative budgets, defined as growth less than the rate of population growth plus inflation:2003 dealt with a $10 billion shortfall and passed a

conservative budget but massive spending increase in 20052011 passed a budget below pop+inf but delayed payments

for Medicaid & education led to a large increase in 2013

2015 session passed a potentially conservative budget, provided tax relief, and left money on the table

Legislature should do so again in 2017

Revenue Problem? 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

Comptroller’s Estimates in

Biennial Revenue Estimate

2016-17 CRE: about $4 B expected surplus for 16-172018-19 BRE: $1.5 B expected surplus for 16-178% Official Spending Limit by LBB

$ in ThousandsFY2016 (BRE)

ActualFY2017 (BRE)

EstimatedFY2018 (BRE)

EstimatedFY2019 (BRE)

Estimated

Real GDP 0.2% 2.5% 3.0% 3.1%

Nonfarm Employment 1.6% 1.7% 1.9% 1.7%

Unemployment Rate 4.5% 4.6% 4.5% 4.5%

Taxable Oil Price $41.40 $47.73 $55.11 $59.26

Sales Tax $28,245,801 $28,804,754 $30,382,579 $31,805,615

Franchise Tax $3,881,176 $3,762,059 $3,865,293 $3,958,054

Total Tax Collections $48,476,226 $49,725,627 $52,249,825 $54,506,439

Total Net Revenue $111,280,871 $112,777,303 $112,793,648 $111,976,440

Total 2016-17 All Funds Approps: $209.1 Billion

(4.3% increase)

$53.3 B, Other $77.2 B,

Health & Human Services

$78.6 B, Education

$68.0 B, Federal Funds

$106.0 B, General Revenue

$27.3 B, Other

$7.8 B, GR-Dedicated

$124

$139

$167

$183 $185

$203 $209

$135

$146

$158

$168

$177

$187

$120

$130

$140

$150

$160

$170

$180

$190

$200

$210

2004-05 2006-07 2008-09 2010-11 2012-13 2014-15* 2016-17*

Bil

lio

ns

All Funds Spending

Spending Adjusted for Population Growth and Inflation

Rainy Day Fund May Be $10.2 billion:

No Need to Use it for Spending

Source: Legislative Budget Board and Leaky Umbrella

Conservative Texas Budget Coalition:

Keys for the 2017 Legislative Session• Pass a conservative budget such that the 2018-19

budget increase is below pop+inf of 4.5%

• Eliminate the business margin tax

• Provide meaningful property tax reform

• Reform the state’s weak tax and expenditure limit

• Create the Sales Tax Reduction (STaR) Fund

• Increase budget transparency

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 will secure the fact 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.

Economist, Center for Fiscal Policy

vginn@texaspolicy.com

www.texaspolicy.com

@vanceginn