Southwest Economy - Gone to Texas: Migration Vital to Growth in the Lone Star State - Federal Reserve Bank of ...
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DALLASFED
FIRST QUARTER 2018
Southwest
Economy
} Gone to Texas: Migration Vital
to Growth in the Lone Star State
PLUS
}}
Texas Economy Starts 2018 Firing on All Cylinders
}}
On the Record: Federal Tax Law Provides Stimulus to
Bustling U.S., Texas Economies
}}
Spotlight: Mexico Sees Stronger 2018, NAFTA Challenges
}}
Go Figure: Texas Home Prices Head Through the Roof
PRESIDENT’S PERSPECTIVE
T
he Federal Reserve Bank of Dallas expects
the Texas economy to grow jobs in 2018 at
a rate of approximately 3 percent. As Keith
Phillips and Christopher Slijk explain in
this issue of Southwest Economy, this strong perfor-
mance is the result of broad-based expansion across
industries and substantial growth in the energy
sector. It is expected that both Texas and the U.S. will
surpass crude oil production records achieved in the
early 1970s.
Since 1990, Texas employment has grown about 1
percentage point faster than the nation. This growth
has been fueled by substantial domestic and inter-
national migration to the state. In their article, Pia
Orrenius, Alexander Abraham and Stephanie Gullo
take an in-depth look at the volume and composi-
tion of this migration. Since 2005, net migration
to Texas has averaged 228,000 people per year, the
highest number of any state. These new residents are
far more likely to be college educated than Texans
on average and are an important source of educated
workers for the region. Jason Saving explains in the
“On the Record” interview that due to limits on the
deductibility of certain taxes, recent federal tax code
changes may further boost migration to Texas. This
legislation, while helping Texas, is likely to raise tax
} Labor shortages are
bills for certain households in jurisdictions with high
state and local taxes.
While the outlook for Texas is positive, certain
likely to constrain growth risks remain. Labor shortages are likely to constrain
growth given that the state unemployment rate is
given that the state now at a near-record low of 4.0 percent. Issues relat-
ing to the renegotiation of the North American Free
unemployment rate is Trade Agreement may also create challenges. Texas
is the nation’s top exporter, and Mexico and Canada
now at a near-record low account for nearly half of the state’s exports.
of 4.0 percent. To help analyze the economic landscape and
address key policy questions, the Dallas Fed will
continue to produce economic research that sheds
light on key issues that are important to the region
and the nation. Based on our research, I remain very
optimistic about the future economic prospects for
Texas and the Eleventh District.
Robert S. Kaplan
President and Chief Executive Officer
Federal Reserve Bank of Dallas
Gone to Texas:
Migration Vital to Growth
in the Lone Star State
By Pia Orrenius, Alexander T. Abraham and Stephanie Gullo
W
ith nearly half of its workers growth—about 210,000 on average
born outside the state, Texas per year for natural increase, another
depends on—and is shaped 200,000 for net migration (Chart 1).
by—migration. For most of its The state’s 1.8 percent average annual
}
history, Texas has relied on migration population growth is about double the
ABSTRACT: Texas has to populate its expansive landmass and nation’s 0.9 percent.
relied on a large and power its economy. Although the state grows faster and is
sustained influx of workers It wasn’t always easy to attract peo- currently slightly younger than the rest
ple. In the beginning, land grants and of the nation, the trajectory of aging in
from other states and other enticements were used to lure Texas resembles that of the U.S. By 2050,
other countries. These settlers. Admittedly, the spirit of entice- about 20 percent of the population will
transplants—making up ments has lived on; the state continues be 65 or older, the highest share in the
nearly half of the state’s working hard to be welcoming—it can state’s history.1
be argued that maintaining low taxes, Population growth and aging are im-
workforce—account for an less regulation and an accommodating portant because they largely determine
even larger share of Texas’ business climate helps attract people the growth of the workforce, which
growth than their relative and firms. helps set the speed limit of economic
numbers. Significantly, this In addition to bringing in outsized growth. An economy can grow by
numbers of migrants, the state also adding workers and/or by workers
inflow brought the types of retains its existing residents. Texas is becoming more productive. Migration
workers most in demand. by far the “stickiest” state in the nation plays an important role in productiv-
with over 82 percent of those born in ity; by channeling the right workers to
the state remaining here. the right jobs, migration makes labor
Since 2000, natural increase and net markets more efficient.2
migration have contributed roughly States typically don’t differ much
equal parts to the state’s population from one another in terms of produc-
CHART
1 Migration to Texas Reaches Record Highs After 2005
Net migration to Texas (thousands)
350
300 Domestic International
250 Hurricane
Katrina
200
150
100
50
0
’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’11 ’12 ’13 ’14 ’15 ’16 ’17
NOTES: Census Bureau population estimates approximate the population on July 1 of the year indicated and, thus,
capture changes from the previous year. Data are not available for decennial census years, 2000 and 2010.
SOURCE: Census Bureau.
Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018 3
tivity growth, but they tend to differ outlook. That said, with the unemploy- Domestic migrants to Texas tend to
greatly with respect to population ment rate already at a historic low, the come from two types of states—large
growth, especially migration. These economic challenge may not be creat- and populous states, such as California
patterns can also reverse themselves ing jobs, but filling jobs. and Florida, and neighboring states,
quickly. For most of the 20th century, principally Louisiana and Oklahoma.
international and domestic migrants Domestic Migration In the postrecession period, 12
streamed into California in a seemingly Migration between the 50 states (and percent of domestic migrants to Texas
endless flow. International immigrants the District of Columbia) is typically re- came from California, followed by
still do, but in every year since 1991, net ferred to as domestic migration.5 States Florida (6 percent) and Oklahoma and
domestic migration to California has can be net recipients or net senders of Louisiana (both 5 percent) (Chart 2).
been negative, with a significant share of domestic migrants. In the postreces- Unlike the map’s depiction, these are
Golden State residents leaving for Texas. sion period—2010 to 2017—Texas was gross (not net) measures of migration.
Rapid economic growth for most the recipient of 920,000 net domestic Migration from populous states in
of the last four decades has been the migrants, equal to 3.6 percent of the part reflects their larger populations;
key factor attracting people to Texas.3 state’s 2010 population (Map 1).6 California is 12 percent of the U.S.
Diversification of the state’s economy Texas was the second-largest net population, so it’s not surprising that
in the 1990s, following the mid-1980s recipient of domestic migrants after 12 percent of migrants to Texas come
oil bust, provided a powerful and Florida; North Carolina was third and from there.
steady jobs magnet, creating sustained Arizona fourth. Many of Florida’s ar- Gross migration from neighboring
economic opportunity for millions. rivals have historically been retirees. states, meanwhile, is likely overstated
Employment in the state grew from 7.2 As a percentage of population, Texas because it captures significant cross-
million jobs in 1990 to 12.4 million at was the 12th largest net recipient border activity.
year-end 2017. Gone are the drastic oil- destination after North Dakota, South What motivates domestic migration?
led swings that used to throw the state Carolina, Nevada, Florida, Colorado, Surveys such as the Current Popula-
economy alternately into booms and District of Columbia and other less- tion Survey ask people who moved why
busts.4 The energy sector remains key, populous states in the Mountain West they did so. Just over half of cross-state
but consistent and robust service sector and Northwest. movers to Texas relocated for a job
growth has muted its fluctuations. The patterns in the map reflect (53.1 percent), another 24 percent
Texas was the nation’s ninth-fastest- longstanding regional population for family reasons and 20 percent for
growing economy in 2017, behind most growth trends, with little or no growth cheaper housing or other amenities
western states. The state’s diversified in the Midwest and Northeast states such as a shorter commute.7
economic base and resurgent oil and but substantial expansion in the South, Among domestic migrants who chose
gas sector portend a bright economic Mountain West and Northwest. a state other than Texas, 43 percent said
MAP
1 Among Most-Populous States, Domestic Migration Additive in Only Texas, Florida
Cumulative Net Domestic Migration by State as Percent of 2010 Population
3.7 3.7 5.7
-1.6
-0.5 0.4
1.4 -1.1
4.7
3.9 -2.1 -5.2
-1.5 0.3
-0.6 -1.6
-0.7 -1.7 -3.1
-4.9 -0.8 -1.6 -4.3
5.5 1.8 5.3 -4.4
-2.9 -0.9 -1.6 2.8
-0.4 -0.7 -2.0
-1.4
0.7 2.8 3.2 Less than -1.9 percent
4.3 -2.8 0.2
-5.4 5.6 -1.9 percent to -1.1 percent
-2.0 0 1.7
3.6 -1.1 to 0 percent
-1.1
0 to 3.5 percent
5.4
Above 3.5 percent
-3.1
NOTE: Chart labels show accumulated net domestic migration from July 2010 to July 2017 as a percent of population in 2010.
SOURCE: Census Bureau.
4 Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018they moved for employment, 27 per- CHART
cent said for family reasons, and 24.5
percent said they relocated for cheaper 2 Domestic Migrants to Texas Come from Variety of States
housing or other amenities.
Cumulative Gross Domestic Migration to Texas by Sending State
Employment opportunities in Texas
are a clear draw. Besides adding jobs
at a rapid clip, employment growth in California
the state has been widespread across 371,730
industries and has required a wide skill Florida
distribution. Since the end of the Great 197,674
Recession, every major industry has Oklahoma
added jobs, led by 35 percent gains in 163,029
Other
professional and business services, 22 Louisiana 1,560,064
percent in construction and 33 percent 162,463
in leisure and hospitality.8
Dividing the economy into quar- New York
134,862
ters based on wage rates during the
2010–15 economic expansion, Texas’ Illinois
lowest-paying jobs (with hourly wages 134,160
below $10) grew 10 percent, while Colorado
118,957
the two highest-paying job quartiles
Georgia
expanded 12 and 18 percent (with 115,079 Arizona
Virginia
hourly wages starting at $16 and $27, 114,219 102,604
respectively).9 The rates of growth for
the nation were lower across the board:
NOTE: Pie-slice labels show total number of movers from sending state to Texas from 2011 through 2016.
8 percent in the lowest-paying quartile, SOURCE: American Community Survey, 2011–16.
and 6 and 10 percent, respectively, in
the two highest-paying quartiles. for many of the same reasons workers grants who leave. The U.S. remains the
Texas job growth was weakest among do—to maximize current and future world’s No. 1 immigrant destination.
the lowest paid, in the first quartile. earnings. Firms move for growth po- Texas was the recipient of 660,000
For the U.S., growth was weakest in the tential, including available high-skilled net international migrants—about
upper-middle wage quartile—jobs pay- and low-skilled labor; cheaper real 2.6 percent of the state’s 2010 popula-
ing $18 to $29 per hour rose 6 percent estate; and ease of doing business. The tion—from 2010 to 2017 (Map 2).14 In
over the five years. latter might include everything from absolute terms, Texas was the fourth-
In addition to robust labor markets, proximity to airports and ground trans- largest recipient of net international
Texas has traditionally offered a lower portation to the ability to build new migrants after California, Florida and
cost of living than other large states, plants and hire and fire workers. New York. It bears noting that census
although that advantage has recently In 1996, there were 37 Fortune 500 and Bureau of Labor Statistics data
eroded as house prices and rents have companies headquartered in Texas; include both legal and illegal immigra-
surged in cities such as Dallas and today there are 52. The most recent tion; population surveys make a point
Austin. Nevertheless, the cost of living transplants include Jacobs Engineering not to ask about legal status in order to
in Texas is still about 9 percent below and Toyota’s North American head- obtain an accurate count.
the U.S. average and 19 percent below quarters—both relocating to the Dallas The influx from abroad helps Califor-
that of the nation’s other nine largest area from California.13 Firms also nia and New York offset net domestic
states.10 report moving for proximity to a supply outmigration. Their populations would
The tax burden is also lower in Texas chain or for a more central location. not grow were it not for immigrants.
than in other large states; though there Florida also receives a large number of
is no state income tax, property taxes International Migration international migrants, about 127,000
are relatively high.11 With lower taxes Migration into the 50 states from (net) per year, but like Texas, it also at-
come fewer services, a trade-off that another country is typically referred to tracts domestic migrants.
migrants to Texas must consider before as international migration or immigra- In percent terms, Texas was the 12th-
making the move.12 tion. While states could be net recipients largest net recipient of international
Workers may follow firms that move or net senders of international migrants, migrants. Florida, District of Columbia,
to the state, or firms may follow work- each U.S. state receives more migrants New York and Massachusetts were the
ers. Whichever the case, firms move from abroad annually than it does mi- top four net recipients.
Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018 5There has been an interesting change period, with surging Central American groups, it is likely Texas’ undocumented
in the relative magnitudes of domestic immigration assuming a larger role. immigrant population will increase.
and international migration to Texas. Still, about 52 percent of the foreign-
From the 1990s through the mid- born population in Texas is from Education, Skills
2000s, international migration to Texas Mexico. Other growing flows include Migrants are an important source
typically exceeded domestic migra- high-skilled immigrants from India, of labor and skills. Migrants typically
tion. Then, domestic migration rose China and South Asian nations. Nev- come “ready to work” with their educa-
sharply, from 55,000 annually before ertheless, Mexican inflows remain the tion completed when they arrive. When
2005, to nearly 135,000 in the years largest, comprising one-quarter of total the inflow of migrants is highly skilled,
since then. Before 2005, international inflows after 2010 (Chart 3). this relocation is sometimes referred to
migrants numbered about 87,000 per Besides those of Mexican origin, as “brain drain” for the origin state and
year. Since 2005, they have averaged other large groups in Texas are Cen- “brain gain” for the destination state.
about 94,000 annually. tral American (8 percent of the state’s Migrants into Texas are much more
It’s notable that international mi- foreign-born population), Indian likely than the general population
gration to the country and the state (7 percent) and Chinese (3 percent). to have a college degree or higher
declined immediately after the Great The total undocumented population (Chart 4). This suggests the state is
Recession and only slowly picked up. in Texas is an estimated 1.65 million, filling its need for high-skilled workers
The biggest change was a decline in about 6.1 percent of the state’s popula- with migrants, relying on a brain gain.
illegal immigration; migrant apprehen- tion, with large shares from Mexico International arrivals have a bimodal
sions along the Southwest border have and Central America.15 distribution; they are disproportionately
declined 75 percent from their peak of Among the undocumented in the concentrated at the low and high ends
1.6 million in 2000. postrecession period, about 120,000 of the education distribution. Almost
Arrivals from Mexico have his- Texas immigrants came as children and one-quarter of new international arriv-
torically dominated immigration to obtained Deferred Action for Child- als lack a high school diploma, while 43
Texas. Willing workers have provided hood Arrivals (DACA) status.16 Other percent have a college degree or higher.
a steady stream of new hires for more immigrants targeted by recent policies Domestic migrants are far less likely
than 100 years. Many individuals in include those with Temporary Pro- to be low-skilled and far more likely
recent decades came as undocument- tected Status (TPS), including 36,300 to be high-skilled individuals than the
ed immigrants. Salvadorans and 8,500 Hondurans in existing Texas population.
This longstanding immigration Texas.17 Amid federal moves to strip Which states are the sources of high-
pattern changed in the postrecession legal status from both DACA and TPS skilled domestic migrants? Domestic
MAP
2 International Migration Most Aids Populous Coastal States
Cumulative Net International Migration by State as Percent of 2010 Population
2.5 0.2 1.4
0.8
1.9 0.7
1.1 0.9
1.2
0.7 0.4 1.5 4.4 1.1
1.3 4.3
1.6 1.8 1.9
1.7 1.1 1.2 3.3
1.8 1.2 1.3 4.2
1.4 0.9 0.3 1.9
1.0 2.9 3.3
2.8
1.2 1.0 1.5 0.2 to 1.0 percent
1.5 0.8 0.7
1.9 0.8 1.0 to 1.2 percent
0.5 0.6 1.7
2.6 1.2 to 1.5 percent
1.1
1.5 to 2.6 percent
4.7
Above 2.6 percent
3.9
NOTE: Chart labels show accumulated net international migration from July 2010 through July 2017 as a percent of population in 2010.
SOURCE: Census Bureau.
6 Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018transplants to Texas from New York, Il- CHART Mexico Accounts for More than a Quarter
linois and Georgia are the most educat-
ed (Chart 5). Among migrants age 25 3 of International Migration to Texas
and older who moved from New York
to Texas since 2010, 51 percent had a
Cumulative Gross
bachelor’s degree or higher compared International Migration
with the native Texan population in to Texas by Country Mexico
of Origin 320,808
which 27 percent had at least a bach- Other
elor’s degree. 567,459
India
The least-educated domestic migrants 100,985
to Texas come from Louisiana, New
Mexico and Oklahoma. Nearly three-
Northern
quarters of recent arrivals from Louisi- Triangle
ana and about two-thirds from Okla- 85,409
China
homa have no bachelor’s degree. Some 54,808 Germany Korea
39,004 37,218
of these workers are likely employed in
the energy sector, and while they may NOTES: Pie-slice labels show total number of movers from sending region to Texas from 2011 through 2016.
Northern Triangle is El Salvador, Guatemala and Honduras.
lack college degrees, they often have SOURCE: American Community Survey, 2011–16.
technical certificates, vocational degrees
and valuable work experience.
Among international migrants, the CHART
least educated are from Mexico and
Central America (Chart 6). This should 4 New Arrivals a Key Source of Skilled Workers for Texas
not be surprising; educational attain- Educational Attainment of Recent Migrants
Percent
ment is relatively low in these coun- 35 Domestic migrants International migrants Texas population
tries overall.
29 29
The most educated international 30
immigrants to Texas are from In- 25 25 25
25 23
dia—76 percent have a college-or-
20
higher degree—followed by China, 20 18 18 18
16 16 17
Korea and Canada. 15
High-skilled immigrants tend to
10 10 9
work in the science, technology, engi-
neering and math (STEM) fields or in 5
the health care sector. Low-skilled im-
0
migrants tend to work in construction, Less than high High school Some Bachelor's Graduate or
agriculture, domestic service, building school graduate graduate college degree professional degree
janitorial services and food prepara- NOTE: Calculations include individuals age 25 and over who moved to the state during the 12 months prior to being
surveyed.
tion. In Texas, 54 percent of construc- SOURCE: American Community Survey, 2011–16.
tion laborers, 56 percent of gardeners,
63 percent of painters and 63 percent
of housekeepers are foreign born.
Recession accounts for much of the third as likely to be unemployed relative
Labor Market Outcomes difference. From the onset of the U.S. to similarly educated U.S. natives.
Texas attracts migrants largely recession in December 2007 through
because of its strong economy. As a year-end 2017, employment grew Lower Immigrant Earnings
result, migrants tend to do relatively about 17 percent in Texas versus about Immigrants’ overall earnings tend to
well in the labor market. Texas immi- 7 percent in the U.S. overall. fall short of those of natives, whether
grants have higher labor force partici- Notwithstanding differences between in Texas or not, since immigrants have
pation rates and significantly lower Texas and the rest of the nation, immi- less education, and English is typi-
unemployment rates than immigrants grants also compare very favorably with cally not their native language. Median
elsewhere in the country (Table 1). U.S. natives within the state. As shown weekly earnings among Texas immi-
Texas natives also tend to outper- in Table 1, even among the lowest grants in 2017 were $608, while im-
form natives elsewhere in the country. skilled, immigrants are nearly 50 per- migrants elsewhere in the U.S. earned
The relative strength of the Texas cent more likely to be in the labor force $700, as shown in the next to last row in
economy in the aftermath of the Great and working and, conversely, are one- Table 1. U.S. natives’ $885 pay in Texas
Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018 7CHART complicated by cost-of-living differ-
5 Domestic Migrants’ Educational Attainment by Sending State ences. Accounting for the lower cost of
living would lift the relative earnings
Less than High school Some college Bachelor's Graduate or of Texans vis-à-vis workers in the rest
high school degree professional degree
Sending state
of the U.S.
New York
Illinois Economic Effects of Migration
Georgia Migration helps power and grease
Colorado the regional economy’s engines.18
California First, migration increases the labor
Arizona force, enlarging the local economy
Florida
and increasing output as measured by
Oklahoma
the gross domestic product (GDP). In
New Mexico
2016, domestic migrants to Texas made
Louisiana
up about 25 percent of the state labor
0 10 20 30 40 50 60 70 80 90 100
force.19 International migrants consti-
Percent
tuted 23 percent of the state’s workers.
NOTES: Chart shows education levels of migrants age 25 or older who moved in the past year from each state to Taken together, nearly five out of 10 Tex-
Texas. Included are the top 10 states by total population over age 25, whose residents moved to Texas in the past year.
SOURCE: American Community Survey, 2011–16. as workers today were not born in Texas
(but got here as soon as they could).
It’s not just the volume of migration
CHART
that’s important. The economic effect of
6 International Migrants’ Educational Attainment by Birth Country
migration also depends on who comes
and the skills they bring. Texas benefits
Less than High school Some college Bachelor's Graduate or
high school degree professional degree from the brain gain through migrants’
Sending country
disproportionate educational attain-
India
ment—the large number with a college
China
degree or more. Of course, with so
Korea
Canada
much migration from Mexico and Cen-
Japan tral America, another concentration is
Germany at the other end of the spectrum—the
Cuba lowest-skilled workers.
Mexico The bimodal education distribu-
El Salvador tion of immigrants maps into simi-
Honduras larly bimodal sets of occupations that
0 10 20 30 40 50 60 70 80 90 100 immigrants fill. Because high-skilled
Percent
immigrants are far more likely to have
NOTES: Chart shows education levels of immigrants age 25 or older who moved in the past year from each
country to Texas. Included are the top 10 countries by total population over age 25, whose residents moved to STEM degrees than college-educated
Texas in the past year. natives, they tend to fill jobs in those
SOURCE: American Community Survey, 2011–16.
sectors, as well as in the health profes-
sions—doctors and nurses.
exceeded natives’ earnings in the rest migrants are likely undocumented. About 46 percent of college-edu-
of the U.S.—$865. In the education categories of high cated immigrants hold STEM degrees
Since educational attainment is such school and higher, Texas immigrants compared with 28 percent of college-
a strong determinant of earnings, it is in- tend to earn slightly less than their educated U.S. natives.20 Top occupa-
structive to hold education constant and counterparts elsewhere in the country tions for high-skilled immigrants to
compare earnings for a given education and less than U.S. natives within the Texas include medical scientists (59
group. Interesting patterns emerge. state. This may reflect a lack of English percent are foreign born), computer
Despite large-scale, low-skilled im- proficiency, less U.S. labor market software developers (45 percent) and
migration to Texas, Texas immigrants experience or a form of occupational engineers (33 percent). Many of these
who have not completed high school downgrading that sometimes happens high-skilled individuals enter the U.S.
actually earn slightly more than their when professionals move and their cre- on temporary, employment-based
counterparts in the rest of the country dentials transfer imperfectly. Discrimi- H-1B visas. Dallas has one of the heavi-
and just as much as similarly educated nation could also play a role. est concentrations of H-1B holders
U.S. natives in Texas. This is surprising Comparing earnings or incomes among major cities.21
because most of these low-skilled im- across different parts of the country is Research has linked increases in
8 Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018the science and engineering work- ent new products at double the rate in communications-intensive jobs,
force to higher productivity growth. of U.S. natives, a difference explained whereas less-educated immigrants
One study estimates over half of total by immigrants’ overrepresentation have a comparative advantage in
factor productivity growth in the U.S. in STEM occupations.23 There is also manual-labor jobs.25
is attributable to greater numbers of some evidence of positive spillovers in Highly educated U.S. natives have a
scientists and engineers, a proxy for patenting among U.S. natives. Another comparative advantage in interactive
research and development intensity.22 study finds that increases in H-1B visas and communications-intensive jobs;
Immigrants made up the majority of significantly raise patent activity by highly educated immigrants have a
the increase in the STEM workforce in immigrants without reducing patenting comparative advantage in quantita-
the past two decades, so it follows that among natives.24 tive and analytical jobs.26 Specializa-
high-skilled immigrants have account- According to economic theory, as tion increases efficiency, which allows
ed for a significant share of recent U.S. long as migrants differ from locals— more output to be produced with fewer
productivity growth. which they do to varying degrees—spe- resources. This boosts labor productiv-
This conclusion is bolstered by evi- cialization occurs. This is particularly ity, raising GDP.
dence of immigrants’ direct contribu- apparent in the case of international Immigration also leads to lower
tions to patenting and other innovative immigration. For example, one recent prices for the goods and services im-
activity, including entrepreneurship. study shows that less-educated U.S. migrants produce, as well as higher
One study finds that immigrants pat- natives have a comparative advantage returns on investors’ capital and land.
TABLE
1 Labor Market Outcomes of Immigrants and Natives in Texas, U.S.
Texas Rest of U.S.
Immigrants U.S. natives Immigrants U.S. natives
Labor force participation (%)
Less than high school credential 61.3 42.2 58.1 35.4
High school credential 67.3 59.4 65.5 56.0
Some college 75.9 65.9 69.8 65.2
Bachelor’s degree 70.9 74.3 70.2 74.0
Graduate/professional degree 77.5 79.3 77.6 74.0
All groups 67.9 65.5 67.1 63.5
Unemployment rate (%)
Less than high school credential 2.4 7.4 5.1 8.5
High school credential 2.9 5.3 4.0 4.8
Some college 2.5 3.7 3.8 3.9
Bachelor’s degree 2.0 2.6 3.5 2.3
Graduate/professional degree 2.5 1.9 2.7 1.9
All groups 2.5 3.8 3.9 3.6
Median real weekly earnings
Less than high school credential $484 $484 $480 $486
High school credential $576 $701 $582 $677
Some college $641 $725 $679 $742
Bachelor’s degree $1,013 $1,109 $1,063 $1,114
Graduate/professional degree $1,402 $1,286 $1,519 $1,367
All groups $608 $885 $700 $865
All groups
$605 $775 $675 $770
(including ages 16–24)
NOTES: All data refer to January–October 2017. Median weekly earnings are deflated to October 2017 and are conditional on being employed, over age 24, with positive earnings.
SOURCE: Current Population Survey (CPS) Merged Outgoing Rotation Groups (MORG).
Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018 9In cases where immigrants and U.S. nation’s 26 percent increase in aver- for an even larger share of Texas’
natives are complements, lower prices age hourly wages from 2010 to 2017.29 growth than their relative numbers.
can have far-reaching effects. For Moreover, pay for the lowest-skilled More importantly, because so much of
example, research shows the immi- workers, as shown in Table 1, is as this inflow was employment related, it
gration-induced decrease in the cost high or higher in Texas than elsewhere naturally brought the types of work-
of child care and housekeeping has among both immigrants and natives ers most in demand, whether it was
significantly increased the labor supply despite the disproportionately high construction and oil field laborers,
of highly educated native women.27 volume of low-skilled migration to the computer engineers, medical scien-
Have jobs for immigrants to Texas state and a state minimum wage set at tists or college professors.
come at the expense of opportunities the $7.25 per hour federal rate. Most Two national trends will play an
for Texas natives? It doesn’t appear so. other large states exceed the federal important future role. First, the nation
The aggregate data do not indicate any minimum standard. has entered a period of rapid aging of
obvious effect on natives’ employment Research on the labor market its workforce due to the retirement of
or wages. Immigrants accounted for impacts of immigration tends to find baby boomers that began around 2010
about 40 percent of state labor force a small but significant adverse wage and is expected to wind down by 2030.
growth between 2000 and 2017.28 effect on low-skilled natives who Baby boomers, born in the years after
During that period, the number of compete directly with foreign workers. World War II, are an unusually large
employed U.S. natives living in Texas However, if there are bottlenecks that birth cohort—about 76 million nation-
increased by 1.7 million. The number constrain growth in a region—such as wide and 5.7 million in Texas.30
of employed immigrants living in the a lack of workers in rapidly growing Demographers have decomposed
state increased by a slightly smaller industries—then worker inflows can the likely change in the future work-
number. In other words, immigrants actually accelerate growth, stimulate force into the contributions of U.S.
and U.S. natives alike gained jobs in investment and mitigate any negative natives, immigrants and the children of
Texas. Meanwhile, the Texas unem- effects on natives. This appears to be immigrants for the nation as a whole.
ployment rate fell below the national more in line with the Texas experience. Among potential workers who are U.S.-
rate in 2007, remaining there and born by U.S. parents, a net 8.1 million
reaching a historic low at under 4 per- Fueling Future Growth will have exited the working-age popu-
cent in 2017. Texas’ economic prowess has relied lation between 2015 and 2035.31
It also doesn’t appear that the on a large and sustained influx of As a result, all U.S. workforce
migrant influx depressed Texas wage workers from other states and other growth over these two decades is
growth, which was identical to the countries. These transplants account expected to comprise immigrants and
CHART
7 Without Migration, Working-Age Population Projected to Stagnate
Index, 1985 = 100
260
2015–35 projection:
240 1.8 percent growth
220
Without immigration or domestic
200 migration: 0.3 percent growth
180
Texas
160 2015–35 projection: 0.3 percent growth
140
Without immigration: -0.2 percent growth
U.S.
120
100
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
NOTES: Chart refers to growth in working-age (25–64) population. Growth rates are annualized.
SOURCES: Census Bureau; Texas Demographic Center; Pew Research; adjustments by Federal Reserve Bank of Dallas.
10 Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018their children.32 Without immigration, November 2013. Survey 2017 data.
the U.S. workforce will decline (Chart 7).
4
See “Texas Job Growth Swings More with Services 20
See “How Highly Educated Immigrants Raise Native
A second issue going forward is the than Oil,” by Navi Dhaliwal, Soojin Jo and Mine Yücel, Wages,” by Giovanni Peri, Kevin Shih and Chad Sparber,
Federal Reserve Bank of Dallas Economic Letter, vol. 13, Centre for Economic Policy Research, May 29, 2014,
future of domestic migration, which
no. 1, 2018. accessed Feb. 27, 2018, http://voxeu.org/article/how-
may not remain a reliable source of 5
Domestic migrants can be foreign born (immigrants); highly-educated-immigrants-raise-native-wages.
growth. Interstate mobility within the
the only requirement in census data is that they move 21
See “The H-1B Visa Race Continues: Which Regions
nation as a whole has fallen since the from one state to another. Received the Most?” by Neil G. Ruiz and Jill H. Wilson,
1980s. Population aging may explain 6
From Census Bureau state population estimates, which Brookings Institute, April 2015, accessed Feb. 27, 2018,
about half of this decline.33 measure annual migration from July to July. www.brookings.edu/blog/the-avenue/2015/04/02/the-
Texas and the U.S. will need mi- 7
Based on tabulations from the March Current h-1b-visa-race-continues-which-regions-received-the-
gration to fuel labor force growth in Population Survey, 2011–16. most/; “Key Facts About the U.S. H-1B Visa Program,”
coming decades. Without migration, 8
Based on employment growth from June 2009 to by Neil G. Ruiz, Pew Research Center, April 27, 2017,
Texas’ working-age population would December 2017. accessed Feb. 27, 2018, www.pewresearch.org/fact-
remain nearly flat at 0.3 percent yearly
9
Based on tabulations of American Community Survey, tank/2017/04/27/key-facts-about-the-u-s-h-1b-visa-
2011–16. program/.
growth through 2035, while the U.S.’ 10
As of 2017, Texas was 8.8 percent cheaper than the 22
See “Sources of U.S. Economic Growth in a World of
working-age population would decline
national average cost of living, and Texas was 19.1 Ideas,” by Charles I. Jones, American Economic Review,
0.2 percent.
percent below the population-weighted index of the nine vol. 92, no. 1, 2002, pp. 220–39.
The Texas Demographic Center’s states with the highest populations other than Texas. 23
“How Much Does Immigration Boost Innovation?”
projections suggest that if migration “Cost of Living Data Series 2017 Annual Average,” by Jennifer Hunt and Marjolaine Gauthier–Loiselle,
into the state continues at the 2000–10 Missouri Economic Research and Information Center, American Economic Journal: Macroeconomics, vol. 2,
pace, the working-age population will Missouri Department of Economic Development, no. 2, 2010, pp. 31–56.
increase 1.8 percent annually through accessed Feb. 27, 2018,www.missourieconomy.org/ 24
See “The Supply Side of Innovation: H-1B Visa
2035. Pew Research Center projections indicators/cost_of_living. Reforms and U.S. Ethnic Invention,” by William R. Kerr
for the U.S., meanwhile, suggest that
11
Per capita state and local taxes in Texas were $4,144 and William F. Lincoln, Journal of Labor Economics, vol.
immigration at current levels will be in 2015; this is lower than the national average of 28, no. 3, 2010, pp. 473–508.
$4,891, California’s average of $5,875 and New York’s 25
See “Task Specialization, Immigration, and Wages,”
enough to counteract the trend of retir-
average of $8,745, according to Census Bureau data. by Giovanni Peri and Chad Sparber, American Economic
ing baby boomers and lead to a modest 12
“Texas Taxes: Who Bears the Burden?” by Jason Journal: Applied Economics, vol. 1, no. 3, 2009, pp.
0.3 annual growth rate percent of the
Saving, Federal Reserve Bank of Dallas Southwest 135–69.
working-age population. Economy, Third Quarter, 2017. 26
See “Assessing Inherent Model Bias: An Application
13
See “Jacobs Engineering Plans to Move Jobs from to Native Displacement in Response to Immigration,”
Orrenius is a vice president, Abraham Pasadena to Texas,” by Natalie Kitroeff, Los Angeles by Giovanni Peri and Chad Sparber, Journal of Urban
an economic programmer and Gullo Times, June 6, 2016, www.latimes.com/business/la-fi- Economics, vol. 69, no. 1, 2011, pp. 82–91.
a research analyst in the Research jacobs-dallas-move-20160606-snap-story.html. 27
See “Low-Skilled Immigration and the Labor Supply
Department of the Federal Reserve 14
From Census Bureau state population estimates, of Highly Skilled Women,” by Patricia Cortés and
Bank of Dallas. which include annual migration from July to July. José Tessada, American Economic Journal: Applied
15
See “U.S. Unauthorized Immigration Population Economics, vol. 3, no. 3, 2011, pp. 88–123.
Estimates,” Pew Research Center, Nov. 3, 2016, accessed 28
Calculations based on Current Population Survey
Notes
Feb. 27, 2018, www.pewhispanic.org/interactives/ Outgoing Rotations Group data for 2000 and 2017.
1
According to the state demographer, if there is no
unauthorized-immigrants/. 29
Calculations based on Current Employment Statistics
migration, 21.3 percent of the population will be 65
16
According to Pew Research, there are 121,300 payroll survey.
or older by 2050; if there is half the 2000–10 level of
Deferred Action for Childhood Arrivals (DACA) 30
See “The Boomer Nation: A State-by-State Snapshot,”
migration, this figure will be 19.5 percent, and if there
recipients in Texas, measured as initial applications AARP, 2014, accessed Feb. 27, 2018,
is the same level of migration as in 2000–10, it will be
approved from August 2012 to March 31, 2017. www.aarp.org/politics-society/history/info-2014/map-
17.4 percent. Data from Texas Population Projections
See “DACA Has Shielded Nearly 790,000 Young where-boomers-live.html#/TX.
Program, Texas State Demographer, accessed Feb. 26,
Unauthorized Immigrants from Deportation,” by Jens 31
See “Immigration Projected to Drive Growth in U.S.
2018, http://txsdc.utsa.edu/Data/TPEPP/Projections/.
Manuel Krogstad, Pew Research Center, Sept. 1, 2017, Working-Age Population Through at Least 2035,”
2
“What Caused the Decline in Interstate Migration in the
accessed Feb.27, 2018, www.pewresearch.org/fact- by Jeffrey S. Passel and D’Vera Cohn, Pew Research
United States?” by Fatih Karahan and Darius Li, Liberty
tank/2017/09/01/unauthorized-immigrants-covered-by- Center, March 8, 2017, accessed Feb. 27, 2018, www.
Street Economics (Federal Reserve Bank of New York’s
daca-face-uncertain-future/. pewresearch.org/fact-tank/2017/03/08/immigration-
blog), Oct. 17, 2016, accessed Feb. 27, 2018,
17
See “A Statistical and Demographic Profile of the projected-to-drive-growth-in-u-s-working-age-
http://libertystreeteconomics.newyorkfed.org/2016/10/
U.S. Temporary Protected Status Populations from population-through-at-least-2035/.
what-caused-the-decline-in-interstate-migration-in-the-
El Salvador, Honduras, and Haiti,” by Robert Warren 32
Although most children of immigrants are also U.S.
united-states.html.
and Donald Kerwin, Journal on Migration and Human born, they are broken out into their own category in this
3
See “Gone to Texas: Immigration and the
Security, vol. 5, no. 3, 2017, pp. 577–92. exercise.
Transformation of the Texas Economy,” by Pia M.
18
See note 3. 33
See note 2.
Orrenius, Madeline Zavodny and Melissa LoPalo,
19
Migrant share data are based on American Community
Federal Reserve Bank of Dallas special report,
Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018 11ON THE RECORD
A Conversation with Jason Saving increase such investment and thereby
raise GDP.
Q. Will the U.S. economy grow faster as
Federal Tax Law Provides a result of the tax cuts? Does it matter
that the cuts are deficit financed and
Stimulus to Bustling U.S., will increase the national debt?
Texas Economies History, buttressed by economic
modeling, suggests tax cuts of this type
temporarily boost growth while the
Jason L. Saving is a senior research economist and advisor at economy gradually transitions to a
new, higher level of economic activity.
the Federal Reserve Bank of Dallas, where he conducts research Over the long run, the best available
estimates peg this new higher level
on public policy issues. He is the author of articles that explore
as 1.5–2.0 percent above where the
tax reform, regional migration and fiscal policy. economy would have been without the
tax package, with about half the impact
occurring in the first year.
Q. What does the recently approved people are able to find work, and firms However, it’s also worth noting that
federal Tax Cuts and Jobs Act of 2017 find themselves selling more products— the plan is expected to add $1.5 trillion in
do? Is it a large tax cut by historical increasing government revenue while federal debt over the next 10 years, pos-
lowering expenditures. sibly more if various provisions sched-
standards?
Many models actually suggest this is uled to expire end up being extended.
The new law is intended to reduce optimal fiscal policy—and monetary Even before the tax change was passed,
individual and corporate tax liabilities, policy, too, for that matter. What’s inter- secular trends such as falling birth rates
improve the U.S. business climate and esting about the most recent tax legisla- and rising life expectancies were likely
enlarge the economy relative to what tion is that it cuts taxes at a time when to drive the nation’s debt-to-GDP ratio
it would otherwise be. It would reduce most measures of overall economic to unsustainable levels over the long
government’s tax take by about a per- activity are fairly strong. While this isn’t run. The primary reason is the nation’s
centage point of gross domestic product unheard of, it’s more common to cut pay-as-you-go entitlement system, in
(GDP) in its first year, which is a rela- taxes when the economy is in recession. which current workers provide benefits
tively large tax reduction, though lower The object is, in effect, to provide a tail- for existing retirees without accounting
than the 1.6 percent reduction in Presi- wind when the wind is most needed. for a shrinking worker-to-retiree ratio.
dent Kennedy’s Revenue Act of 1964 and The unfunded nature of the tax law could
considerably lower than the almost 3 Q. What are the law’s main somewhat exacerbate this situation.
percent reduction in President Reagan’s provisions? How will they affect indi- Why does a high debt-to-GDP ratio
Economic Recovery Act of 1981. viduals and businesses? matter? Well, as government indebted-
ness rises, the larger debt load (interest
Q. Is it unusual to cut taxes during an The new tax law has many provisions, payments) begins to “crowd out” other
economic expansion? but three in particular have macroeco- types of discretionary spending such as
nomic implications of note. One is a national defense, food safety or environ-
Typically, we think of federal fiscal reduction in the top statutory corporate mental protection. Higher interest pay-
policy as countercyclical, with govern- tax rate from 35 percent to 21 percent, ments also decrease the federal govern-
ment running larger deficits during which should incentivize firms to place ment’s ability to respond to a recession
recessions and smaller deficits during more business capital in the United through fiscal expansion.
expansions. When times are tough, States so that more taxable income can One might think states could simply
government’s tax take naturally falls as be generated here. pick up the slack in a situation like that,
individuals lose their jobs and firms find Another is a modest reduction in the but they can’t because nearly all of
themselves selling fewer products than individual income tax rate schedule, them have statutory or constitutional
they otherwise would. which will somewhat increase short-run balanced-budget requirements, so
And on the flip side, government take-home pay for many Americans and constraining the federal government’s
spending naturally rises during those thereby increase both consumption and “fiscal space” matters. Finally, when
periods as more people avail themselves (possibly) hours worked. And the third a country’s debt-to-GDP ratio is high
of safety-net programs such as food is the ability of firms to more quickly de- enough, its willingness or ability to re-
stamps. As the economy improves, more duct business investment, which should pay debt may be called into question,
12 Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018} “The plan is expected to add $1.5 trillion in
federal debt over the next 10 years, possibly
more if various provisions scheduled to
expire end up being extended.”
increasing borrowing costs at the pre- expenditures and business profits over It’s important not to overstate this
cise moment it may most need to bor- the short term, consistent with recent phenomenon, though. While there are
row. An example of this occurred during trends in the Federal Reserve Bank of certainly neighborhoods in Texas that
the Greek debt crisis. Dallas’ business outlook surveys. would fall into this category, this effect
One provision of the new law that will be most severe in areas such as New
Q. Some companies are raising pay has substantial regional implications is York City and San Francisco, where a
and awarding bonuses to employees, the $10,000 limit on state and local tax relatively large share of residents itemize
citing the new law. Are workers likely deductibility. While Texas’ property tax and own relatively expensive properties.
to continue seeing more such pay- rates are among the highest in the na- As a result, the tax law’s impact on Dal-
ments in the future? tion, the overall state and local tax bur- las and Houston home prices should be
den in Texas is about 15 percent lower comparatively small.
The expensing provisions in the new than the national average, 29 percent
tax law will encourage investment. Over lower than California and about half that Q. Texas is the largest exporting state
time, this investment should make of New York. in the nation. How will the new law
workers more productive and one would This means Texans’ itemized deduc- affect international trade and our
expect employers to respond by raising tions will tend to be smaller than those trading partners?
wages. I’m unaware of any reasons why in high-property-wealth parts of the
employers would respond now, before country. This also suggests the possibility For many years, the U.S. corporate tax
those productivity gains have material- that the tax law could incentivize some rate has been among the highest in the
ized. That said, the best available esti- middle-income Californians and New industrialized world. The new tax law
mates suggest we might see a 1.5 percent Yorkers to move to Texas, though tax- changed this, moving our corporate rate
increase in wages over the long run. code differences are only one of many toward the lower end of the industrial-
factors that impact migration decisions. ized world and, in so doing, improving
Q. How will the tax law affect Texas? U.S. competitiveness.
Will we see faster output growth? Will Q. Could the new law affect Texas International organizations such as
there be more migration? home prices? the International Monetary Fund and
the World Bank think global output will
In general, as firms choose where to In general, a less-generous state and rise somewhat, but there’s no question
locate their increased production and local tax deduction may cause housing individual countries—especially those
investment, states with a favorable busi- demand to soften because taxpayers for who now find themselves with substan-
ness climate should attract a dispropor- whom the $10,000 limit is binding will tially higher corporate rates than the
tionate share of this activity. However, face a higher after-tax cost of home own- U.S.—could suddenly find themselves at
Texas is also the state most affected by ership. This particular provision has gar- a competitive disadvantage.
international trade and, to the extent nered most media attention, but other Meanwhile, a number of proposed
this tax change places other countries’ provisions including the newly raised changes that U.S. exporters and our
economies at a competitive disadvan- standard deduction and newly lowered trading partners had opposed, such
tage, slower growth in Mexico and other limits on mortgage interest deductibility as the “border adjustment” tax (a levy
large trading partners would be expect- will similarly impact home ownership on the value added to imports) didn’t
ed to disproportionately reduce Texas’ costs at the margin. make it. For that reason, Texas exports
growth rate. This softening of housing demand will perhaps be more greatly affected by
Thus, it is unclear whether the short- would, with other things being equal, ongoing measures such as the renegoti-
run impact of the tax law would be imply somewhat slower home-price ation of the North American Free Trade
larger or smaller in Texas. What is clear, appreciation over the near term, espe- Agreement and the decision to pull out
though, is that both the state and the na- cially in areas where house prices are of the Trans-Pacific Partnership trade
tion can expect somewhat larger capital relatively high. agreement.
Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018 13Texas Economy Starts 2018
Firing on All Cylinders
By Keith R. Phillips and Christopher Slijk
T
he Texas economy headed quarter and beginning of 2018 noted
into 2018 firing on all cylin- difficulty in finding workers and re-
ders for the first time since ported increased wage pressures.
2014, with broad-based eco- The Texas economy accelerated in
}
nomic growth across most regions and 2017, primarily due to rebounding
ABSTRACT: Aided by industries. Leading economic indica- energy and manufacturing sectors,
the oil and gas sector’s tors and reports from Federal Reserve which overcame a powerful blow dealt
Bank of Dallas business contacts in by Hurricane Harvey in late August.
recovery, the Texas
fourth quarter 2017 and the beginning Steadily rising oil prices propelled
economy rebounded in of 2018 suggest that the positive mo- the energy sector and boosted related
2017 and is poised to mentum will carry forward this year. equipment manufacturing.
expand at a faster pace The Dallas Fed Texas forecasting During much of 2017, the state
model predicts that employment will benefited from a broad acceleration in
in 2018. However, tight
grow between 2.9 and 3.9 percent in the world economy and a weakening
labor markets, disruptions 2018 following a 2.1 percent expansion dollar. While the hurricane inflicted big
to trade, and potential oil in 2017. The expectation for the jobs property losses on homeowners and
price declines pose risks to outlook is somewhat restrained relative businesses along much of the Texas
to previous periods of strong expansion Gulf Coast, its impact on job and out-
the outlook.
because labor markets are unusually put growth was temporary.
tight in both Texas and the nation.
The Texas unemployment rate Texas Races Ahead
reached a historical low of 3.9 percent Texas' 2.1 percent employment
in October after declining most of growth was at the upper end of the 1.5–
the year. Respondents to Dallas Fed 2.5 percent range forecast in Southwest
business outlook surveys in the fourth Economy last year.1 It was significantly
CHART
1 Texas Pulls Ahead of U.S., Other Energy States in Job Growth
Percent change, December 2017/December 2016
4.0 !
3.0
TX
2.0
U.S.
1.0
0.0
ID
UT
NV
WA
OR
CO
CA
AZ
TX
FL
OK
SC
NC
RI
MT
US
GA
PA
HI
MN
NY
MA
MI
TN
SD
MS
WY
MO
NJ
DC
NM
NH
IN
AL
IA
IL
WV
WI
NE
OH
KY
ME
VA
KS
AR
CT
DE
LA
MD
VT
-1.0
ND
AK
-2.0
NOTE: Black bars represent significant energy-producing states.
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; adjustments by the Federal Reserve Bank of Dallas.
14 Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018above the 1.2 percent rate in 2016 and CHART
above the state’s long-term trend of 2.0
percent. 2 Oil Price and Texas Rig Count Pick Up Through 2017
Renewed job growth exceeded the Number Nominal dollars
Rig count
national average last year, ranking 1,000 120
Texas as ninth-strongest among the 900
states (Chart 1). The latest ranking is 100
800
comparable to 2014, before energy West Texas Intermediate oil price
700 80
prices tumbled. With the energy de- 600
$61.31
cline, Texas job growth slipped to 36th 500 492 60
among the states in 2015 and 18th in 400
2016. Nevertheless, Texas fared (and 40
300
continues to fare) much better than 200 20
other energy-intensive states such as 100
North Dakota and Louisiana, which fell 0 0
2012 2013 2014 2015 2016 2017 2018
to near the bottom of the state rankings.
The Texas Business-Cycle Index, a NOTE: Data are weekly; last data point is the week of March 16.
composite indicator of economic activ- SOURCES: Oil and Gas Journal; Baker Hughes.
ity, rebounded last year to 4.3 percent,
reflecting a pace of growth well above
the index’s historical average. It was
propelled by the pickup in job activity, CHART
the decline in the unemployment rate 3 Professional and Business Services Lifts Service Sector in 2017
and an acceleration in state gross do-
Percent change, December/December
mestic product growth in the first three
15
quarters of 2017. For the year, the index
10
turned in the strongest year-over-year
5
performance since August 2015.
0
Leading the Rebound -5 '15
-10 '16
Oil and gas activity picked up in
-15 '17
mid-2016, after West Texas Intermedi-
ate prices steadied at around $45 per -20
barrel. Activity accelerated as prices -25
Trade, Prof. Health Leisure Fin. Natural
climbed in mid-2017, reaching into -30
transp & Govt. & bus. & private & Mfg. Activities Const. resources Information
the mid-$60 range in February 2018 utilities svcs edu. Hospitality & mining
(Chart 2). The rig count rose through (20.0%) (15.8%) (13.7%) (13.6%) (10.9%) (6.9%) (6.2%) (5.8%) (1.8%) (1.6%)
the first half of last year, attaining a
NOTE: Figures in parentheses represent share of total nonfarm employment as of December 2017.
two-year high of 466 in July. Employ- SOURCES: Bureau of Labor Statistics; adjustments by the Federal Reserve Bank of Dallas.
ment followed about six months later,
rising at an annualized 12.2 percent Resurgent state exports also pro- expensive and, thus, less competitive in-
rate through December (25,500 jobs) vided a boost. Texas exported goods ternationally, pressuring manufacturers.
after bottoming out in November 2016. worth more than $250 billion last year, The trend reversed with a notable
State manufacturing activity accel- far more than any other state. Much of dollar weakening from January to
erated throughout the year, with the the state’s manufactured output, such September 2017. Although the dollar
Dallas Fed’s Texas Manufacturing Out- as computer and electronic products, rose in the final quarter, overall it was
look Survey showing the fastest rise in refined petroleum products and trans- down 8.6 percent for the year. A general
production growth since the mid-2000s. portation equipment, is sent abroad. strengthening of the world economy
Employment in sectors linked to oil and Before last year, export activity faced also led to greater demand for U.S.
gas production, such as fabricated met- challenges. The Texas value of the goods abroad. As a result, state exports
als and mining machinery, grew 7.0 per- dollar—the dollar’s value weighted by rose sharply. The real value of goods
cent last year—more than three times exchange rates with the state’s largest shipped internationally from Texas in-
the rate of overall job growth. Such work trading partners—appreciated over 27 creased 10.8 percent from 2016 to 2017.
makes up approximately 17 percent of percent from mid-2014 lows to early Meanwhile, the state’s service sector
the state’s manufacturing employment. 2017. This made Texas exports more grew steadily, largely unaffected in
Southwest Economy • Federal Reserve Bank of Dallas • First Quarter 2018 15You can also read
