Feathers for our cap

Texas recognized as second best state for business, while Houston expected to see key economic growth

Texas was named the second best state for business by Forbes, and Oxford Economics predicted Houston's economic growth to be more significant over the next few years than most other major metros. Getty Images

Houston and the rest of Texas received two early Christmas presents signaling that their economies continue to percolate.

In a report released December 23, economic forecasting and analysis firm Oxford Economics predicted Houston and Dallas-Fort Worth will enjoy a greater share of economic growth through 2023 than any other mega-metro area in the U.S. except San Francisco.

Meanwhile, Forbes magazine declared on December 19 that Texas is the second best state for business, behind only North Carolina. Texas previously sat in the No. 3 spot on the Forbes list, preceded by North Carolina and Utah.

Through 2023, Oxford Economics forecasts average compound GDP growth of 2.4 percent in Houston and Dallas-Fort Worth. Among the country's 10 biggest metro areas, only the projection for San Francisco is higher (2.7 percent).

For Houston, the 2.4 percent figure would be an improvement over recent economic performance. From 2014 to 2018, the region's GDP growth rate was 1 percent, while it was 1.5 percent for 2015-19. In the 2020-21 timeframe, the growth rate for Houston is expected to be 1.9 percent.

In a recent forecast, the Greater Houston Partnership envisions the Houston area adding 42,300 jobs in 2020, mostly outside the energy sector. Among the region's top-performing sectors in 2020 will be healthcare, government, food services, and construction, the partnership says. Meanwhile, the energy, retail, and information sectors are expected to shrink.

In November, Robert Gilmer of the University of Houston's Institute for Regional Forecasting explained that by the end of 2022, job losses in the oil industry should have a limited effect on the region's economy. Still, he anticipates Houston's job growth through 2024 will be "moderate and just below trend."

In forecasting strong economic growth for Houston and DFW, Oxford Economics says the "industrial structures" of the two regions "are not exceptional, but low costs and low regulation mean that the industries that they do have grow faster than elsewhere."

"San Francisco's very high costs are creating affordability problems and rising inequalities that may eventually undermine its model," Oxford Economics adds. "Competitive advantages never last forever. The Sunbelt cities [including Houston and DFW] may yet give it a run for its money."

Houston's and DFW's competitive advantages mesh with those of the entire state. Texas' high points include lower taxes, lower labor expenses, lower cost of living, and low levels of regulation, Oxford Economics says.

As noted by Forbes, Moody's Analytics predicts Texas businesses will add close to 1 million new jobs by 2023, which would be the third highest average annual job growth rate among the states. Meanwhile, the share of Texans who launched businesses last year was the fourth highest in the country, according to Kauffman Foundation data cited by Forbes. And just three states — California, New York and Washington — saw more venture capital flow into them in 2018 and 2019 than Texas did, according to PwC.

Texas earned these rankings on the Forbes list:

  • No. 1 state for growth prospects
  • No. 1 state for business costs
  • No. 4 state for economic climate
  • No. 10 state for labor supply
  • No. 15 state for quality of life
  • No. 21 state for regulatory environment
In his 2019 State of the State address, Gov. Greg Abbott praised Texas as "the most powerful state in America," thanks in part to healthy job growth, low unemployment, and rising wages. "Texas is the premier economic destination in the United States," he said.
Most of Houston's smartest ZIP codes surround the Texas Medical Center. Photo by Dwight C. Andrews/Greater Houston Convention and Visitors Bureau

The Houston area is bursting with brain power. Three ZIP codes in the region are home to the biggest share of Texans who've earned a master's, professional, or doctoral degree, according to a new list from UnitedStatesZipCodes.org. And that, according to one economic development executive, is a boon to Houston's workforce.

Houston's 77030 ZIP code, which houses the Texas Medical Center, sits atop the new ranking. There, more than half (51.7 percent) of adults 25 and over, or about 3,800 people, hold a postgraduate or professional degree. As a whole, 12 percent of adults in the Houston metro area have a postgraduate or professional degree, according to the Greater Houston Partnership.

The postgraduate category includes PhDs and MBAs, while the professional category includes JDs (law degrees) and MDs (medical degrees).

"When deciding where to live, neighborhoods full of residents with postgraduate degrees are … increasingly attractive," reads UnitedStatesZipCodes.org, which based its ranking on U.S. Census Bureau data. "Well-educated communities — full of leaders in technology, medicine, business, and more — can bring new industries and revenue."

Ranking second on the list of brainiest Texas ZIP codes is Houston's 77005, where 48.5 percent of adults (or about 8,600 people) hold a postgraduate or professional degree. This ZIP code, which neighbors the 77030 ZIP code, includes the Rice campus. Also, it's presumably home to a lot of highly educated Rice professors and Texas Medical Center doctors.

Directly to the west of the 77030 ZIP is Bellaire — 77401 — which appears at No. 3 in the ranking. In the 77401 ZIP code, 47.6 percent of adults (or nearly 6,300 people) have earned a postgraduate or professional degree; it, too, is likely packed with Rice University professors and Texas Medical Center doctors.

Susan Davenport, senior vice president of economic development at the Greater Houston Partnership, says the region's two top-tier schools — Rice and the University of Houston — along with the region's more than 40 other four-year and two-year schools contribute to Houston's collective brain trust. So do two nearby schools: the University of Texas at Austin and Texas A&M University in College Station.

"More broadly, we are an attractive market for educated professionals from across the country, especially compared to leading East or West Coast cities, because of our lower cost of living, affordable housing prices, and strong economy," Davenport says.

"This creates a virtuous cycle: Companies move to or expand in Houston because they want access to this talent," she adds, "and leading talent moves here because they want to work for these companies and institution."

Davenport says initiatives like the Innovation Corridor, the TMC3 research campus and The Ion entrepreneurship hub also help nurture a well-educated workforce.

"We anticipate these projects will attract even more of the world's brightest minds to our region," she says.

Three other Houston ZIP codes made the top 10 in Texas:

  • No. 5 — 77098 (39.2 percent). That percentage represents about 4,300 people. This ZIP code is just northwest of the Rice and Texas Medical Center campuses.
  • No. 6 — 77025 (39.15 percent). That percentage represents almost 8,200 people. This ZIP code is just southwest of the Rice and Texas Medical Center campuses.
  • No. 10 — 77024 (35.4 percent). That percentage represents about 9,400 people. This ZIP code is slightly east of the Energy Corridor.

"It is no surprise that top-flight, innovation-focused talent would flock to neighborhoods near downtown, Uptown and the world-renowned Texas Medical Center," Davenport says.

Other Texas ZIP codes in the top 10 for postgraduate or professional degrees are:

  • No. 4 — 78703, Austin (41.5 percent). This ZIP code, less than two miles west of the University of Texas campus, includes high-end neighborhoods such as Tarrytown and Old West Austin.
  • No. 7 — 75205, Dallas (37.7 percent). The Southern Methodist University campus sits on the east side of this ZIP code.
  • No. 8 — 78746, Austin (37.2 percent). This ZIP code encompasses parts of West Austin, as well as the wealthy suburbs of Rollingwood and West Lake Hills.
  • No. 9 — 78731, Austin (37.1 percent). This ZIP code incorporates part of Central Austin and a large swath of Northwest Austin.

Federal data shows the unemployment rates for people with master's, professional, and doctoral degrees are lower than for other groups, such as people whose bachelor's or associate's degrees are their most advanced degrees. In addition, people with a postgraduate or professional degree typically earn more money.

"Graduates with the right knowledge and skills have the ability to demand higher salaries, as they are equipped to make significant contributions to the revenue and growth of the companies they work for," the Digital Marketing Institute says.