The latest job estimates show growth has slowed in Texas, but other metrics are still pointing up – way up.
Gross domestic product in Texas grew a whopping 8.2% in the third quarter, up from an annualized rate of 1.8% in the second quarter, according to new data from the U.S. Bureau of Economic Analysis.
The numbers, which are adjusted for inflation, put Texas second among all states in growth rate, behind only Alaska. Texas also was far ahead of the U.S. growth rate of 3.2%.
In addition to its surging GDP numbers, Texas led all states in population growth this year. Texas added 470,708 residents in the year that ended July 1, 2022, the U.S. Census Bureau reported. That’s nearly 54,000 more than runner-up Florida and over 300,000 more than No. 3 North Carolina.
Texas’ total population was 30,029,572 on July 1, becoming only the second state (after California) to cross the 30 million threshold.
Texas’ economic momentum appeared to slow after the Federal Reserve jacked up interest rates several times to try to tamp down inflation. Home starts and sales fell sharply, and the Dallas Fed recently lowered estimates for full-year job growth.
The latest Texas economic outlook by Dallas Fed economists is titled: “Slowing economic growth.”
But the new GDP results show Texas was still growing strong at the end of September, thanks in large part to the oil and gas industry. The mining sector, which includes oil and gas, was the biggest contributor to GDP growth in the six fastest-growing states: Alaska, Texas, Oklahoma, Wyoming, North Dakota and New Mexico.
In Texas, oil and gas accounted for about 44% of the GDP increase, according to government data. Wholesale and retail trade, information and manufacturing were the next-largest contributors to Texas’ increase.
Activity in the Texas oil patch has grown sharply, especially since Russia invaded Ukraine and sent global energy prices surging.
In the 12 months through November, Texas added over 42,000 jobs in the sector that includes oil and gas. That’s an increase of nearly 23%, far higher than any other field.
The industry has big ripple effects on the economy, in part because it’s so capital intensive and workers are paid high wages, said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University.
“It adds a lot of high value to the economy,” Bullock said. “It’s also somewhat counter-cyclical, especially now that a good portion of it is funded through internal cash flows.”
Oil has been trading for about $70 to $80 a barrel, which is enough to prompt investment in more production – but lower than last summer’s triple-digit highs. The current range represents a “Goldilocks” price, Bullock said, in that it works for industry and consumers.
Production companies can generate enough profit for investment, he said, and that’s vital when borrowing costs are rising and many investors are reluctant to put money into fossil fuels.
“These prices have enabled (companies) to fund more projects internally, which is a good thing,” Bullock said. “That’s led to this robust growth that everyone’s seeing.”
Manufacturing activity has slowed in Texas, and the Dallas Fed’s new order index has fallen for six consecutive months. That’s an ominous trend, but everything isn’t down: “Energy-related manufacturing is still strong,” said Pia Orrenius, senior economist at the Dallas Fed.
The real weakness is in construction-related manufacturing: “Because there’s been such a downturn in building single-family homes,” Orrenius said.
Texas’ population got a lift on several fronts this year. Perhaps most striking was the shift in international migration, which had plunged during the pandemic.
The U.S. had a net gain of just over 1 million international migrants in ‘22, compared with 376,000 the year before, the Census Bureau said.
Texas’ increase in population was fueled by net gains from all three components of growth: domestic migration, up 230,961; international migration, up 118,614; and natural increase, up 118,159.
This year, Texas ranked second in domestic migration, which has been crucial to filling key gaps in the workforce. The three states losing the most residents – New York, California and Illinois – have sent the most newcomers to Texas, especially during the pandemic.
Texas has been growing jobs roughly twice as fast as the nation, according to a recent report by researchers from the Dallas Fed and University of North Florida.
“Consistent and sustained net in-migration from other states and abroad makes this possible,” they wrote.
