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

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

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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

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SLIDE 1

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

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SLIDE 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.

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SLIDE 3

Economic & Fiscal Challenges to Prosperity

  • 11th 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
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Economic Opportunity to Prosper is Key: Texas Model Leads the Way

Source: TPPF, A Labor Market Comparison: Why the Texas Model Supports Prosperity (updated)

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SLIDE 5

Texas, America’s Jobs Engine

DATA ARE CUMULATIVE MONTHLY TOTAL CIVILIAN EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 4/2017.

Texas has created 27% of total U.S. employment increase since pre-Great Recession

TEXAS: +1,875,000 U.S. MINUS TEXAS: +5,009,000

  • 8,500,000
  • 7,000,000
  • 5,500,000
  • 4,000,000
  • 2,500,000
  • 1,000,000

500,000 2,000,000 3,500,000 5,000,000 12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016 TOTAL CIVILIAN EMPLOYMENT

N

U.S. minus Texas civilian employment wasn’t positive until January 2015 and didn’t surpass Texas until November 2015.

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Texas has Created 22% of All Nonfarm Jobs Since Great Recession Started

DATA ARE CUMULATIVE MONTHLY TOTAL NONFARM EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 4/2017.

TEXAS: +1,686,000 U.S. MINUS TEXAS: +5,964,000

  • 8,500,000
  • 7,000,000
  • 5,500,000
  • 4,000,000
  • 2,500,000
  • 1,000,000

500,000 2,000,000 3,500,000 5,000,000 12/2007 12/2008 12/2009 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016 TOTAL NONFARM EMPLOYMENT

N

U.S. minus Texas nonfarm employment wasn’t positive until September 2014 and didn’t surpass Texas until March 2015.

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Texas Created 258,900 Net Nonfarm Jobs During the Last 12 Months

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6%

  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ANNUAL NONFARM JOB GROWTH RATE U.S.: 1.6% CA: 1.4% TX: 2.2% FL: 2.6% NY: 1.0%

APRIL 2017

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Texas' Unemployment Rate At or Below 5% for 34 Consecutive Months

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

3% 5% 7% 9% 11% 13% 3% 5% 7% 9% 11% 13% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 UNEMPLOYMENT RATE U.S.: 4.4% CA: 4.8% TX: 5.0% FL: 4.5% NY: 4.3%

APRIL 2017

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Lower Unemployment Rates in Texas Since Great Recession

Source: Dallas Fed, Less Involuntary Part-Time Work Suggests Texas Economic Strength, Third Quarter 2016.

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Texas' Employed Population Rate Remains Above Others

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

54% 56% 58% 60% 62% 64% 66% 54% 56% 58% 60% 62% 64% 66% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EMPLOYMENT-POPULATION RATIO U.S.: 60.2% CA: 59.1% TX: 60.9% FL: 57.4% NY: 58.3%

April 2017

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Texas’ Labor Force Participation Rate Increasing Above Others

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.

58% 60% 62% 64% 66% 68% 58% 60% 62% 64% 66% 68% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 LABOR FORCE PARTICIPATION RATE U.S.: 62.9% CA: 62.1% TX: 64.1% FL: 60.2% NY: 61.0%

APRIL 2017

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SLIDE 12

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.

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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.

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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.

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SLIDE 15

Not Just Low Wage Jobs: Job Growth Across Wage Quartiles from 2005–2014

Source: Dallas Fed, Annual Report 2015

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SLIDE 16

Job Growth Across Wage Quartiles, 2000–14

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

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

Source: Energy Information Administration

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SLIDE 19

Future of Oil Prices Remain Uncertain

Source: Dallas Fed, Texas Economy Shifting Into Second Gear In 2017, First Quarter 2017.

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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
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SLIDE 21

Revenue Problem? More GR Available Excluding Lege Priority on Transportation

Source: Texas Comptroller, Biennial Revenue Estimate

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Footprint of Government: Total Revenue Estimated Up 7.5% Above 2016-17 Approps

Source: Texas Comptroller, Biennial Revenue Estimate

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Comptroller’s Estimates in Biennial Revenue Estimate

  • 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

$ in Thousands FY2016 (BRE) Actual FY2017 (BRE) Estimated FY2018 (BRE) Estimated FY2019 (BRE) 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

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Total 2016-17 All Funds Approps: $209.1 Billion (4.3% increase)

$53.3 B, Other $77.2 B, Health & Human Services $78.6 B, Education $68.0 B, Federal Funds $106.0 B, General Revenue $27.3 B, Other $7.8 B, GR- Dedicated

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SLIDE 25

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

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SLIDE 27
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SLIDE 28

Rainy Day Fund May Be $10.2 billion: No Need to Use it for Spending

Source: Legislative Budget Board and Leaky Umbrella

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SLIDE 29

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

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

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Texas’ Economic, Labor Market, and Fiscal Situation

Vance Ginn, Ph.D. Economist, Center for Fiscal Policy vginn@texaspolicy.com www.texaspolicy.com @vanceginn