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May 29, 2014

Economic Growth, Texas Style

The Lone Star State has a few lessons for other states about job creation.

With a record 92 million Americans out of the work force and the labor force participation rate under 63% – matching a 36-year low – at least one state is actually seeing a jobs boom. The Lone Star State, which has always marched to its own drumbeat, is now bucking the trend in the downward growth spiral. And the reason is a lesson the rest of the Union could learn.

But first, the facts. According to the Bureau of Labor Statistics, Texas’ preliminary unemployment rate for April 2014 was 5.2%, notably below the national 6.3% headline unemployment rate. Of course, these numbers can easily hide the true story. More important – and more impressive – is that Texas’ labor force participation rate for April was 65.1%, significantly above the national average.

Additionally, comparing red-state Texas with blue-dyed California, economist Stephen Moore notes that over the last 20 years, Texas has had four times the job growth of California, has an unemployment rate far lower than California’s, has income growth greater than California’s, and regularly ranks in the top five states for business climate while California consistently lands in the bottom 10.

Is it any wonder that people are fleeing states like California and moving to Texas? For example, Toyota recently announced relocation of its U.S. headquarters, along with some 3,000 jobs, from Torrance, California, to Plano, Texas.

But what’s behind the good news? Several things – none of which you’ll find in California.

First, the oil and gas boom. While Washington regulators are spouting energy independence with one breath and trying to regulate the growth out of the oil and gas industry with the other, Texas is, well, drilling away. The Heritage Foundation notes that already in 2014, year-over-year drilling has doubled, with 10,000 new wells being drilled this year alone. (North Dakota, the other ‘oil boom’ state, is also seeing tremendous job and population growth – coincidence?). And when it comes to dishing out dough, Texas doesn’t do much to subsidize solar and wind energy, which are invariably more expensive and less reliable than oil and gas. California, meanwhile, has a Hollywood love affair with subsidy sprees.

Additionally, Texas actually welcomes business growth, charging no state income tax and avoiding many excessive regulations.

Of course, this isn’t to say Texas is the new Promised Land. As the Texas Public Policy Foundation noted in a recent report, the state’s economic development programs allow local governments to use taxpayer money to support “private interests,” meaning private business. That practice of cronyism has rightly drawn criticism from both sides of the aisle.

Yet, looking at the larger economic and regulatory landscape, it’s impossible not to notice the land of the Alamo is making a stand for Liberty, while the Left coast of solar utopia simply isn’t.

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