Matthias Shapiro on the Texas Employment Figures

by Avik Roy

Matthias Shapiro has put forth an interesting quantitative analysis of the Texas employment numbers, which he prefaces with the following:

I don’t like Rick Perry for our next president. I have my reasons that aren’t worth going into here…[However,] having familiarized myself with the data, I started noticing [criticisms of] the Texas jobs data that started popping up that directly contradicted what I was seeing in the data. So I wanted to clear up a couple of these common misconceptions.

His piece is worth reading in full, but I will try to summarize the critiques he addresses, along with his analyses of the critiques:

1. Texas’ unemployment rate of 8.2% belies its alleged jobs growth. Shapiro charted Texas’ employment data, and found that, in terms of the absolute number of jobs now vs. prior to the recession, Texas has performed better than any other major state. In addition, according to his analysis, the unemployment rate in Texas is artificially boosted by substantial migration to Texas from other states; since December 2007, 739,000 people moved to Texas.

2. Texas’ jobs are low-paying. Texas’ median hourly wage is $15.14, ranking 28th; however, Texas’ rate of hourly wage growth since the recession is 6th-fastest in the nation.

3. The recent boom in oil and energy prices is responsible for Texas’ performance. New jobs in the energy sector account for around one-quarter of Texas’ increase in the past year; however, “take the energy sector completely out of the equation and Texas is still growing faster than any other state.”

4. Texas’ jobs performance is inflated by public sector jobs growth. “Counting from the beginning of the recession (December 2007) the Texas public sector has grown 3.8%, or a little under 70,000 employees. This is faster than normal employment, but it’s not off the charts.”

Shapiro concludes:

My advice to anti-Perry advocates is this: Give up talking about Texas jobs. Texas is an incredible outlier among the states when it comes to jobs. Not only are they creating them, they’re creating ones with higher wages.

One can argue that Perry had very little to do with the job situation in Texas, but such a person should be probably prepare themselves for the consequences of that line of reasoning. If Rick Perry had nothing to do with creating jobs in Texas, than why does Obama have something to do with creating jobs anywhere? And why would someone advocate any sort of “job creating” policies if policies don’t seem to matter in when it comes to the decade long governor of Texas? In short, it seems to me that this line of reasoning, in addition to sounding desperate and partisan, hogties its adherents into a position where they are simultaneously saying that government doesn’t create jobs while arguing for a set of policies where government will create jobs.

Or, to an uncharitable eye, it seems they are saying “Policies create jobs when they are policies I like. They don’t create jobs when they are policies I dislike.”

People will continue to argue about the data. But hopefully this will be helpful in sorting out reality from wishful and desperate thinking. I mentioned on Twitter that the Texas jobs situation was nothing short of miraculous. This is why I said that and why I’m standing by that statement.

UPDATE 1: Jim Pethokoukis points out that the Texas unemployment rate looks more favorable when you correct for the labor force participation rate (emphasis added):

Because [discouraged workers who have not looked for work in the prior 4 weeks] are excluded from the U-3 measure, the labor force participation rate has been falling as has the official size of the U.S. labor force.  The rate was 63.9 percent in July and 64.1 percent in June, down from 65.7 percent in January of 2009. The Texas labor force participation rate was 65.6 percent in June, higher than the national average. That means there were more folks active seeking work, a reflection of the more positive job environment.

Bottom line: So let’s do an apples-apples comparison. What if the national labor force participation rate was as high as that in Texas? Well, the national U-3 unemployment rate would have been 11.3 percent in June, sharply higher than the 8.2 percent rate in Texas. And what if the Texas labor force participation rate had been as low as the national rate? Under that scenario, the Texas unemployment rate would have been 6.1 percent, also dramatically better. So either way you cut, the unemployment rate is much better in Texas than the national average.

UPDATE 2: Richard Fisher, President of the Federal Reserve Bank of Dallas, weighs in with a cornucopia of data. His bottom line: “You may select whichever metric you wish. Regardless, it is reasonable to assume Texas has accounted for a significant amount of the nation’s employment growth both over the past 20 years and since the recession officially ended.”

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.