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