Some of Texas' top economic leaders paint a rosy picture for the state heading into 2023, saying it’s on more solid ground than many other areas around the country. But they also warn the state isn’t immune to a recession.
“Texas is well positioned for long-term growth, with favorable demographics and expansion across a spectrum of industrial sectors,” according to the annual long-term Texas economic outlook report from The Perryman Group.
Dallas’ best asset is its natural population growth, coupled with the flood of people moving into the state, said Ray Perryman, CEO of The Perryman Group, at an event this week hosted by the Dallas Regional Chamber at UT Southwestern Medical Center. By 2050, his firm expects Texas’s population to hit 42 million, compared with about 30 million today.
“Human capital is going to be the single most important resource that we have going forward,” he said. “Because [the U.S.] is running short of it, and we have it in abundance here.”
Population growth, jobs
Employers in the state have added 694,200 positions since October 2021. Texas is expected to generate 7 million more new jobs by 2045. Most of those will be in the services sector, including professional and business services, education, health care, accommodations and food services, the Perryman report said. The wholesale and retail trade segment will also grow significantly.
Next year will see about 340,700 jobs added, less than the 725,100 total jobs projected for this year, because the state can’t continue to grow at its existing rate, the report projected.
Texas Comptroller Glenn Hegar, who also spoke at the event, said Texas’ growing population can help fill jobs during a tough labor market better than other areas.
“When you wake up in Texas, think about this for the next week, every morning when you wake up, there’s another thousand people who call Texas home,” he said.
Recession, employment, real gross product
Perryman, who has studied the Texas economy for 40 years, is optimistic about the state avoiding a recession or housing market crash next year. He said a mild recession has a 50% chance of happening, although a downturn of some kind is “likely.”
Inflation has already started to moderate and will be higher than what consumers are accustomed to for the next year or so, but it won’t be permanent, he said.
Texas job growth and business investment provide a defense against a recession and inflation, he said.
“We gained 50,000 jobs last month,” he said. “That’s a remarkable statement of the resilience of the state, and its core industries. In the Dallas-Forth Worth area, and particularly the Dallas side of it, I really am not sure we can be in a much better place right now.”
The growing population helped Texas employment surpass pre-COVID-19 levels well before most areas in November 2021. In October, Dallas-Plano-Irving had the largest year-over-year percentage increases in employment among metropolitan divisions, with a 6.9% jump, or the addition of 193,400, according to the U.S. Bureau of Labor Statistics.
Rising employment continues to push up the state’s real gross product, which is expected to expand by 8.38% in 2022 compared with 2021 and by 4.68% in 2023, the report said. The uptick this year is largely due to an increase in tax collections by more than 25% compared with 2021, for a total of more than $77 billion.
Real gross product — the value of good and services produced in the state — is projected to grow to about $3.9 trillion in 2050, up from about $1.6 trillion in 2021. The increase will largely be tied to mining, services and manufacturing, the report projected.
The Texas economy
Hegar recently released an end-of-year financial report for the fiscal year ended Aug. 31. The state’s net revenue rose 7.5% to $183.3 billion compared with 2021. Spending was also up, rising 10.4% to $161.8 billion.
The state’s economy continues to get a boost from corporate locations and expansions. While oil and gas continue to account for about 14% of total business activity in the state, adding about 100 rigs in the last year for 375 total, the overall diversity of the state’s economy is a huge asset, Perryman said.
“During the next five years, the Texas economy will likely outpace growth in most parts of the nation,” the Perryman report said.
