Texas’ largest metropolitan areas are set for relatively healthy growth over a long-term horizon. Business cycles will happen, but when we look out through 2040, the state’s major population centers are likely to continue to compare well with most parts of the country in terms of economic expansion. The Austin and Dallas areas should lead the way, with Houston, San Antonio, and Fort Worth also doing quite well. For reference, our most recent long-term forecast for the state economy indicates that Texas output (real gross product) will likely expand at a 3.35% annual pace through 2040, while total wage and salary employment grows at a 1.64% yearly pace.
The Fort Worth-Arlington Metropolitan Division has seen the level of hiring pick up in recent months, though growth remains spotty due to the area’s exposure to the oil and gas industry. Businesses which have long been cornerstones of the regional economy (such as logistics) will continue to serve as a source of growth, and natural gas exploration and development will provide additional stimulus as prices recover. Output growth is expected to occur at a 3.43 percent annual pace through 2040, with almost 504,700 net new jobs through 2040 (a 1.61 percent yearly rate of growth).
The Austin-Round Rock Metropolitan Statistical Area (MSA) has been adding jobs at a notable pace, and is widely recognized as one of the strongest economies in the nation. For example, Austin was recently ranked atop a Forbes list of the nation’s 53 largest cities (“America’s Next Boom Towns”) as the city with the best chance to prosper in the coming decade. The technology-intensive MSA, which will likely see a notable stimulus from a new research-oriented medical school, is forecast to see growth in output at a 3.76 percent annual pace through 2040, with the manufacturing, services, and information sectors expected to see the fastest growth rates. Employment gains at a 2.02 percent yearly rate over the period are projected, resulting in the addition of almost 632,000 net new positions.
The Dallas-Plano-Irving Metropolitan Division has also been adding jobs at a healthy clip, with gains across most industrial sectors. Because the area’s diverse economy is more insulated from the energy sector than some parts of Texas, it has been performing better than the state as a whole. The real estate market continues to show strength, though over time it will moderate from the current elevated level. The Dallas area’s role as a business and financial services center for the state will contribute to ongoing economic stability, and emerging sectors (including technology industries) will lead to long-term growth. I am expecting that more than 1.33 million net new jobs will be created in the Dallas-Plano-Irving MD through 2040, representing a 1.75 percent annual rate of growth. Output growth is likely to be concentrated in the services and finance, insurance, and real estate sectors.
Economic conditions in the El Paso MSA continue to improve, setting the stage for future gains. Expansion will be driven in part by the area’s strong ties to the Mexican economy, which is benefitting from structural reforms implemented by the government and is projected to expand despite current low oil prices. Although hiring has slowed in manufacturing firms across the border in Juarez, maquiladoras are expected to continue to be an important source of economic activity in the region. Output in the El Paso MSA is projected to grow at a 2.99 percent yearly pace, reaching $56.47 billion in 2040. More than 147,400 net new jobs are expected to be added through 2040, a 1.47 percent annual rate of growth.
The Houston-The Woodlands-Sugar Land MSA has stabilized after adjusting to job losses associated with lower oil prices. Although additional fallout may well occur, it appears that the area is set for stronger growth. Health care has long been a source of economic growth in the area, and recent construction and expansion projects are enhancing the role of the sector. Visitors to the area are also enhancing the economy, with tourism and business travel expanding. Over the long term, oil price recovery will lead to resurgence in energy sector businesses, adding to the expansion across the rest of the area economy. Output in the Houston area is expected to increase at a 3.35 percent annual pace through 2040, topping $1.12 trillion at the end of the time period. Almost 1.63 million net new jobs are projected to be added, a 1.70 percent annual rate of increase.
The San Antonio-New Braunfels MSA has been affected by lower oil prices and the resulting slowing of activity in the nearby Eagle Ford Shale. Even so, the area is adding more jobs in other sectors than are being lost in energy-related industries. The region continues to attract locations in emerging technology industries. In addition, the area’s important tourism industry will benefit from completion of a $325 million renovation of San Antonio’s Henry B. Gonzalez Convention Center and ongoing improvements to the adjacent Hemisfair Park, Alamodome, and Alamo Plaza. Over the long term, as oil prices recover, the development of regional oil resources will generate significant jobs and business activity. Output is forecast to grow at a 3.27 percent annual pace, reaching $227.30 billion in 2040. Almost 512,400 net new jobs are likely to be added through 2040, a 1.62 percent yearly rate of growth.
Texas’ largest population centers drive economic progress for the state, serving as centers for business activity. The long-term prospects for these metropolitan areas are favorable (though there will be cycles), with expansion across a spectrum of industries driving overall growth.
M. Ray Perryman is president and CEO of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.