Texas: I Woudn’t Call It a Miracle, but a Slight Advantage, Maybe?
Paul Krugman questions the latest talks on the Texan recovery (Matthew Yglesias, The Economist, The Atlantic).
In Paul Krugman’s analysis, he uses unemployment rate, which might not tell the whole story about the labour market. The following graph uses the same three states, but depicts the employment situation since the peak, before the recession.
The graph does show that Texas has a bit of an edge on Massachusetts and New York. In fact, it shows that Texas is doing fairly better 22 months after its employment peak. Surely, it does not seem like Texas has had a full proof economy throughout the recession, but employment does seem to be doing better so far.
Interesting. Can you explain the “why” behind this?
Thank you for your interest N., I’ll gladly explain what’s behind it. Texas’ economic drivers are very different from the rest of the US, leading to different speeds of labour contraction and expansion. I hope this helps.
If you need more info, please write.
Keep on truckin’
If there is some “bubble”, that means there was overemployment. So I don’t think “peak=100″ is such a fair starting point.
While I’d guess the lower tax, lower gov’t service (lower gov’t waste) economy of Texas will remain one of higher growth, I think unemployment rate is a better tracking measure than this one, “employment since peak (in % of peak)”. I don’t know if Texas will really have much better unemployment numbers.
Thanks for the feedback. Two things:
First, the “peak=100” measure is useful in determining how the labour market performed since the beginning of its downfall. It shows the relative reaction of the different states. By creating the same reference point, you can see that Texas was the state with the least affected market – as opposed to Paul Krugman’ post where you can’t really see the difference between the curves.
Second, the housing and credit bubbles are among the most important factors that led to the crisis. Employment, at the other hand, “followed” economic growth during the good and bad years. Therefore, I don’t think there was overemployment: the resources employed at the time corresponded to the level of economic activity.
In sum, comparing the relative fall in employment within different states is much easier to do if you’re comparing with same starting point or the same “scale”. One could’ve used a more “normal” point in time to create a comparative measure (choosing a point in 2005 where economic growth was closer to long term average), but you would see the same pattern in the curves (peak or not).