AUSTIN, Texas (AP) — Oil and gas production is up, construction is on the rise and unemployment is low. The Texas economy is strong with no trouble in sight, economists say.
Texans of a certain age have seen this before, and they know what usually happens next. Bust.
The question facing all Texans, then, is where might the next bust come from, and how can the state mitigate against it.
In the last 40 years, busts hit when oil prices collapsed in 1982 and when savings and loans collapsed four years later. Most recently, it was the Great Recession in 2007 that cost 400,000 Texans their jobs.
Economist Ray Perryman, whose clients range from private companies to political activists, told Texas lawmakers last week that Texas has bounced back better than any state in the nation.
"We've gained back roughly a million jobs," he told the House Business and Industry Committee. "In contrast to everybody else, we're doing very, very well."
Since Texas represents 8 percent of the nation's economy, the state's $1.3 trillion in economic activity and 5.7 percent unemployment rate are two of the reasons the country is no longer in a recession.
Perryman told lawmakers the oil and gas boom is different than the one in the late 1970s that led to the state's worst modern recession in 1982. Back then, Texas oil and gas revenues skyrocketed because of troubles with OPEC, Iran and other Middle Eastern strife, not due to demand or increased production.
Texas oil and gas production peaked in the early 1980s at 1.2 billion barrels a year, but Perryman said few people realized that the higher prices were temporary. When other oil-producing nations boosted production, prices dropped and the Texas economy went down with them.
The hit to the Texas state budget was so extreme that lawmakers created the rainy day fund to be ready if another economic bust hit the state. The comptroller's office predicts that fund will have $12 billion in it by the end of the 2014-2015 biennium.
This time the Texas oil and gas boom is driven by growing global demand for energy and new technologies that are boosting production, such as hydraulic fracturing, Perryman said. This is much more sustainable and less likely to result in the overnight plummeting of revenues, he argued.