So, I notice the Texas job story has been getting a lot of attention.
My answer, not unexpectedly, is that we don’t really know. There are some obvious contributing factors, but sorting out the strength of all of those factors is no easy task.
While answering the full question of “What’s Up With Texas” is well beyond the scope of a few blog posts, the Texas story is fascinating because it run counter to both major trends and easy narratives. These are the cases that really make our understanding.
Lets start, however, with a few stats that aren’t that anomalous.Here is year-over-year job growth in Texas compared with the US as a whole.
We can see that Texas is typically higher, but that this difference is most pronounced during booms. When the economy turns around it turns hard in Texas.
We can also seem some suggestive differences. In two spots Texas does no better than the nation, 1998-99 and the dot-com bust.
The first, I’d guess was the fallout from the Asian financial crisis and the resulting oil bust.
The second suggests that IT as a major part of the Texas story. That makes sense, Texas Instruments, Electronic Data Systems, Dell Computing and AT&T are a few names that immediately spring to mind.
I am going to borrow a quick chart from Krugman that helps me make another observation. This is apparent in the chart above but even more so here.
In both cases the red line peaks in 2007 while the blue line doesn’t peak until just after the start of the recession. Maybe some of that is Mining related and is a blip but its important for my ongoing inquiry into the question “are recessions really different.”
To be more clear here is one view: One might think that sometimes the economy does well, sometimes the economy does poorly. The economy also has a lot of inertia, so when its doing well it tends to continue to do well and when its doing poorly it continues to do poorly.
We call the times when we are doing well booms and the times when we are doing poorly recessions.
An alternative view is that recessions are fundamentally different. That something deep changes about the economy that pushes it into a new regime. Therefore, recession isn’t just a term for when things are going poorly but describes a binary phenomenon that is either taking place or it is not.
Related is the question: are recessions a general decline in economic activity or a decline of economic activity in general?
The first view is implicitly held by theorists who use “GDP factory” models. That is economic models in which we assume that households make one good called GDP, which they can use for either consumption or investment.
This view is held tentatively but explicitly by myself. That is, I tend to think that this is not just a convenient way of modeling the economy but the correct way. That a general phenomenon is a foot which affects all sectors to a greater or lesser degree.
The opposite view is pushed by for example, Arnold Kling. Kling is opposed to the GDP factory notion and instead sees economic activity as a network of individual trade relationships, whose connections are determined primarily by factors relating to the sustainability of those connections.
Texas is interesting because it had a slightly different path than the rest of the economy. When I look at the charts I say look – there was weakness in 2007 caused by the original foreclosure crisis. Because of Texas’s laws they avoided that.
However, in 2008 the dynamic changed. A new force took hold that Texas was not immune to despite everything going well for them as an individual state.
Obviously there are different ways of reading this data but its all interesting.