Just a quick follow-up on Rick Perry, with much more to come over the coming days and weeks, no doubt. One of the ongoing debates over his record is whether the governor can really take credit for the "Texas miracle" of job creation during the recession. Between June 2009 and June 2011, Texas added about 261,000 jobs, according to an August 2011 report from the Dallas Fed. The United States as a whole had net job creation of 524,000, meaning that 49.9% of net job growth came from Texas. (If you set aside the states that lost jobs during time, the states that added jobs added about a million jobs--I don't know why you would look at it in those terms, but the Fed mentions it, so I'll pass it along to you.)

Skeptics point out that Texas benefits from a robust oil and gas sector. It's true that energy remains a key driver of the Texas economy and that other energy-producing states (Wyoming, North Dakota, etc) have been similarly propped up by these industries.

However, oil and gas prices are not sufficient to explain job creation in the state during Perry's tenure. They're capital-intensive industries, and so even when oil and gas is booming, the net employment effect is smaller than you would expect. The Dallas Fed has a good overview of the impact of energy prices on the Texas economy over the past 40 years. The most relevant bit for our purposes:

Although energy price shocks still aid the Texas economy in this period [1997-2010], the effects of a 10 percent oil price increase are smaller than in the first period [1970-1987]. The increase leads to gains of 0.5 percent in GDP, 0.36 percent in employment and 6.2 percent in the rig count.

A 10 percent natural gas price jump leads to gains of 0.3 percent in GDP and 4.9 percent in the rig count. The price increases do not affect employment significantly. In general, these results are consistent with the development of the Barnett Shale and the increase in natural gas production.

Or to put that in different terms, the oil and gas industry added 28,600 jobs between June 2010 and June 2011--nearly 13% of all the jobs created in Texas during that time, according to economist Karr Ingram. So, a lot of jobs, but it's not the whole story.

In general, I think Perry deserves partial credit for the job creation that has happened in Texas during his time in office. He also deserves some criticism for the things that that haven't gone well. I will elaborate more on this later.

In the meantime, since yesterday I've heard critics say that Perry is NOT responsible for having created jobs in Texas, but also that he IS responsible for the state's unemployment rate, which is currently at 8.2%, a point below the national average. On the face of it those claims strike me as slightly contradictory. I suppose the argument is that Perry has been lucky and now his luck's running out. That may be the case. I've argued in The Economist that Texas's budget shortfall and rising unemployment complicate Perry's claims to be a brilliant steward of the economy. There are also some economists who argue that Texas has a tendency to be slow to get into a recession, and slow to get out.

But the response the Perry people give is that no one can be fully immune from the effects of a global economic downturn. I think that's plausible, and even if the accomplishment turns out to be merely that Texas avoided a few years of a brutal recession, that’s not nothing. It means that the state, and more to the point the people in the state, were spared a lot of serious distress. During the worst of the national recession, when we were hearing horror stories from other places, people who were laid off in Texas were able to find new jobs relatively quickly. And I don’t just mean highly skilled people in Austin. Watching that happen made an impression on me.

08/14/2011 12:12

Quick reax, maybe more later:

1. Can't just look at direct employment in oil & gas sector. Metal fabrication, engineering construction, consulting, gas-fed petrochem, etc. also benefit enormously from increased production. Obviously there is also a multiplier effect in non-oil/gas sectors such as retail, real estate, services, etc. from the jobs and spending associated with oil & gas. Also, not sure about the time frames you quote-- on the one hand a 13 year stretch, on the other hand a 12 month stretch. Seems to me you want to look at TX starting in the period immediately after the recession began and compare our major industry growth to the rest of the national economy.

2. Economic facts aside, I think it's a bit of a strawman to say that commenters are claiming that Perry can't own the job creation but does own the unemployment. I've never claimed that he "owns" either. My point is that if Perry runs on a jobs narrative, there are some very obvious counter-claims, the most obvious being that Perry doesn't have a single original policy or legislative push to his credit that actually did anything to moderate negative economic effects. He simply avoided negative effects, largely due to factors out of his control and policies that pre-dated his tenure. Texas governors are weak by design.

This is perhaps too nuanced for outside pundits, but undecided voters outside of Texas will want to know: what would Perry have done differently in their state, without oil & gas growth and royalties? Romney/Obama are skilled enough to portray Perry as a beneficiary of circumstance rather than actively guiding destiny. Moreover, Obama would have a field day presenting Perry as a continuation of GW Bush, and since Perry basically was a continuation of GW Bush in Texas, it's a tough claim to refute.

08/15/2011 10:12

Regarding your parenthetical -- the reason this matters is that the "% of new jobs created" stat can be a bit misleading because the relation of the two numbers is such that, since some states will have lost net jobs, the sum of the % of net jobs added by states that added net jobs will exceed 100% of the nation's total added net jobs -- in fact, even a single state's contribution could exceed 100% of the total net jobs created, if the rest of the country lost jobs on net.

This is a bit counter-intuitive to most people, who expect "Texas added half of all new jobs" to mean this is describing Texas' contribution to a certain number of jobs that equals the sum contributions of all the states that created jobs.

(To some extent, this is just because it's hard to describe proportions of things that are negative -- e.g. it's very awkward to say "Illinois created minus 15% of the nation's new jobs.")

08/15/2011 14:27

Even if Perry had a hand in creating these jobs - which he didn't, I would rather the next President come from Mars than Texas. Texas spawns religous nutjobs. One hand on their bible, one hand on a gun (or their neighbors wife).

America deserves better than texas.


After reading your blog post I am inspired with the writing and looking forward to write a blog on the same including my view points. I will share my writing content soon! About this blog post, very informative and inspiring as well. Good Job!

10/05/2012 05:10

I always like to read a quality content having accurate information regarding the subject and the same thing I found in this post. Nice work.


Your comment will be posted after it is approved.

Leave a Reply.