Texas Today: Strong Business Environment and Innovation Spurs Job Creation
What recession? Texas can boast cheerful headlines and the creation of thousands of new jobs.
Steve Stackhouse-Kaelble (April 2012)

Things were tough all over during the Great Recession. Now that there's more economic optimism in the air, it's worth taking a look around the country to see how individual states are faring. It turns out that Texas tops the charts, with the highest number of jobs added since 2008.

Research by ON NUMBERS, crunching U.S. Bureau of Labor Statistics data, found that just four states have not only regained all the jobs they lost to the recession but have actually added employment on top of the baseline. Texas is one, along with Alaska, Louisiana, and North Dakota. The stats show that Texas is now ahead by nearly 140,000 jobs, and boasts a jobless rate that's a full percentage point better than the national average.

So what's up with Texas? For one thing, Texas offers a friendly business environment, according to Larry Gigerich, managing director at Ginovus, a site selection and incentives consulting firm. The state's "excellent business climate has created more opportunities for Texas to compete for projects," he explains.

A similar assessment comes from David Brandon, senior vice president at Site Selection Group in Dallas. "Texas has continued to prosper economically in comparative terms," he says. Like most other places, the state continues to experience some ups and downs, he notes, but its overall trend is good, bolstered by strength in a number of desirable economic sectors, from energy to healthcare to technology.

Strong, Diversified Industrial Sectors "Clearly, one sector with a great tradition in Texas is energy," Brandon says. That in itself is nothing new - after all, they've been drilling for oil there for more than a century now, and the state's refineries are national leaders in both crude production and refining. A major twist that's driving the sector now, though, is new technology opening up oil and natural gas mining within the state's major shale formations. Hydraulic fracturing combined with horizontal drilling is allowing energy companies to tap into deposits that were previously out of reach, and the result is the creation of thousands of Texas jobs. Texas also leads the nation in wind power generation and has the world's two largest wind farms - and it's also prime real estate for solar power generation, with enough solar energy shining on each acre of Texas land every year to equal 800 barrels of oil.

Brandon also sees growth in manufacturing. A lot of cost-sensitive but labor-intensive manufacturing happens along the border with Mexico, but great manufacturing stories are being reported all over. Advanced technology and manufacturing are thriving, led by top-notch research facilities and many thousands of workers experienced in technology disciplines. This, too, is really nothing new - Texas was the birthplace of the integrated circuit back in the late 1950s.

"You'll also find tremendous and continuous growth in health services," Brandon says. The state's biotechnology sector generates an estimated economic impact of $75 billion each year, with thousands of firms working in biotech manufacturing, research, or testing. Additionally, more than 25,000 high-tech firms lead the state to prominence in information and computer technology - including such household names as Dell and Texas Instruments. And, Brandon points out, defense remains a strong sector, too. The state has 15 active military bases plus a continually growing aerospace and aviation sector that provides work for more than 200,000 people.

Gigerich adds more highly active sectors to the list, including corporate offices, financial services, contact centers, and data centers. "I think these sectors will continue to do well, and as the population of the state continues to grow, distribution and logistics will become more important."

The Dallas suburb of Richardson provides a good example of the explosion in data centers and cloud computing. About a dozen data centers are there now, and four or five more are in the works. Across the Dallas area, cloud computing could create as many as 24,000 jobs in the next few years, according to a recent study conducted by IDC.

Gigerich notes that the Lone Star State is gunning for businesses that have historically enjoyed prominence on the West Coast. "Texas has been very aggressive in trying to attract California companies," he says. "In particular, information technology and financial services companies view Texas as a very attractive location for new and/or expanded facilities. In addition, contact centers - due to the bilingual population - and manufacturing have been key sectors looking to expand into Texas."

Texas Success Stories
Positive news headlines have been in rather short supply in many U.S. places, but not so in Texas. Check out a small sampling of the recent job-creating developments that have helped put the state on top of the list of employment growth. What's particularly striking about this list is the diversity of the projects, from automotive to aerospace to energy to customer support.

To these happy headlines, Gigerich adds impressive growth involving Charles Schwab in Austin and Oracle Corp. in Dallas-Fort Worth.

Why Texas?
Many a state would be green with envy at the diversity of businesses that share hopeful futures in Texas. So what makes the outlook so positive? It certainly helps having massive volumes of energy beneath the soil and in the air, waiting to be tapped. And while the presence of such resources could be seen largely as a matter of divine intervention or good fortune that has little to do with human efforts, the truth is that shale gas in Texas and elsewhere might still be seen as untouchable if not for the innovations of George P. Mitchell - a Texan.

Beyond the state's penchant for innovation, Brandon cites an environment that welcomes business activity with open arms. "Texas has an independent and conservative business tradition, and is committed to promoting business opportunities," he says. That's not a political statement, either, as pro-business attitudes can be found on both sides of the aisle in Texas.

Among the welcoming attributes, the state has been working on its legal system in an effort to ensure it's fair to all, including businesses. For example, 2011 reforms include several geared toward discouraging frivolous lawsuits.

Then there's the fact that things in Texas tend to be Texas-sized - "the sheer number and wealth of options are extremely appealing," Brandon says. "There's a broad variety of work force choices, from unskilled hourly labor to extremely skilled technology and corporate professionals," he explains.

Gigerich rattles off a similar list of positive attributes that help drive Texas growth: "great tax structure; bilingual work force; large population; different markets that can offer different types of settings for companies (urban, suburban, and rural); affordable labor costs; outstanding road, air, and rail infrastructure; and good quality of life."

Just to expand a bit on one of these key points - there's no corporate income tax in Texas, and no individual income tax, either. At the state level, there's no property tax. If you're thinking the sales tax must therefore be through the roof, think again. Some states have lower sales tax rates than Texas, but the rate is a fair amount more in other states.

As for the work force, it's about 12 million strong, marked by a variety of industry-specific concentrations in different regions. That makes it easier to find the right workers. And, as anyone in human resources knows, finding properly skilled labor is not always easy, even with the higher unemployment rates that the recent recession brought.

Texas is a prime address for conducting international business, with exports that continue to grow explosively. Consider that they were $163 billion in 2009, $207 billion in 2010, and $250 billion in 2011. Exports grew by 20.7 percent last year, and the state's share of America's export picture hit 16.9 percent, up two whole percentage points since 2008. For the 10th consecutive year, Texas has been the nation's top exporting state, according to the U.S. Department of Commerce. The top export industries last year were petroleum and coal products, chemicals, computer and electronic products, non-electrical machinery, and transportation equipment.

What makes it a great place for connecting globally? For one thing, its dozen deepwater ports include the port of Houston, second-busiest in the country and 13th-busiest in the world. More evidence of global-business friendliness includes the recent ranking of the Alliance Foreign-Trade Zone as the nation's top general-purpose foreign-trade zone. The most recent figures available cover fiscal 2010, when the FTZ admitted more than $4 billion in foreign products, more than any other general-purpose FTZ (it's the fourth time in the past five years that Alliance has grabbed that ranking).

One more thing worth mentioning: Though the state is marked by an independent streak that strives to keep government out of the way of business success, the public sector remains there to help when needed. The list of incentive programs and financial assistance for expanding businesses is long and generous.

For example, there's the Texas Enterprise Fund, a "deal closing" fund that is the largest of its kind in America. For projects that promise significant job creation and capital investment, the fund is able to step in and sweeten the pot to ensure that Texas is super-competitive with other jurisdictions.

Then there's the Texas Emerging Technology Fund, which helps those doing business in Texas to recruit top research talent, then migrate innovative ideas from the lab into the marketplace. Add in generous financing options, valuable grants, and attractive incentives and you'll see why a lot of organizations are ranking Texas among the nation's best places to do business.

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