The U.S. Bureau of Labor Statistics released the Regional and State Employment and Unemployment Summary last Friday for July 2015. The labor market data for the states with the largest populations and economies—California, Texas, New York, and Florida—and U.S. averages show that the Texas model faces headwinds but remains resilient according to several employment measures.
Texas has now had positive job creation in 57 of the last 58 months with 31,400 net nonfarm jobs added in July. Figure 1 shows that the state’s 2.3 percent annual job creation rate remains above the U.S. average with other large states creating jobs at a similar pace. Texas’ job creation rate has slowed as oil prices have declined by more than 60 percent contributing to 14,200 fewer jobs in the mining and logging industry that’s dominated by oil and gas jobs since last July. However, Texas is a well-diversified economy with 236,200 net nonfarm private sector jobs added during the last year in multiple industries.
Figure 1
Texas’ 4.2 percent unemployment rate in July marks the 103rd straight month it has been at or below the U.S. average and is at least 1.1 percentage points lower than any of the other unemployment rates in Figure 2.
Figure 2
This lower unemployment rate is even more impressive when you consider how many Americans have stopped looking for work after an unsuccessful job search. While the nation’s reported 5.3 percent unemployment rate in July is near what some consider “full employment,” it doesn’t tell the whole story. Figure 3 presents evidence of the drop in the U.S. labor force participation rate and the fact that Texas’ rate remains higher than other large states though it has recently declined sharply from such factors as lower oil prices and a weakening global economy.
Figure 3
Given the false signal a lower unemployment rate might send from fewer searching for a job, the employment-population ratio provides valuable information. Figure 4 shows that Texas’ share of the population employed has taken a steep decline since March and should be watched closely.
Figure 4
Figures 5 and 6 below illustrate that Texas has been the nation’s primary job creator since the Great Recession began in December 2007. Total employment in Texas also didn’t decline during that recession when oil prices dropped more than they have since last July. Though this provides some indication of the potential consequences of the current smaller drop in oil prices, recent declines in total employment since March indicate this time could be different.
Figure 5
Figure 6
Though Texas faces headwinds, strengthening the Texas model by continued economic diversification, more international trade, and pro-growth policies will help the Lone Star State weather the storm.