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Wednesday, August 24, 2011

Texas Unemployment Worsening Relative to National Average

Michael Leachman at the Center on Budget and Policy Priorities has a new post up today
on why some state economies have weathered the recession better than others, naming Alaska, Texas, and North Dakota as prime examples of this. He cites “a new Goldman Sachs study,” which is apparently subscription-only (I'll follow up with the link if one turns up.) As we saw in my post, “The Massachusetts Miracle,” there are a lot of things worse in Texas than in the state conservatives love to hate, Massachusetts. In fact, in some ways the uninsurance rate in Texas is even grimmer than I painted it: While 26% of the entire population lacks health insurance, a full 33% of adults 19-64 is without insurance, the country's worst, compare to 7% in Massachusetts, the country's best.

According to Leachman, the three things that predicted better performance were the presence of the energy industry, low exposure to the housing bubble (in Texas, strong banking regulation), and having high-end service and technology jobs, which accounted for ¾ of the difference in state outcomes. He notes that the Goldman Sachs study found no effect from low taxes (income or property) and state government spending.

But I want to question the claim that Texas has done all that well. Yes, its unemployment rate is lower than the national average. But its unemployment rate was lower than the national average before the recession. In fact, its relative performance has worsened since the recession began: In January 2008, Texas' unemployment rate was 88% of the national average but in July 2011 it was 92.3% of the national average. See the following table, using monthly data at 6-month intervals.

Date                         Mass. Unemp. Texas Unemp. National Unemp.

January 2008                  4.4%              4.4%                 5.0%
July 2008                        5.3%              4.9%                 5.8%
January 2009                  7.1%              6.4%                 7.8%
July 2009                        8.5%              7.8%                 9.5%
January 2010                  8.8%              8.2%                 9.7%
July 2010                        8.4%              8.1%                 9.5%
January 2011                  8.3%               8.3%                9.0%
July 2011                        7.6%               8.4%                9.1%

Sources: For MA and TX, Bureau of Labor Statistics ( then, as Matthias Shapiro says, “select the state or states you want, then select "Statewide", then select the states again, then select the metrics you want to see”). For national rate,

Texas and Massachusetts entered the recession in December 2007 and in January 2008 with the same unemployment rate, 4.4%. The national rate in both months was 5.0%. Contrary to my implication in “The Massachusetts Miracle,” over the entire period of the official recession (December 2007-June 2009), Texas outperformed Massachusetts on the unemployment rate. This continued until January 2010. Since then, however, Massachusetts has had its unemployment rate fall by 1.2 points, whereas Texas' has been stable, even increasing by 0.2 points. Massachusetts now has a significantly lower unemployment rate than Texas, even though they started from the same level pre-recession. Texas' unemployment rate, at 8.4%, is now 92.3% of the national average, while Massachusetts has a rate that is only 83.5% of the national average.

As I stated in my last post, I don't consider Shapiro's argument at Political Math (that growth in jobs and the labor force are the best metrics to analyze employment performance) to be that persuasive: he conflates growth in the labor force with interstate immigration, and I don't see how adding two new unemployed people to the labor force for every new employed person is such a “good problem to have.” As we saw above, Texas' unemployment rate has worsened more than the national average, and the state fares poorly on a whole host of economic and social indicators compared with “Taxachusetts.”

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