Why the Texas economy is booming

It has been nearly three years since the National Bureau of Economic Research (NBER), the official arbiter of U.S. business cycles, declared an end to the Great Recession. But in spite of the agency’s proclamation, the labor market in many states remains stalled; in some cases, the jobs picture is getting worse.

A cursory glance at the latest employment statistics reveals that between June 2009 and December 2011 — the most recent month for which there is data for all states — 13 states recorded net job losses. Twenty-one states and the District of Columbia recorded anemic levels of growth, gaining fewer than 25,000 jobs over those 30 months. Only 16 states created 25,000 or more net new jobs.

More evidence of a jobless recovery is seen through another lens, unemployment rates.

Today, despite billions in government “stimulus,” 30 states’ unemployment rates are either higher or less than 1 percent lower than they were at the end of the recession. For a majority of states, there has simply been no great improvement in this area during the past two and a half years. The remaining states’ unemployment rates, with the exception of Michigan (-4.5 percent), have decreased by between 1 percent and 2.8 percent.

Nearly everywhere you look, state economies are at a standstill, existing in a sort of job-creation limbo. But while job-creation stagnation generally plagues the U.S. as a whole, there is one large state — Texas — where vitality has returned.

Two weeks ago, Texas officials announced that the Lone Star State had crossed an important threshold. After a shorter, less severe recessionary period than the rest of the nation experienced, the state’s labor market had returned to its pre-recession employment levels, meaning that Texas’ economy has now regained every job lost during the worst parts of the recession in late 2008 and 2009.

More evidence for this idea of a resurgent Texas economy came earlier this month with the latest revelation of the state’s unemployment rate. As of December 2011, Texas’ unemployment rate has been at or below the national average for 60 consecutive months. This feat is all the more impressive given that Texas added more people than any other state between 2010 and 2011, according to the latest U.S. Census Bureau data.

Clearly, something special is happening in Texas, but what exactly is the state’s secret to success? Simply put, Texas has gotten government out of the way.