Texas Economic, Labor Market, and Fiscal Situation Vance Ginn, - PowerPoint PPT Presentation

Texas’ Economic, Labor Market, and Fiscal Situation Vance Ginn, Ph.D. Economist, Center for Fiscal Policy Updated Monthly – May 2017 Email: vginn@texaspolicy.com Website: www.texaspolicy.com Twitter: @vanceginn

Outline  I nformation about the state of Texas’ economy, labor market, and fiscal situation.  Updated monthly to include the latest jobs data and periodically when other economic and fiscal data are updated.  Conservative Texas Budget Coalition’s key priorities for the 2017 Session to promote prosperity.

Economic & Fiscal Challenges to Prosperity  11 th largest world economy possibly hampered by:  Slower global economic growth  Federal Reserve tightening credit: rates too low for too long  Low oil prices (~15% of real private economy/+20% in 80s)  First major recession in 30+ years? Unlikely in near term  Revenue picture tighter in 2017 Session than previous  Fortunately, 2015 Texas Legislature:  Passed a conservative 2016-17 budget: 4.3% increase  Left billions of dollars on table & $10 B in Rainy Day Fund  Passed $4 B in tax and fee relief

Economic Opportunity to Prosper is Key: Texas Model Leads the Way Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity (updated)

Texas, America’s Jobs Engine Texas has created 27% of total U.S. employment increase since pre-Great Recession 5,000,000 U.S. MINUS T EXAS : 3,500,000 +5,009,000 2,000,000 T OTAL C IVILIAN E MPLOYMENT 500,000 T EXAS : +1,875,000 -1,000,000 -2,500,000 -4,000,000 U.S. minus Texas civilian -5,500,000 employment wasn’t positive until January 2015 and didn’t surpass -7,000,000 Texas until November 2015. N -8,500,000 12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016 D ATA ARE C UMULATIVE M ONTHLY T OTAL C IVILIAN E MPLOYMENT FROM THE U.S. B UREAU OF L ABOR S TATISTICS FROM 12/2007 TO 4/2017.

Texas has Created 22% of All Nonfarm Jobs Since Great Recession Started 5,000,000 U.S. MINUS T EXAS : 3,500,000 +5,964,000 2,000,000 T OTAL N ONFARM E MPLOYMENT 500,000 T EXAS : -1,000,000 +1,686,000 -2,500,000 -4,000,000 U.S. minus Texas nonfarm employment wasn’t -5,500,000 positive until September 2014 and didn’t surpass -7,000,000 Texas until March 2015. N -8,500,000 12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016 D ATA ARE C UMULATIVE M ONTHLY T OTAL N ONFARM E MPLOYMENT FROM THE U.S. B UREAU OF L ABOR S TATISTICS FROM 12/2007 TO 4/2017.

Texas Created 258,900 Net Nonfarm Jobs During the Last 12 Months 6% 6% 4% 4% A NNUAL N ONFARM J OB G ROWTH R ATE 2% 2% 0% 0% -2% -2% A PRIL 2017 -4% -4% U.S.: 1.6% CA: 1.4% TX: 2.2% FL: 2.6% NY: 1.0% -6% -6% -8% -8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 S EASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE B UREAU OF L ABOR S TATISTICS .

Texas' Unemployment Rate At or Below 5% for 34 Consecutive Months 13% 13% 11% 11% A PRIL 2017 U NEMPLOYMENT R ATE U.S.: 4.4% CA: 4.8% 9% TX: 5.0% FL: 4.5% 9% NY: 4.3% 7% 7% 5% 5% 3% 3% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 S EASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE B UREAU OF L ABOR S TATISTICS .

Lower Unemployment Rates in Texas Since Great Recession Source: Dallas Fed, Less Involuntary Part-Time Work Suggests Texas Economic Strength, Third Quarter 2016.

Texas' Employed Population Rate Remains Above Others 66% 66% April 2017 64% 64% U.S.: 60.2% CA: 59.1% TX: 60.9% FL: 57.4% E MPLOYMENT -P OPULATION R ATIO NY: 58.3% 62% 62% 60% 60% 58% 58% 56% 56% 54% 54% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 S EASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE B UREAU OF L ABOR S TATISTICS .

Texas’ Labor Force Participation Rate Increasing Above Others A PRIL 2017 68% 68% U.S.: 62.9% CA: 62.1% TX: 64.1% FL: 60.2% NY: 61.0% 66% 66% L ABOR F ORCE P ARTICIPATION R ATE 64% 64% 62% 62% 60% 60% 58% 58% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 S EASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE B UREAU OF L ABOR S TATISTICS .

Texas Job Creation was Positive in Most Industries from 2014 to 2016 Source: Dallas Fed, Texas Economy Shifting Into Second Gear In 2017, First Quarter 2017.

Texas’ Metro Areas had Relatively Strong Job Creation Except Houston: 2014 to 2016 Source: Dallas Fed, Texas Economy Shifting Into Second Gear In 2017, First Quarter 2017.

Texas has Smaller Share of Part-Time Workers than Rest of U.S. Source: Dallas Fed, Less Involuntary Part-Time Work Suggests Texas Economic Strength, Third Quarter 2016.

Not Just Low Wage Jobs: Job Growth Across Wage Quartiles from 2005 – 2014 Source: Dallas Fed, Annual Report 2015

Job Growth Across Wage Quartiles, 2000 – 14 Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity

Economic Challenges  Mining industry 1980s:  21% of real private economy; 5% of labor force  Mining industry today:  15% of real private economy; 2% of labor force  More diversification from market activity, NAFTA, pro-growth policies  Still, lower oil prices, slower global growth, & federal government policies may be impediments  TX will one day have another recession

Oil prod/day down only 8% in Texas since March ‘15 high despite 55% drop in oil prices Source: Energy Information Administration

Future of Oil Prices Remain Uncertain Source: Dallas Fed, Texas Economy Shifting Into Second Gear In 2017, First Quarter 2017.

Fiscal Challenges Reduce Opportunity  No recent examples of consecutive conservative budgets, defined as growth less than the rate of population growth plus inflation:  2003 dealt with a $10 billion shortfall and passed a conservative budget but massive spending increase in 2005  2011 passed a budget below pop+inf but delayed payments for Medicaid & education led to a large increase in 2013  2015 session passed a potentially conservative budget, provided tax relief, and left money on the table  Legislature should do so again in 2017

Revenue Problem? More GR Available Excluding Lege Priority on Transportation Source: Texas Comptroller, Biennial Revenue Estimate

Footprint of Government: Total Revenue Estimated Up 7.5% Above 2016-17 Approps Source: Texas Comptroller, Biennial Revenue Estimate

Comptroller’s Estimates in Biennial Revenue Estimate FY2016 (BRE) FY2017 (BRE) FY2018 (BRE) FY2019 (BRE) $ in Thousands Actual Estimated Estimated Estimated Real GDP 0.2% 2.5% 3.0% 3.1% Nonfarm Employment 1.6% 1.7% 1.9% 1.7% Unemployment Rate 4.5% 4.6% 4.5% 4.5% Taxable Oil Price $41.40 $47.73 $55.11 $59.26 Sales Tax $28,245,801 $28,804,754 $30,382,579 $31,805,615 Franchise Tax $3,881,176 $3,762,059 $3,865,293 $3,958,054 Total Tax Collections $48,476,226 $49,725,627 $52,249,825 $54,506,439 Total Net Revenue $111,280,871 $112,777,303 $112,793,648 $111,976,440  2016-17 CRE: about $4 B expected surplus for 16-17  2018-19 BRE: $1.5 B expected surplus for 16-17  8% Official Spending Limit by LBB

Total 2016-17 All Funds Approps: $209.1 Billion (4.3% increase) $53.3 B, $68.0 B, Other $77.2 B, Federal Health & Funds Human $106.0 B, Services General Revenue $7.8 B, GR- $78.6 B, Dedicated Education $27.3 B, Other

$209 $210 $203 All Funds Spending $200 Spending Adjusted for Population Growth and Inflation $185 $190 $183 $187 $180 $167 Billions $177 $170 $168 $160 $158 $150 $139 $140 $146 $130 $124 $135 $120 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15* 2016-17*

Rainy Day Fund May Be $10.2 billion: No Need to Use it for Spending Source: Legislative Budget Board and Leaky Umbrella

Conservative Texas Budget Coalition: Keys for the 2017 Legislative Session • Pass a conservative budget such that the 2018-19 budget increase is below pop+inf of 4.5% • Eliminate the business margin tax • Provide meaningful property tax reform • Reform the state’s weak tax and expenditure limit • Create the Sales Tax Reduction (STaR) Fund • Increase budget transparency Gov’t spending is ultimately paid for by taxation, so we must control spending to have the best opportunity for Texans to prosper.

Taking these steps will secure the fact that the American Dream is not dead – it has simply moved to the Lone Star State.

Texas’ Economic, Labor Market, and Fiscal Situation Vance Ginn, Ph.D. Economist, Center for Fiscal Policy vginn@texaspolicy.com www.texaspolicy.com @vanceginn