I’ve been analyzing the Texas economy for more than four decades, including peering into the future to project growth patterns (I was very young when I started). I’ve recently taken yet another deep dive into the long-term outlook for the state, including which industries are likely to lead the way. Let’s take a quick look.
In the distant past, the Texas economy was based almost entirely on cattle, cotton and oil. Our strong resource base was the primary source of jobs and business activity, and these industries remain important today. In the decades to come, agriculture should continue to see modest job and output growth. As an important source of food and fiber production, the Lone Star State will help meet the needs of a growing global population.
Energy will remain a cornerstone of economic expansion. Although renewable and innovative sources such as hydrogen will be important, oil and natural gas will remain essential. While they must be produced responsibly, these fuels will be required according to forecasts from virtually every major source (including my firm). Natural gas will reduce emissions by replacing coal, and conventional fuels are crucial to dealing with extreme poverty throughout the world. Even as we address legitimate climate change issues, these industries are at the forefront of new technologies to capture carbon and otherwise reduce emissions. Simultaneously, they generate jobs, revenues and tax resources for Texas. In fact, the state is a leader in almost every facet of the energy complex.
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Manufacturing will be a source of substantial growth. The mix will evolve, but the trend will be upward. Rapidly emerging sectors such as biosciences, commercial space activity, crypto mining, data centers and artificial intelligence (AI) are accelerating the trajectory of business activity in Texas.
The largest industry group in terms of both output and job expansion is likely to be professional and business services. The workers in this segment keep the economy going, supporting all aspects of the industrial complex.
Population growth (and aging) will contribute to gains in health and social services, education and the public sector. Logistics will expand to keep things moving. Real estate is another source of increase, including buying/selling, renting, managing and other activity.
Every major segment is expected to see gains, though there will be inevitable shifts in specific activities. Over a span of decades, technological and demographic changes will facilitate the creation of businesses and even entire industries that we can’t yet even imagine. Fortunately, the dynamic Texas economy is well-positioned to evolve as needed and sustain the leadership that has persisted through decades of change. We no doubt have some challenges to face (education, power, water and transportation, among others), but the groundwork is definitely in place.
Economist Ray Perryman is president and CEO of the Perryman Group, an economic research group and analysis firm based in Waco. He is a member of the Tribune-Herald Board of Contributors.
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