Monday, June 7, 2010

Night and Day Difference

When I first moved to Texas I was surprised at the intensity of Texan pride. I now think some of it is justified given how well the Texan economy has handled the recession. Texas was one of the last states to start shedding jobs--employment peaked in August 2008--and started adding jobs way back in October 2009 as illustrated in the figure below:


Now compare these developments in Texas to the employment carnage in my previous home state, Michigan:


What a night and day difference. Michigan has had a decade of job destruction. Micheal D. Lafaive argues these developments are due to differences in economic freedom between the two states. Maybe so, but I suspect the lack of industry diversification in Michigan compared to that in Texas plays an important role. One point Lafaive does get right is that Michigan's gift to Texas is people. I am evidence of that. I left Michigan in 2007 and have never looked back.* Apparently a net total of 68,000 Michiganders did the same thing as me between 2000 and 2008. If only the Eurozone had such labor mobility.**

*To be clear, though, I am not a true Michigander like fellow economics blogger Josh Hendrickson. Therefore, leaving Michigan was not hard for me.
**If the Eurozone did have such labor mobility, which country would be Michigan (Greece?) and which one would be Texas (???)?

Update: The Dallas Fed takes thinks it sees a recovery under way in Texas.

Update II: I inadvertently put up financial sector employment in the original post for Michigan. It is now corrected to reflect total non-farm payroll employment.

7 comments:

  1. It is not clear to me from your post why you are comparing Michigan's Total Non-farm payroll employment to Texas' Financial Activities payroll employment. Another mystery is why the Federal Reserve graph labels the NAICS based Financial Activities with the old SIC based acronym FIRE. Will the mysteries never end?

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  2. I don't think this is necessarily a fair comparison in terms of attributing the differences to economic freedom (although I acknowledge and would gladly accept the greater economic freedom of Texas relative to Michigan). Manufacturing employment has been declining since the 1960s and this has had a particularly large effect on Michigan given the substantial lack of diversification of industry. The perils of the auto industry over the last decade have made this worse.

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  3. How did I do that? I must be dislexic. Actually the comparison is your post is Texas Total non-farm and Michigan Financial Activities.

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  4. Josh,

    Iagree about the auto industry. Since 2000, Michigan's total non-farm employment has lost -816,000 jobs and manufacturing has decreased by -443,400 jobs. Manufacturing jobs have made up 54% of the decline in employment. It is interesting that since 2000 Michigan's has been in a jobs recession. Texas during the same time period has gained nearly 1 million jobs. That is a night and day difference.

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  5. Tom:

    Thanks for catching that inconsistency. It was purely accidental. I have put up the correct graph which does not look pretty.

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  6. Texas would be the UK: complaining all the time about the Union, but can't live without it. Interestingly, both Michigan and Texas are border states. Has Texas benefited from being next to Mexico and Michigan from being next to Canada? Any trade specialist?

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  7. Well let's not get carried away. Texas is not even in the top 20 richest states in the Union. For instance, Mass has about 25% higher per capita state gdp - so much for role of economic freedom!
    And how much of TX gdp consists of spending on air conditioning?

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