For the foreseeable future, we’re likely to hear quite a bit about the “Texas Miracle” — the fact that the Lone Star State managed to stave off the worst of the Great Recession’s effects. Gov. Rick Perry, now a leading Republican presidential candidate, will tell voters who can bring similarly magical results to the nation.
Paul Krugman today helps set the record straight.
It’s true that Texas entered recession a bit later than the rest of America, mainly because the state’s still energy-heavy economy was buoyed by high oil prices through the first half of 2008. Also, Texas was spared the worst of the housing crisis, partly because it turns out to have surprisingly strict regulation of mortgage lending.
Despite all that, however, from mid-2008 onward unemployment soared in Texas, just as it did almost everywhere else.
In June 2011, the Texas unemployment rate was 8.2 percent. That was less than unemployment in collapsed-bubble states like California and Florida, but it was slightly higher than the unemployment rate in New York, and significantly higher than the rate in Massachusetts.
Texas has also benefited from a rising population coupled with a low cost of living.
[T]he high rate of population growth translates into above-average job growth through a couple of channels. Many of the people moving to Texas — retirees in search of warm winters, middle-class Mexicans in search of a safer life — bring purchasing power that leads to greater local employment. At the same time, the rapid growth in the Texas work force keeps wages low — almost 10 percent of Texan workers earn the minimum wage or less, well above the national average — and these low wages give corporations an incentive to move production to the Lone Star State.
So Texas tends, in good years and bad, to have higher job growth than the rest of America. But it needs lots of new jobs just to keep up with its rising population — and as those unemployment comparisons show, recent employment growth has fallen well short of what’s needed.
That’s not a miracle; that’s a mirage.
I’d add, by the way, that Texas has also benefited from state government spending that’s risen “faster than inflation and population growth,” and spending in Texas increased even more under Perry than under his predecessor, George W. Bush. Perry has also taken on more state debt at a pace that eclipses the national government, “paying for much of [Texas’] expansion with borrowed money.” (thanks to R.P. for the tip)
Just a few tidbits to keep in mind in the midst all the talk of “miracles.”