Rick Perry's 'Texas miracle': a demographic quirk?

Since Gov. Rick Perry entered the presidential race, his state's touted economic gains have come under closer scrutiny. Demographics have played an important role in the Texas story.

Rick Perry is suddenly leading the pack of Republican presidential hopefuls in a new Gallup poll. If you ask the Texas governor about his record, he'll say that his state's economy is also a national leader.

"I know how to create jobs," Governor Perry said in Iowa recently. "You let the private sector [free from] overtaxation, free them up from overregulation, free them up from overlitigation."

He summed up the strategy in six words: "Government, get out of the way."

It's true that Texas has a long record of relatively low taxes and light regulation – a pattern that Perry inherited from predecessors and continued to pursue.

And Perry can tout an impressive statistic: Texas has created about half of all new jobs in America since the recession ended in June 2009.

But since he announced his candidacy, the state's economy has been coming under closer scrutiny, with critics seeking to cast doubt on the so-called Texas miracle.

A bit submerged in the discussion is the important role that demographics play in the Texas story. The tale of its jobs engine is also, inextricably, the story of rapid gains in population.

The population of Texas has risen nearly 21 percent over the past decade, more than twice as fast as in the nation as a whole. On that basis, solid job creation in good times should be expected, because jobs tend to track closely with the growth of the labor force over time.

To fans of Texas and Perry, the population growth is simply part of the "miracle." The state has made itself one of the most popular places in the nation for people to move.

To critics, it taints the success story with a big asterisk. In part, the population growth stems not from Texas's economic appeal, but from a high birthrate and immigrants crossing the border from Mexico.

Of course, demographics isn't the whole story of the Texas economy versus the rest of America. It's significant that Texas was not hit as hard by the recession or the housing slump. And its emphasis on one very strong industry – energy – has helped the state move forward since then.

But the people factor is important.

Consider the contrast between two ways of measuring the Texas economy – one that adjusts for population and one that does not.

First, raw job creation. Since the recession ended in June 2009, Texas has created 328,000 new jobs as of July, according to the US Labor Department – 47 percent of the nation's total. If you look back to the start of 2001 – roughly the beginning of Perry's tenure as governor – Texas has spawned more than 1 million jobs. The rest of the nation (leaving Texas out) has lost more than 2 million jobs in that time.

A second lens is gross domestic product per capita. This measures how much economic activity an economy generates per person, whether such people are employed or not. This statistic hints at whether productivity – a key to rising living standards – is improving. And it levels the playing field somewhat between states that are gaining or losing population.

By this measure, Texas saw its GDP per capita rise 5.6 percent between 2000 and 2010, according to numbers from the US Commerce Department, while the national figure was 6.7 percent. Those numbers are adjusted for inflation. In this view, Texas appears to be doing fine, but is not a standout.

So what does this all mean?

Rather than a focus on just one statistic that's positive or not so positive, the reality may be that Texas is neither a "miracle" state nor a failure (as some critics say, pointing to things like the state's high number of minimum-wage workers).

Ana Orozco, a senior economist at the forecasting firm IHS Global Insight, sees the state as being among the nation's top performers. And the population growth has helped.

It's sort of a chicken-and-egg issue: Is population growing because Texas is good at job creation, or are jobs cropping up to some extent because of willing workers? Both factors are at work, and "it's sort of a virtuous cycle in Texas, where one leads to the other ... and back again," Ms. Orozco says.

That is, businesses and people move to the state partly because it is seen as having a good business climate. And as they move, that creates demand for everything from schools and teachers to roads and restaurants.

Texas isn't alone in enjoying the benefits of that cycle. North Carolina is another example. So are other Sun Belt states, with the notable caveat that some saw rapid growth followed by a deep housing bust.

Nevada is the prime example there, with nation-leading joblessness after a huge population surge.

Some states, Orozco says, have been wrestling with a vicious cycle in which people are moving out, damaging the economy and the tax base. Illinois is a case in point.

The prowess of Texas can be appreciated without being exaggerated. For all its recent success, unemployment is still above 8 percent. The nation's overall unemployment rate is 9.1 percent.