Texas Gov. Rick Perry, who ends his shadow run for the White House this weekend by announcing his bid for the GOP presidential nomination, has been touting the success of the Lone Star State’s economy, which, he says has done significantly better than the rest of the country through the Great Recession. Perry’s announcement comes exactly in time for this weekend’s Iowa Straw Poll.
“We keep adding jobs while others are losing them left and right,” he told the Republican Leadership Conference during its mid-June meeting in New Orleans. Some analysts say that Perry will enjoy a strong advantage over others in the crowded Republican field because of his state’s near-miraculous record of job creation throughout one of the worst economic periods in U.S. history.
There’s just one problem with that portrayal. While Texas has created more jobs than any other state in the past two years, the increase is far less than advertised. The rate of increase is not much higher than a number of other states, including former rustbelt centers like Pennsylvania or liberal sanctuaries like Vermont.
Moreover, its recent performance is a classic case of “all hat, no cattle.” Texas lost 34,000 jobs in June, causing its unemployment rate to jump to 8.2 percent, which ranks it 25th among states and leaving it worse off than its immediate neighbors. Even as Texas’ unemployment rate rose along the lines of the entire country, the neighboring states of Louisiana and New Mexico saw their unemployment rates fall to 7.8 percent and 6.8 percent, respectively.
Moreover, to the extent Texas has succeeded in adding jobs over the past two years, most of its good fortune rests on conditions that are not replicable elsewhere. Soaring oil prices have provided a substantial number of new jobs and tax revenue since it is the nation’s leading oil- producing state, even as those $4-a-gallon gas prices drained consumers nationwide and put pressure on other states’ budgets. An influx of new government defense spending has also pumped up revenue, while the state has used oil revenue to postpone a sharp cutback in state and local government employment, which is about to hit in full force.
Two other factors that may not play well with Republican Party primary voters also contributed to the Texas economic performance over the last decade and through the Great Recession. According to a recent analysis in the Ft. Worth Star-Telegram, state debt grew by 282 percent over the last decade, a slightly faster rate of increase than the ostensibly more profligate federal government. Local government debt in Texas grew by a heady 220 percent over the same period.
Texas also benefited during the downturn by having tighter housing finance rules – a stark contrast to the business-friendly regulatory environment Perry likes to tout. After the savings and loan crisis of the early 1990s, which hit Texas hard, the state legislature prohibited “cash out” mortgages. The state’s tough mortgage rules kept housing prices in check and saved it from the huge price declines and foreclosures that devastated many other areas of the country. Still, construction employment fell by 95,000 jobs during the recession and remains 14 percent below its pre-recession peak.
“Anyone who thinks the relatively strong performance in Texas has much to do with state government policy is wrong, except when it comes to housing, where regulation helped the state,” said Howard Wial, an economist and fellow at the Brookings Institution’s Metropolitan Policy Program. “In Texas, the worst is yet to come.”
After assuming the seat held by George W. Bush in 2000, Perry, 61, has been elected to three full terms as Texas Governor, making him the longest serving chief executive in state history. Married with two grown children, he has won plaudits from social and economic conservatives alike for his strong anti-abortion, anti-tax and anti-regulation stands. He also takes pride in his willingness to lure businesses from other states by offering special tax breaks. Asked by a television interviewer why some companies had relocated to Texas from California, he replied, “They like the smell of freedom – freedom from taxation.”
The recession officially ended in June 2009, but job declines continued across the country for most of the next six months, including in Texas. But after oil prices soared to nearly $150 a barrel in 2008 and remained high for most of the past two years, the Texas oil patch and the global oil services industry centered in Houston staged a strong recovery.
The state added 45,000 natural resource extraction jobs since the jobs trough of the recession. That was 15 percent of all the new jobs added in the state. The oil price bubble has also created tens of thousands of new business service jobs, which are counted separately.