We are frequently bombarded nowadays with negatives regarding the difficulties so many people across the nation are facing. Most of them seem to have their epicenters based squarely on the state of the economy or housing market. Even so, I am optimistic about the future. The nation has weathered worse storms, and Texas is particularly well situated.
While it is certainly true that the US is facing an economic slowdown, not all parts of the country are experiencing the challenges equally. The Lone Star State, for instance, is faring much better than many others, and its outlook over the short term is encouraging.
The Texas economy is benefiting from recent key locations, a favorable business climate, and effective economic development tools. In 2007, the Lone Star State led the nation in the number of new jobs created. Although the pace of employment growth has slowed in recent weeks, the 25,700 new workers added to the wage and salary payrolls during the first two months of 2008 is a significant achievement when considering the fact that the US overall lost some 152,000 jobs over this timeframe.
The health of the Texas economy even prompted Governor Rick Perry to approve an employment tax cut last month of approximately $90 million, which is normally collected to replenish the unemployment trust fund. The break will be felt by some 370,000 businesses across the state.
Texas has also recently been identified by the Census Bureau as the "go to" state. About one in six Americans who left their home state last year came to Texas, which has been averaging an addition of more than 422,000 new residents annually since 2000.
A large percentage of the state's population and jobs are located in the major metros and border areas, each of which has a distinct economy supported by particular industry clusters. Much of the population expansion over the long term in Texas will likely be in a triangle between Houston, San Antonio, and Denton. Being near the center of this area, Waco is expected to see a significant gain in the number of new residents.
Nationwide home building activity has been on the decline since March 2006. In February it dropped another 0.3%. While the Waco area has seen some evidence of the housing slump over the past several months, during the first two months of this year, 75 single-family housing permits were issued reflecting an estimated overall building cost of nearly $11.64 million. Although home values have not risen substantially, they have been experiencing slow, but steady advancement.
In addition to the single-family facilities being built, some 66 multi-family units were authorized in January and February. Commercial construction has also been on the rise recently as several industrial, medical, and multi-use facilities are being developed in various locations in the area.
Over the short-term period from 2007 to 2012, the Waco metro is expected to experience a population gain of about 15,700 people. During this same timeframe, approximately 9,400 new jobs are forecast. This employment growth, which reflects a 1.62% compound annual growth rate, will likely be widespread across numerous industrial sectors.
Expectations for other key economic indicators also point to healthy growth, for the Waco metro area during the next five years, with real personal income projected to achieve a 4.13% per annum growth rate and retail sales likely to experience a 6.76% yearly expansion to reach almost $4.68 billion in 2012.
While it is clearly evident that business activity has been gradually slowing for some time, the Waco area remains fairly healthy, and it appears that much of the worst could be behind us. Of course challenges remain, such as high energy and food costs, but a diverse industrial mix and excellent educational facilities help to insulate the area from many adverse phenomena.
Although the national economic slowdown is affecting the Waco metro to some degree, the relative health of the Texas economy will provide a source of ongoing stability. In addition, Waco's location in the midst of future growth corridors and transportation linkages will serve as a source of future expansion.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group
(www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic
Theory and Method at the International Institute for Advanced Studies.
