March/ April/ May 2014 Oops: The Texas Miracle That Isn’t

Conservatives say the Lone Star state’s recent record of growth validates their economic agenda. That record crumbles upon inspection.

By Phillip Longman

But Fisher is talking here about new jobs, and according to the Dallas Fed, only 28 percent of the jobs created in or relocated to Texas since 2001 pay in the lowest quarter of the nation’s wage distribution. By comparison, jobs paying in the top half account for about 45 percent of the new jobs in Texas.

This means that Texas has been creating or attracting middle- and high-wage jobs at a far faster pace than the rest of the country taken as whole. For example, between 2001 and 2012, the number of Texas jobs in the upper-middle quarter of the nation’s wage distribution increased by 25.6 percent. This compares with a 4.1 percent decline in the number of such jobs outside of Texas. Though coming off a comparatively small base, Texas has also outperformed the rest of the country in its growth of high-paying jobs.

That’s potentially a very big deal. During the eight years of George W. Bush’s presidency, the country as a whole experienced zero net job creation, and the continuing decline in middle-class jobs is arguably the largest single threat to the economy’s viability. If Texas has figured out a replicable and enduring fix for America’s broken jobs machine, then the rest of the country does indeed have something important to learn. But as we’ll see, there’s much less to the Texas Miracle than meets the eye, and its lessons hardly confirm conservative ideology.

The first and most obvious question to ask about the Texas boom in jobs is how much it simply reflects the boom in Texas oil and gas production. Texas boosters say the answer is very little, and play up how much the Texas economy has diversified since the 1970s. And indeed, Texas has more high-tech, knowledge-economy jobs than it did forty years ago. But so does the rest of America, and the stubborn truth is that, despite there being more computer programmers and medical specialists in Texas than a generation ago, oil and gas account for a rapidly rising, not declining, share of the Texas economy.

Unless you’ve been to Texas lately, you might have missed just how gigantic its latest oil and gas boom has become. Thanks to fracking and other new drilling techniques, plus historically high world oil prices, Texas oil production increased by 126 percent just between 2010 and 2013. Only a few years ago, Texas’s oil production had dwindled to just 15 percent of U.S. output; by May of last year it had jumped to 34.5 percent, as new drilling methods opened up vast new plays in once-forgotten corners of south and west Texas with names like Eagle Ford, Spraberry Trend, and Wolfcamp. Thanks to the bonanza of drilling, Texas already produces more oil than Venezuela, and is headed to become the ninth-largest producer of oil in the world, ahead of Kuwait, Mexico, and Iraq.

The big picture: The scale of Texas’s oil and gas boom is so large it can be seen from space, as in this 2012 satellite photo in which gas flares in the Eagle Ford Shale light up the night sky in an arc stretching across south Texas to the Mexican border.

Meanwhile, Texas accounts for 27 percent of U.S. natural gas production, which is more than the production of any nation except Russia. NASA satellites now record an arc of white light at night stretching from San Antonio to the Mexican border produced by gas flares. As a recent issue of Texas Monthly notes, in once-sleeping towns like Cotulla, where a young Lyndon Johnson taught migrant Mexican children in the 1920s, the population has more than tripled in the past two years, and no fewer than thirteen new hotels have opened, along with numerous “man camps,” to accommodate the influx of oil rig workers.

Though Texas boosters point to the growth of the high-tech industry in Austin, the so-called “telecom corridor” in Dallas, and the growth of health care jobs in Houston, this can’t hide the fact that oil and gas are by far the fastest-growing sources of the state’s economic growth. Between 1998 and 2011, for example, the percent of Texas GDP produced directly by oil and gas extraction more than doubled, according to the U.S. Commerce Department’s Bureau of Economic Analysis. This doesn’t even count the growth of related industries, like oil refining and a petrochemical sector now thriving on the state’s abundant supplies of natural gas. Meanwhile, the share of the Texas economy produced by the information, communications, and technology sectors is 27 percent smaller than it was in 1998.

To be sure, only about 8 percent of the new jobs in Texas are directly involved in oil and gas extraction, but the multiplier effects of the energy boom create a compounding supply of jobs for accountants, lawyers, doctors, home builders, gardeners, nannies, you name it. Saying that Texas doesn’t depend very much on oil and gas just because most Texans are not formally employed in drilling wells is like saying that the New York area doesn’t depend very much on Wall Street because only a handful of New Yorkers work on the floor of the stock exchange.

The next big question is how much Texas’s growth in jobs just reflects its growth in population. For many decades, Texas has grown much faster in population than the U.S. as a whole, indeed about twice as fast since the 1990s. On its face, there is nothing particularly impressive about a rate of job formation that is just keeping pace with increases in population.

But in the conservative narrative, this population growth is largely driven by individual Americans and businesses fleeing the high taxes and excessive regulation of less-free states. In other words, Texas’s rate of job creation is supposedly more a cause than a consequence of its population growth. If that were true, the Texas boosters would be right to brag. But among the many problems with this story is the reality that, even with an oil boom on, nearly as many native-born Americans are moving out of Texas as are moving in.

For example, according to Census Bureau data, 441,682 native-born Americans moved to Texas from other states between 2010 and 2011. Sounds like a lot. But moving (fleeing?) in the opposite direction were 358,048 other native-born Americans leaving Texas behind. That means that the net domestic migration of native-born Americans to Texas came to just 83,634, which in a nation of 315 million isn’t even background noise. It’s the demographic equivalent of, say, the town of Lawrence, Kansas, or Germantown, Maryland, “voting with its feet” and moving to Texas while the rest of America stays put.

Phillip Longman is a senior editor at the Washington Monthly and a lecturer at Johns Hopkins University, where he teaches health care policy. He is also a senior fellow at the New America Foundation, where Atul Gawande is a board member.


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