Rick Perry enjoyed taking credit for all of the job growth in Texas under his administration, going so far as to claim he was overseeing a “Texas miracle.” But now that job growth is evaporating, so is the myth of Rick Perry as a job whisperer.
According to the Federal Reserve Bank of Dallas, Texas may not outpace the rest of the nation in job growth in 2015 for the first time in years. Job growth was 3.6 percent in 2014, but is expected to only be 2 – 2.5 percent this year. That means there will be at least 100,000 fewer new jobs created this year than last, and possibly even closer to 170,000 fewer.
The main reason for slower job growth is lower oil prices. This translates into less drilling statewide and a decrease in export volumes, exacerbated by the strong value of the dollar. According to the New York Times, “every day, oil companies are decommissioning rigs and announcing layoffs. Small companies that lease equipment have fallen behind in their payments. In response, businesses and workers are bracing for the worst.” In the Permian Basin, for instance, rig count peaked at 570 in 2014, but has now dropped below 490 and is projected to hit 300 by April.
According to Mine Yucel, director of research at the Dallas Federal Reserve Bank, Texas’s job growth tends to outpace the nation when there are energy booms, but is hit the hardest in energy slumps. “There’s only one sample from 1986, and Texas went into recession and the nation did not,” Yucel said. “The question is, let’s see how we’re going to do in this bust.”
Texas’s economy is undoubtedly more diversified this time around than in 1986, positioning it better to weather the storm. One economist anticipates more of a “headwind for the Texas economy” than a recession.
Recession or not, Texans will feel the impacts of lower oil prices – and not just those in the oil industry or people refilling their gas tanks. Some cities in the Eagle Ford Shale in South Texas and the Permian Basin, where the economies are more singularly reliant on oil, could see both home values and property taxes drop, which could lead to budget issues at the local level. Revenue will also suffer at hotels, restaurants, retail, construction and other businesses that rely on a steady stream of customers. Ripple effects will be felt far and wide.
How hard the state is hit will depend largely on how long oil prices stay low. In the meantime, we’ll be learning the hard way how well a state that hasn’t invested in the social safety net for two decades is prepared for a downturn.