Factcheck.org fact checks Perry's Claims About Texas

From FactCheck.org
Texas-Size Recovery
Here's a look at the facts behind job growth in the Lone Star State.
August 31, 2011
Summary

Presidential candidate and Texas Gov. Rick Perry has boasted of significant job growth in his state in the past few years. And for good reason: It's true. While Texas clearly hasn't avoided the recession, the state has done well in terms of increasing jobs, when compared with the recovery nationally.

Perry's claim that "40 percent … of all the jobs in America were created in Texas" since June 2009 is accurate. But it’s also true that the increase in jobs hasn't kept pace with the rise in the state's population — so the number of jobless Texans also has risen, along with the state’s unemployment rate. And Texas is tied with Mississippi for the highest percentage of hourly workers paid at or below the minimum wage.

Texas job statistics are a mixed bag. Perry’s supporters and Perry’s detractors select the statistics that suit their spin. Here we'll just lay out a balanced look at the facts — good and bad alike — and leave the spin to others.

Analysis

Fact: Texas is responsible for 40 percent of the nation's job creation since June 2009.

Perry, South Carolina, Aug. 13: Since June of 2009, Texas is home to 40 percent of all the jobs added in the United States.

Perry has touted this statistic several times, and with the economy and jobs monopolizing the political discourse these days, it's little wonder this has become a major talking point for the governor. On top of that, it's true — even if there are some not-so-rosy-sounding statistics that go along with it. More on those in a minute.

Texas has done a fine job of adding to its employment numbers. Since June 2009, which marked the official end of the recession, until July 2011, the number of jobs increased in the state by 328,000. Nationally, the job growth in that time period was 697,000, according to figures from the Bureau of Labor Statistics. That means Texas jobs made up 47 percent of the national net job creation.

What about Perry's entire tenure as governor? Texas still looks better than the country overall. The state has added 1,081,900 jobs since December 2000, the month Perry took office. It's an increase of 11.3 percent during his time as governor. Nationally, employment has gone down in this time frame, declining by 1,295,000, a nearly 1 percent drop.

Perry's record is part of a long-term trend. Texas has done well in the jobs department for decades. "This point goes neglected," says Bernard L. Weinstein, professor of business economics in the Cox School of Business at Southern Methodist University in Dallas. "Yes, Texas has created more jobs than any other state" in the last two years. "But that’s been true since 1970. For the last 41 years Texas has added more jobs than any other state, and in most years, has led the nation in job creation," Weinstein told us. "So Gov. Perry can claim that these jobs were created on his watch, but they were created on everybody else’s watch too."

The San Antonio-Express News recently pointed out that past Texas governors have done well in terms of job creation, too. The state did even better when George W. Bush was governor; jobs went up 20.3 percent, though Bush's 1995-2000 term also came during prosperous times. "A lot of what we’re doing is growing like we always grew," Dick Lavine, senior fiscal analyst for the Center for Public Policy Priorities in Austin, a think tank that advocates for low- and moderate-income families, told us, referring to both jobs and the state's burgeoning population. "It’s a longer-term trend in Texas that’s just continuing."

Fact: Despite the job gains, Texas' unemployment rate has gone up.

While Texas has created jobs, the state hasn't created enough of them to keep pace with a rising population and labor force. In fact, if we look at the June 2009 starting point that Perry refers to, unemployment got worse in Texas – going from 7.7 percent in June 2009 to 8.4 percent in July 2011. The national rate, meanwhile, improved – dropping from 9.5 percent to 9.1 percent.

The fact is, neither Texas, nor the nation, is adding jobs at a pace fast enough to bring down unemployment to historically normal levels. And Texas' unemployment rate — while still below the national average — is now higher than that of 26 states.

The number of employed and the number of unemployed in Texas both have increased in the past three years, according to BLS data. So, while jobs have grown, the number of unemployed in the state has doubled since January 2008. How can a state add jobs while also adding unemployed workers? It simply adds population.

Texas is the second largest state, and its population — 25.1 million as of the 2010 census — has increased rapidly. It has gone up by 20.6 percent from 2000 to 2010, more than twice the rate of the U.S. overall, according to the Census Bureau.

"It’s a little hard to tell … whether job growth has led to population growth in Texas or vice versa," says Lavine.

Perry's supporters will say that people from other states have moved to Texas because of job opportunities. And that's true for some. But a little more than half of the state's population growth, 54 percent, was natural — births and deaths — from 2000 to 2009. The rest was split between domestic and international immigration, with 21.6 percent of the growth coming from people moving from other states and 23.7 percent coming from international migrants. That's according to the Census Bureau and the Texas State Data Center.
"When you have more people, you generally have more jobs," Howard Wial, an economist and fellow with The Brookings Institution, said in an interview with FactCheck.org. "When more people move in, wages don’t rise. They might fall a little bit," which, in turn, can be an impetus for job creation. "When there are more jobs created, more people want to move in."

Another look at BLS data comparing Texas to the nation shows that the state has done better than the country as a whole. But it still has been hit by the recession. Both unemployment rates have grown at roughly the same rate. The Texas unemployment rate was 4.4 percent in Jan 2008, 0.6 percentage points below the national rate of 5.0. In July, Texas’ unemployment was 8.4 percent, 0.7 percentage points below the national rate of 9.1 percent.

Fact: The Texas economy has benefited from high fuel prices.

When one of your state's major industries is oil and gas, this is a no-brainer. "When the price of oil goes up, the Texas economy, which is a major oil producer, booms," Wial says. Or at least, it would not be as depressed as it was before. That, combined with new technology to extract natural gas from shale, has led to job growth.

Other oil-producing states have done even better: North Dakota's unemployment rate is an enviable 3.3 percent.

Crude oil prices were $66 to $72 per barrel in June 2009, but they've topped $110 this year (before declining to about $85 this week). "This has a direct impact on jobs in energy exploration, extraction, and energy support businesses and an indirect impact on job creation by boosting the wealth and incomes of many state residents," Gary Burtless, a senior fellow in economic studies at The Brookings Institution, said in an email to FactCheck.org.

Indeed, jobs in the mining and logging sector, which includes energy, have gone up by 25 percent since June 2009 in the state, an increase of 50,300 jobs. And the impact extends to other industries. "The energy sector has very strong linkages" to other parts of the economy, says Weinstein, and accounts for a healthy portion of tax revenue. "So it’s been a significant factor in helping the state."

Texas jobs have grown in trade, transportation and utilities; professional and business services; and education and health services, among others. The only sectors measured by the Bureau of Labor Statistics to decline since June 2009 were construction, manufacturing and information.

Fact: Texas didn't experience the big housing bust.

Texas was largely spared from the major spike in housing prices that occurred in other states, followed by the bust that sent homeowners into foreclosure and left others owing more than their homes were worth. Weinstein says a housing bust in the 1980s left a sobering effect on developers. "This time we didn’t overbuild," he says. Plus, the state has tighter restrictions than other states on home equity loans and refinancing — homeowners can only borrow on 80 percent of the home's value. Elsewhere, subprime lenders were offering loans of up to 125 percent of home value. "Your home couldn't be a piggy bank" in Texas the way it could in other states, Weinstein says.

In the case of mortgages, Texas had stricter regulation than the nation as a whole. But the state also has fewer regulations compared with other states on construction. That also helped avoid a housing boom and bust.
"Building restrictions are more lax and there is also a lot of buildable land, with few natural obstacles to building," such as mountains or large bodies of water in metropolitan areas, Wial says. The population growth, therefore, sustained demand for homes without pushing up prices. "Because it’s easy to build, it’s easy to accommodate a lot of people who want to move into the state without a big spike in housing prices," he says.

So for one reason or another, consumers didn't overborrow on homes and didn't have to cut back spending in other ways. "Texans, unlike consumers in some other parts of the country — think Arizona, Nevada, Florida, and southern California — did not have to tighten their belts as much in the house price bust, because they borrowed less in the boom that preceded the bust," Burtless says.

Fact: Texas has benefited from an increase in government jobs, too.

Government was the largest industry in the state in 2010, as measured by a percentage of gross domestic product, according to the Bureau of Economic Analysis. It beat out mining, which was the state's second largest industry.

In terms of the total number of jobs, as measured by BLS, government is the second largest sector, behind trade, transportation and utilities. Since June 2009, the state has added 31,100 government jobs. That's nearly 10 percent of Texas' job growth. The nation, meanwhile, has lost 523,000 government jobs in that time frame.

These government jobs — which would include teachers, police and firefighters — have been a significant part of the employment growth in Texas throughout Perry's tenure. Since Perry took office, private sector employment has gone up by 10 percent and government sector employment has climbed 18.3 percent, as the San Antonio-Express News noted.

Government jobs in the state may decline now that Texas has instituted cutbacks to cover budget shortfalls. The Texas Legislative Budget Board said the new budget passed this summer provides funding for 5,727 fewer full-time equivalent positions over two years (see page 20). The Center for Public Policy Priorities has estimated that a $4 billion cut in funding to school districts over the next two years, compared with what the schools were supposed to receive under current law, could lead to a total loss of 49,000 positions in the coming school year, Lavine said. That's if the districts cover the shortfall only by eliminating jobs. (Government jobs already have declined in the state in recent months: If we use July 2010 as our starting point, government jobs have dropped by 14,500 in the past year.)

Perry also has used state money to encourage job growth outside government, giving grants to businesses to create jobs as part of the Texas Enterprise Fund. It's unclear exactly how many jobs have been created by the program. A Texas watchdog group, Texans for Public Justice, published a report in September 2010, saying that businesses had created 22,544 jobs — with evidence of another 8,147 indirect jobs — since 2003 under the program, while the Perry administration had claimed about 54,000 new jobs.

Fact: Texas, along with Mississippi, has the highest percentage of hourly workers at or below the minimum wage.

In Texas, 9.5 percent of workers paid hourly rates earn at or below minimum wage. That gives the state the highest percentage in the nation, tied with Mississippi, according to BLS data.

In 2000, the percentage of hourly workers paid at or below minimum wage was a little under 6 percent. Perry took office in December of that year, and the percentage declined, reaching about 3 percent of hourly workers in 2006. It then jumped back up in the next few years, at least partly due to increases in the federal minimum wage.

Weinstein points to a few reasons low-wage jobs are so prevalent in the state — Texas' convention business and an increase in health service jobs to care for an aging population. Both sectors include many low-paying jobs.

Lavine adds that in addition to low wages, many jobs come with low benefits. Texas has the highest percentage of residents lacking health insurance — 26 percent — among U.S. states.

The jobs created also match the workforce, says Lavine, and he's concerned that the state needs to do a better job of educating and training its labor force. "Yes, it's better to have a job than not have a job, but as we move into the 21st century," he says, "it would be much better to have a highly skilled workforce that was able to compete in a service economy." He cites a study by the Georgetown University Center on Education and the Workforce, which estimated that in 2018, Texas would rank first among the states in the proportion of jobs for high-school dropouts. The state would rank 31st, according to the study, in the proportion of jobs requiring a bachelor's degree.

Weinstein, too, says that Texas has a growing segment of the population that isn't prepared for high-wage work. "One of the big things facing Texas and a lot of other states," he says, is that "we have a rapidly growing population of under-educated workers."
– by Lori Robertson

Clarification, Aug. 31: Texas is tied with Mississippi in having the highest percentage of hourly workers at or below the minimum wage. We stated this twice in our article. In a third instance, we originally left out the word "hourly."

Sources
U.S. Department of Labor. Bureau of Labor Statistics. Texas employment data. accessed 30 Aug 2011.
U.S. Department of Labor. Bureau of Labor Statistics. Employment, Hours, and Earnings from the Current Employment Statistics survey (National). accessed 30 Aug 2011.
Weinstein, Bernard L., professor of business economics, Southern Methodist University. Interview with FactCheck.org. 30 Aug 2011.
Lavine, Dick. senior fiscal analyst, Center for Public Policy Priorities. Interview with FactCheck.org. 29 Aug 2011.
Fikac, Peggy and Patrick Danner. "Government fuels Texas jobs." San Antonio Express-News. 26 Aug 2011.
U.S. Department of Labor. Bureau of Labor Statistics. Local Area Unemployment Statistics. accessed 30 Aug 2011.
U.S. Department of Labor. Bureau of Labor Statistics. Selected Labor Force Statistics, Texas and U.S. 19 Aug 2011.
U.S. Census Bureau. State and Country QuickFacts, Texas. accessed 30 Aug 2011.
U.S. Census Bureau. National and State Population Estimates, Components of Population Change. Cumulative Estimates of the Components of Resident Population Change for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2009 (NST-EST2009-04). accessed 30 Aug 2011.
Texas Office of the State Demographer. Texas: Demographic Characteristics and Trends. Texas State Data Center. 19 Aug 2011.
Wial, Howard, economist and fellow, The Brookings Institution. Interview with FactCheck.org. 30 Aug 2011.
Smith, Virginia. "Shale gas is producing jobs, stimulating the economy." Houston Chronicle. 11 Sep 2009.
Burtless, Gary, senior fellow in economic studies, The Brookings Institution. Email interview with FactCheck.org. 26 Aug 2011.
U.S. Energy Information Administration. Cushing, OK WTI Spot Price FOB (Dollars per Barrel). accessed 30 Aug 2011.
Texas Office of Consumer Credit Commissioner. Home Equity Loans in Texas: Frequently Asked Questions. accessed 30 Aug 2011.
Nussbaum, Debra. "Spending It: Focus on Home Equity Loans — 125 Percent Loans; Bigger Amounts May Bring Bigger Risks." New York Times. 22 Mar 1998.
U.S. Department of Commerce. Bureau of Economic Analysis. Bearfacts, Texas. 7 Jun 2011.
Mildenberg, David. "Texas Legislators Pass Two-Year Budget That Shorts Schools by $4 Billion." Bloomberg. 28 May 2011.
Texas Legislative Budget Board. Summary of Conference Committee Report on House Bill 1 for the 2012–13 Biennium. May 2011.
Texans for Public Justice. "Phantom Jobs: The Texas Enterprise Fund's Broken Promises." 8 Sep 2010.
U.S. Department of Labor. Bureau of Labor Statistics. Minimum Wage Workers in Texas – 2010. 28 Mar 2011.
Kaiser Family Foundation. Health Coverage & Uninsured. statehealthfacts.org. accessed 30 Aug 2011.
Carnevale, Anthony P., et. al. "Help Wanted: Projections of Jobs and Education Requirements Through 2018." Georgetown University Center on Education and the Workforce. Jun 2010.