The Texas Population Miracle

This, I think, is the best and clearest account of what’s real and what’s not real about the “Texas miracle” of jobs growth. It compares the Texas unemployment rate to the national unemployment rate, and the Texas population growth rate to the national population growth rate:

You see a couple of things here. One is that the Texas economy is less cyclical than the national economy. That means higher unemployment in good times, but lower unemployment in bad times. That’s probably because Texas has a relatively low-skill economy and thus a relatively high structural rate of unemployment, but at the same time, it has a substantial energy sector that’s robust in the face of cyclical downturns.

But what you clearly see here is that Texas isn’t somehow immune to the general business cycle or an exception to the Keynesian equation that a collapse in demand raises the unemployment rate. Dallas Federal Reserve President Richard Fisher seems to think that the experience of Texas proves that monetary stimulus is unnecessary, but the exact same recession exists in Texas as exists in the rest of the country.

What differentiates Texas from the rest of the United States isn’t an immunity to recessions, it’s a systematically higher population growth rate. That gap predates President Obama, predates the recession, and it predates Rick Perry, so I don’t think it tells us anything about any of those things. It’s driven, I believe, by proximity to Mexico and relatively cheap housing. This is to Texas’ credit. National living standards would be higher if the Los Angeles, San Jose, San Francisco, Seattle, and Portland MSAs along with the whole Acela corridor from Boston to Washington would adopt more robust Texas-style policies to increase the housing stock. But this doesn’t relate to the recession, and Perry is weirdly reluctant to tout one of the best aspects of Texas public policy.