Texas Economic, Labor Market, and Fiscal Situation

Transcription

1 Texas Economic, Labor Market, and Fiscal Situation Vance Ginn, Ph.D. Economist, Center for Fiscal Policy Updated Monthly June Website:

2 Outline Information 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.

3 Economic and Fiscal Challenges 12 th largest world economy is hampered by: Slower global economic growth Federal Reserve tightening credit: too low for too long Low oil prices (15% of real private economy/21% in 80s) First major recession in 30 years? Budget picture looks tight going into 2017 Legislative Session in January Fortunately, 2015 Legislature: Passed a conservative budget: 2.9% increase Left billions of dollars on table & $10 B in Rainy Day Fund Passed $4 B in tax and fee relief

4 Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity

5 TOTAL CIVILIAN EMPLOYMENT Texas, America s Jobs Engine Texas has created 36% of total U.S. employment increase since pre-great Recession 3,500,000 2,000,000 U.S. MINUS TEXAS = +3,029, ,000-1,000,000 TEXAS: +1,727,275-2,500,000-4,000,000-5,500,000-7,000,000-8,500,000 12/ / / / / / / / /2015 DATA ARE CUMULATIVE MONTHLY TOTAL CIVILIAN EMPLOYMENT FROM THE U.S. BUREAU OFLABOR STATISTICS FROM 12/2007 TO 5/2016. U.S. minus Texas civilian employment wasn t positive until January 2015 and didn t surpass Texas until November 2015.

6 TOTAL NONFARM EMPLOYMENT Texas has Created 26% of All Nonfarm Jobs Since Great Recession Started 3,500,000 2,000, ,000-1,000,000 U.S. MINUS TEXAS = +4,035,800 TEXAS: +1,445,200-2,500,000-4,000,000-5,500,000-7,000,000-8,500,000 12/ / / / / / / / /2015 DATA ARE CUMULATIVE MONTHLY TOTAL NONFARM EMPLOYMENT FROM THE U.S. BUREAU OFLABOR STATISTICS FROM 12/2007 TO 5/2016. U.S. minus Texas nonfarm employment wasn t positive until September 2014 and didn t surpass Texas until March 2015.

7 ANNUAL NONFARM JOB GROWTH RATE Texas Created 171,800 Net Nonfarm Jobs 6% During the Last Twelve Months 6% 4% 4% 2% 2% 0% 0% -2% -2% -4% -6% MAY 2016 U.S.: 1.7% CA: 2.8% TX: 1.5% FL: 3.2% NY: 1.0% -4% -6% -8% % SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE BUREAU OFLABOR STATISTICS.

8 UNEMPLOYMENT RATE Texas' Unemployment Rate Lower than U.S. Average for 113 Consecutive Months 13% 11% MAY 2016 U.S.: 4.7% CA: 5.2% TX: 4.4% FL: 4.7% NY: 4.7% 13% 11% 9% 9% 7% 7% 5% 5% 3% % SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE BUREAU OFLABOR STATISTICS.

9 EMPLOYMENT-POPULATION RATIO Texas' Employed Population Trending 66% 64% Upward after Recent Dip May 2016 U.S.: 59.7% TX: 1.5% TX: 60.9% FL: 56.2% NY: 58.4% 66% 64% 62% 62% 60% 60% 58% 58% 56% 56% 54% % SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE BUREAU OFLABOR STATISTICS.

10 LABOR FORCE PARTICIPATION RATE 68% 66% Texas Labor Force Seems to have Stabilized after Recent Decline MAY 2016 U.S.: 62.6% CA: 61.9% TX: 63.8% FL: 58.9% NY: 61.4% 68% 66% 64% 64% 62% 62% 60% 60% 58% % SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM THE BUREAU OF LABOR STATISTICS.

11 Not Just Oil and Gas Jobs: Texas Job Creation from 2000 to 2014 Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity, data in parentheses are that sector s share of the labor force.

12 Job creation has been positive in most industries during the last four years Source: Dallas Fed, Texas Economy Remains Resilient, But Low Oil Prices Loom as Future Risk, First Quarter 2016.

13 Not Just Low Wage Jobs: Job Growth Across Wage Quartiles, Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity

14 Job Growth Across Wage Quartiles During Oil Boom from Source: Dallas Fed, Annual Report 2015

15 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, low oil prices, slower global growth, and federal government policies are impediments TX will one day have another recession

16 Fiscal Challenges No recent examples of consecutive conservative budgets, defined as an increase of less than the increase in population growth plus inflation: 2003 session dealt with a $10 billion shortfall and passed a conservative budget but massive spending increase in session passed a conservative budget but large spending increase in session passed a conservative budget, cut taxes, and left money on the table Legislature should do so again in 2017

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

18 Billions $210 $200 $190 $180 $170 $160 $150 $140 $130 $120 All Funds Spending Spending Adjusted for Population Growth and Inflation $185 $183 $124 $139 $135 All Funds spending is up 68.5% since $167 $146 $158 $168 $203 $177 $209 $187 Spending adjusted for compounded population growth plus inflation of 51% is up 11.8% since * * Source: Real Texas Budget - Legislative Budget Board's Fiscal Size- Up and authors' calculations. *indicates estimate.

19 Drop in expected economic growth and oil prices lower revenue projections $ in Thousands FY2016 (BRE) FY2017 (BRE) FY2016 (CRE) FY2017 (CRE) Real GDP 3.2% 4.1% 2.4% 2.3% Nonfarm Employment 2.2% 2.3% 1.7% 1.8% Unemployment Rate 5.0% 5.0% 4.3% 4.4% Taxable Oil Price $64.52 $69.27 $49.48 $56.52 Sales Tax $29,796,127 $31,685,564 $29,258,665 $30,663,502 Franchise Tax $4,741,992 $4,827,605 $3,528,510 $3,547,819 Net GR-Related Funds $53,778,041 $56,656,471 $51,743,275 $54,023,469 Net Revenue All Funds $111,545,560 $109,385,492 $108,053,259 $105,944,086 BRE: about $7 B expected surplus CRE: about $4 B expected surplus Actual could be less given current trends

20 Oil prod/day down only 8.8% in Texas since March 2015 high despite 55% drop in prices Source: Energy Information Administration

21 Rainy Day Fund looks to end the current budget period with a $10.4 billion balance Source: Legislative Budget Board

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23 Pass another conservative budget such that the 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 Spending is ultimately taxation, so we must control the budget to limit the footprint of government.

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

25 Texas Economic, Labor Market, and Fiscal Situation Vance Ginn, Ph.D. Economist, Center for Fiscal Policy