Texas economy

An Overview of the Texas Economy

The last two years have been difficult, but the road ahead is encouraging!

Texas’ economy was in the midst of a historic expansion at the start of 2020 when the COVID-19 pandemic hit. In just two months, almost 1.5 million jobs have been lost. Since then, a recovery has ensued and many parts of the state have reached or surpassed pre-pandemic employment levels. Problems remain, but the recovery is well-conditioned to continue (as long as another major outbreak of severe COVID-19 cases requiring reduced business activity can be averted).

Looking ahead, effects such as supply chain issues and sluggish oil and gas activity will likely persist over the next several months, slowing the near-term rate of expansion to some extent. Even with these short-term challenges, however, the outlook for the state remains favorable, with underlying forces such as the future prospects for the energy sector, a young population and continued growth in the sectors. focused on technology contributing to potential long-term expansion. .

Normally, the energy sector accounts for about 13-14% of total business activity in Texas. The industry is a major source of employment and investment, not only in production areas, but across the state. Suppliers, service companies, corporate headquarters, pipelines, refining and petrochemical facilities, and an array of other related operations lead to business activity in many Texas communities. Oil and gas are also key exports from the state, whether in raw or processed form. Although the Texas economy is large and diverse and becoming increasingly so, energy remains a major component and the outlook for the sector is an important determinant of future overall performance.

Oil prices have more than doubled over the past year and have consistently closed above $70 (and sometimes above $80) a barrel in recent weeks, which hasn’t happened. since 2014. While high oil prices are rippling through the economy and contributing somewhat to near-term inflation, they are also encouraging additional activity in industry.

Activity in the energy sector has increased significantly since the trough of the pandemic, but the response has been somewhat subdued. For much of 2018, the last time prices were near this level, a range of $65 to $75 was enough to push the number of Texas rigs to well over 500. only had about half the number of platforms running. There are a myriad of reasons for this phenomenon. Many companies are dealing with the financial fallout from the COVID-19 market chaos, and drilling programs require massive capital commitments. The green energy movement and potential policy initiatives have increased uncertainty. Changes in drilling practices are also relevant, as are backlogs of wells drilled but not yet completed. The market is full of complexities at the best of times, and the current environment adds even more layers.

Despite the slower response and market uncertainties, it is clear that oil and gas will remain crucial to future energy dynamics for decades to come, and oil supply is essential for reliable and affordable energy in economies. advances in the world as well as in developing countries. . While renewable energy has a vital role and climate change is a reality, any reasonable look at the global landscape indicates that conventional fuels (with lower emissions) will be essential to meet future needs, despite what you might hear the opposite. Over an extended time horizon, the industry will grow, although the trend is likely to be uneven (as always).

Demographic patterns also favor long-term growth. The 2020 census indicates that US population expansion is slowing, with the decade 2010-2020 being one of the slowest on record. The number of young people (under 18) has also fallen, with over a million fewer in the age category in 2020 than in 2010.

In Texas, however, the total population grew from 25.1 million in 2010 to 29.1 million in 2020, an increase of four million people. The state’s 15.9% expansion is more than double the US rate, partly due to births and partly to immigration from other parts of the United States and beyond.

Of particular significance, the number of residents under 18 in Texas grew by nearly 413,000 (6%) between 2010 and 2020, in direct opposition to the substantial national loss. This solid growth in the number of young people places the state in a good position for economic expansion, provided that sufficient attention and resources are devoted to ensuring a high quality education in public schools and beyond, through the through higher education and technical training. Labor availability was a major issue before COVID-19, has been recently, and will be even more critical in the future. Young Texans are the raw material for a prosperous future; Turning them into the knowledge workers who will define tomorrow’s economic landscape is both a huge opportunity and a huge challenge.

Technology-based industries and advanced manufacturing are another source of future expansion. Premier locations and expansions in the state pave the way for the continued development of related and supporting industries. Emerging industries complement the expansion of the state’s long-standing flagship sectors, enhancing future performance.

These and other strengths position the state well for short- and long-term growth. The Perryman Group’s most recent projections indicate that Texas’ real gross product is expected to grow 5.44% in 2022. Job gains are expected to be about 354,200 next year.

The Perryman Group’s long-term forecast for the Texas economy points to real gross product growing at a compound annual rate of 3.43%, leading to an increase of about $1.7 trillion in 2020 to more than 4 .0 trillion in 2045. Nearly 6.8 million net new jobs are expected. to generate an annual growth rate of 1.72% over the period. Total employment in 2045 is expected to reach 19.5 million. Real retail sales and real personal income are expected to increase by 3.48% and 3.57% respectively.

The service sector will continue to drive employment growth; the sector includes professional and business services, education, healthcare, accommodation and food services. Many of these segments have been hit hard by the pandemic, but are returning to the forefront of future employment patterns. The wholesale and retail segment is also expected to create a substantial number of jobs. Real gross product expansion will likely be concentrated in mining, services and manufacturing.

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Before the pandemic, Texas was among the fastest growing states in the country. Although the economy suffered a noticeable setback, lost ground was regained. The long-term outlook remains positive. There are certainly challenges (such as education, infrastructure, restrictive social legislation and major demographic shifts), but there are also a myriad of competitive advantages that have served the state well for decades (including, among others, a favorable cost environment, location, available workforce, diversified industrial mix, regulatory climate and world-class development programs). In short, Texas is likely to remain among the strongest economies in the world for decades to come.