The COVID-19 pandemic led to significant economic disruption, but the Texas economy continues to recover.
Recently released October data indicate the seasonally adjusted Texas unemployment rate continues to fall and stands at 5.4%. Texas added 56,600 jobs for the month and has almost recovered to pre-pandemic levels. While issues such as supply-chain challenges and inflation will likely linger over the coming months, the long-term outlook for the state remains favorable.
One reason that Texas will do well is the energy sector, which is a major source of jobs and investment not only in producing areas, but across the state. Even though drilling activity has been sluggish in responding to recent price levels, oil and gas will remain crucial to future energy dynamics for decades to come. Over the long term, the industry will grow, enhancing business activity in the state. While climate issues must be addressed, the simple math of global expansion and fuel requirements will assure a vital, albeit evolving, role for fossil fuels for the foreseeable future.
Another pattern favoring expansion is the state’s relatively young and growing population. The state’s 15.9% increase in population between 2010 and 2020 was more than double the U.S. rate, due partly to births and partly to in-migration from other parts of the U.S. and elsewhere. Growth in the number of young people positions Texas well for future opportunities (as long as sufficient attention and resources are directed toward ensuring top-quality education from K-12 through higher education and technical training).
Our latest long-term forecast for the Texas economy indicates gains in real gross product at a 3.43% annual pace, leading to an increase from approximately $1.7 trillion in 2020 to more than $4 trillion in 2045. Nearly 6.8 million net new jobs are expected to be generated over the period, a 1.72% annual rate of growth. Total employment in 2045 is projected to reach 19.5 million. Real retail sales and real personal income are expected to increase at 3.48% and 3.57% rates, respectively.
The services sector (including professional and business services, education, health care, accommodations and food services) will be a major driver of job growth. The wholesale and retail trade segment is also expected to add substantial numbers of jobs. Real gross product expansion will likely be concentrated in mining, services and manufacturing.
Prior to the pandemic, Texas was among the most rapidly growing states in the nation. Although the economy has suffered a notable setback, much of the lost ground has been recouped. There are challenges (such as education, infrastructure, restrictive social legislation and major demographic shifts), but the assets and composition of the state economy suggest that it will experience substantial expansion for decades to come.