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Looking Ten Years Back and Ten Years Forward

Texas ended the millennium with an estimated 9.31 million jobs, over one-fourth of which were created in the last decade. This means that for every three Texas jobs when the decade of the 1990s began, we now have four.

This job surge gave us average annual increases of 3.0 percent throughout the 1990s, bestowing Texas the distinction of adding more jobs than any other state in that decade. Our 2.35 million new jobs--through December 1999--substantially outpaced California, which is second with 1.79 million jobs and third-place Florida with 1.72 million jobs (see Table 1).

Overall, the decade of the 1990s was a period of sustained economic growth in Texas, a contrast with the 1980s. The nation fell into recession in 1991, but Texas' did not experience the recession, as our gross state product held steady or increased. However, the 1980s saw three recession years--1982, 1986 and 1987--when our real gross state product declined.

During the 1990s, Texas added jobs every year, ranging from a not-so-low 80,000 net new jobs in 1991 to a remarkable 352,000 in 1997. The health of the U.S. economy is one of the major factors supporting this striking rise in the number of Lone Star jobs.

Texas started the 1990s with 6.96 million nonfarm jobs. We passed the 7 million mark later in 1990, reached 8 million jobs in 1995, and 9 million jobs in late 1998.

This economic strength of the 1990s resulted in a 15% decline in the total number of unemployed Texans--from 557,000 as the 1990s began to 473,000 in the fourth quarter of 1999. This decline, however, did not happen initially, as the nation's 1991 economic downturn caused the number of unemployed Texans to reach a peak of nearly 700,000 by the third quarter of 1992. Not only has the state's unemployment rate declined every year since that peak, but the total number of unemployed Texans also dropped each year since 1992.

We are now at a 20-year low unemployment rate with 4.5 percent. The 1990s began with a 6.5 percent unemployment rate that rose to a three-month moving average as high as 7.7 percent in 1992.

The complexion of the Texas economy continued its shift away from goods-producing jobs during the 1990s, sustaining a pattern that was even more pronounced during the 1980s. In 1980, 29.4 percent of Texas nonfarm jobs were in the goods-producing industries of manufacturing, construction and mining, which is mostly oil and gas in Texas. The share of goods-producing jobs dropped to 21.4 percent of all nonfarm jobs by 1990 and is 19.3 percent today.

Construction jobs bucked the downward trend of the rest of the goods-producing jobs and rose as a share of all jobs. In terms of employment shares, the mining and manufacturing industries were substantially smaller (see Figure 1).

As a group, Texas service-producing industries have followed a national trend and now constitute a larger slice of the job pie than they did at the beginning of the last decade. Interestingly, most of the service-producing industries' sectors have proportionately smaller shares of total nonfarm employment, due almost entirely to the growth of the services industry.1 The largest jump in the services subcategory was seen in business services, along with substantial gains in engineering, accounting, research, consulting and management services.

Texas employment in the services industry has more than doubled over the past 15 years. Jobs in this subcategory have ballooned by nearly 1 million jobs in the 1990s alone, accounting for 42 percent of the state's total nonfarm employment growth of 2.35 million jobs.


Figure 1
Trends in Texas Employment by Industry
1990 to 2010
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Sources: Carole Keeton Rylander, Texas Comptroller of Public Accounts (Fall 1999 State Economic Forecast); Texas Workforce Commission; and U.S. Bureau of Labor Statistics. TCPU is Transportation Communications and Public Utilities. FIRE is Finance, Insurance and Real Estate.
The Next Decade
A more mature Texas economy is foreseen over the next 10 years, slowing a bit from its exuberance during the 1990s. Texas employment growth, which advanced 2.9 percent annually during the 1990s, is expected to grow about 2.2 percent a year over the next 10 years.

The number of Texas nonfarm jobs will reach the 10 million mark sometime in 2003. By 2010, it will approach 11.7 million. Real gross state product grew at 4.5 percent annually in the 1990s and barreled ahead at 5.5 percent per year during the last five years. We predict, however, that real gross state product will increase only by a moderate 3.6 percent annually between now and 2010.

One pattern of the 1990s expected to continue over the next decade is the growth of service-producing jobs. They are expected to outpace goods industries.

Statewide, service-producing industries will add about 206,000 jobs annually between now and 2010, compared to only 25,000 more goods industry jobs per year. This is particularly true in the short-term between 1999 and 2001, when only 4 percent of all job growth, or 15,000 additional jobs, will be in the goods industries. This will be due to a gradual slowing of construction and manufacturing activity.

The fastest growing sectors of the economy over the next decade will be largely in industries requiring specialized education and skills. Those industries include high tech communications, engineering, research and business services, which includes software and data processing.

High technology industries, some of which will grow explosively, will not necessarily produce the greatest number of jobs. The large business services sector will account for the greatest number of actual new jobs, averaging 44,100 annually over the next 10 years (see Table 2).

Retail trade will account for the second largest number, with 36,700 new jobs created each year. The actual rate of growth for this industry will be slower than the overall state rate.

The third-highest number of jobs will be created by local government, with 25,600 positions added each year. Approximately two-thirds of those jobs will be in school districts.

The other industry sectors with large job gains will be the following:

  • Miscellaneous services will be the source for 23,900 additional jobs each year. Those services include lodging, amusements and movies, recreational services, legal services, associations, agricultural services and personal services.
  • Health and medical services, growing as the median age of the population rises, will add 20,200 positions per year.
  • The engineering, management/consulting, accounting and research services industry group is expected to add 14,500 jobs annually.
  • Transportation services, which includes trucking, railroads and airlines, will add 14,400 jobs per year.

The industrial sectors most likely to lose more jobs than they gain are mining (oil and gas), instruments manufacturing, food processing and depository institutions. These sectors are expected to grow in terms of production, but technological changes and higher productivity will mean fewer employees.

Other sectors likely to see little or no growth are textiles, apparel, leather, petroleum refining, printing and publishing, and public utilities (see Tables 3a, 3b and 3c).

Rural Renaissance?
Today, 11.4 percent of all Texas nonfarm jobs are in the 196 counties outside of Texas' 27 Metropolitan Statistical Areas (MSAs). In the past 10 years, nonfarm employment in these generally less-populous, often rural, counties grew nearly as fast as in the MSAs. These areas now have 1.05 million nonfarm jobs, an increase of 228,000 jobs in the last decade.

For every 100 jobs in Texas' less populated counties at the beginning of the 1990s, 128 now exist. This represents more than 2.5 percent annual employment growth, compared to 2.9 percent per year in the MSAs.

The growth has been particularly strong in landscape and nursery services, recreational and retirement-related sectors and tourism services. A strong correlation has developed during the past decade between physically attractive rural areas and net migration to those areas.

The historical economic link for rural areas has been with farming, ranching, and petroleum, but that is now being supplemented by a broader economy producing other goods and services. The Internet is one of the factors linking urban and rural economies, allowing traditionally urban jobs to be done in rural areas. Still, the unemployment rate in Texas' rural areas (the non-MSA counties) is about one percentage point higher than the state's overall unemployment rate of 4.5 percent.

One consequence of the growth in many nonmetropolitan areas is a firming of rural land prices, which rose quickly in the late 1970s, only to be followed by price erosion through the 1980s. Statewide rural land, which lost more than half its inflation-adjusted average value from 1980 through 1993, has risen 27 percent in inflation-adjusted value over the last five years, according to the Texas A&M Real Estate Center.

Continued


1 Defined as Standard Industrial Classification Codes 70 through 89.