Economists: Private Job Gains Offset Government Losses

In stump speeches across Texas, Republican incumbents are touting the conservative budget cuts made last session or going one step further saying there’s room for more. Few, if any, are emphasizing the 10,200 state government jobs lost over the last year as a result of budget tightening.

There’s the obvious reason politicians would avoid the topic, and then there’s this: Economists don’t think the loss of state jobs will have a significant continuing impact on the Texas economy.

There's no doubt that overall government job losses dampened economic growth in 2011; even as private sector job growth accelerated, the unemployment rate barely budged because Texas dropped a combined 67,000 government jobs that year. What's notable is while Texas shed government workers, the total number of unemployed people dropped by 120,600 as the overall economy improved, according to Texas Workforce Commission statistics.

The main drivers of Texas’ economic growth — the technology and energy sectors — are projected to show continued strength in the coming months. Oil and natural gas continue to fetch high prices and the increase in hydraulic fracking is attracting lots of technological innovation.

Austin, the hot bed of state government jobs, has shown even more economic growth than most areas of the state because of its success with expanding high tech companies, the obvious examples being Apple and Facebook. This week, Forbes ranked Austin fifth out of the 65 largest metropolitan areas as the best place to find a job in 2012.

Even the impact of the $4 billion reduction in appropriations for local school districts, which dropped local government employment by more than 56,000 jobs over the last year, should start to level out in the next year, says Keith Phillips, a senior economist at the Dallas Federal Reserve. And although that drop seems drastic, many of the teachers and administrators laid off by public school districts found lower-paying jobs at private schools, he added.

“The government sector will be less of a drag on the economy than last year, I’m pretty confident in that,” he said, emphasizing that the recent increase in sales tax revenue reported by the state Comptroller, combined with fairly stable or increasing property values across the state, should help school districts in the long run.

Projections for the health care sector are mixed. On the one hand, hospitals and other health care providers are facing drastic cuts to reimbursements for Medicare and Medicaid services and uncertainty on the impact of federal health care reforms, which makes it difficult to expand. But in the long run, baby boomers on the brink of retirement will soon reach a critical turning point and the need for health services is bound to boom when they do.

These health care challenges are particularly stark in the Rio Grande Valley where a larger portion of the population is enrolled in government health programs. Although the regional economy has increased health care services dramatically in the last few years, pharmacists and other providers say the tightening reimbursement rates are putting their businesses in danger.