July 8, 2011 — -- While the Labor Department's monthly jobs report on Friday is expected to show only slight improvement in jobs added, Texas Gov. Rick Perry may still have fodder to say his state is a "winner" in the shifting economy.
But the factors contributing to the Lone Star State's job creation may have little to do with Perry, and its downside may not be fully realized, critics argue.
Texas accounts for 29 percent of jobs created nationwide from June 2009, when the 1.5 year recession ended, through May, according to Mine Yucel, senior economist and vice president with the Federal Reserve Bank of Dallas.
"Texas is quite a low-regulation state. It's cheaper to do business here than quite a few other states," she said. "We're relatively lower wage. It doesn't mean our skilled workers are getting lower wages."
The oil and gas industries have boosted the state's economy as the price of oil has risen, Yucel said. The average price of regular gas was $2.35 in 2009, $2.78 in 2010 and is $3.60 so far this year, according to the U.S. Energy Information Administration.
Also, the state has been able to diversify into other sectors, namely technology and financial services.
Political watchers wonder whether Gov. Perry will enter the 2012 presidential race, boasting of his jobs record, now that the Texas legislative session has closed.
But the Texas legislature, required by law to balance a budget created every two years, made significant cuts in education and other public services that may blemish the governor's record.
Lucy Nashed, spokeswoman for the governor's office, said the legislators faced a tough economic environment and made difficult decisions.
"Hopefully, circumstances will be different next session and we'll be able to make different decisions next time," she said. "Texans hope [for] their government to be responsible and live within their means and, I think, that's what we did."
Perry has been able to keep taxes low, maintain a "predictable" regulatory climate, a "fair" legal climate and a skilled workforce, according to Nashed.
The governor also has attracted businesses with initiatives such as the Texas Enterprise Fund, which started in 2003. Nashed said that fund has created more than 58,000 jobs to date by offering incentives to companies.
Nashed said the governor has focused on creating an economic environment in which people can "create capital and find jobs."
"Moving forward, that's where his focus remains," she said.
But Daniel Hamermesh, an economics professor at the University of Texas at Austin, said public services in the state are "terrible" as a result of its lower taxes. He added that it is "nonsense" to say low taxes have contributed to job creation.
"We had low taxes previously in past recessions. In those recessions we didn't do any better than anybody else," Hamermesh said. "We've always been a low-tax and low-service state."
While the state's property taxes may be higher than in other states, Hamermesh said the lack of an income tax and lower rates for other taxes contribute to poor public services.
For instance, Texas has the highest rate of uninsured workers in the country at 27.4 percent, according to the Robert Wood Johnson Foundation and State Health Access Data Assistance Center at the University of Minnesota.
Hamermesh said the factors for job creation are more complicated than taxes and public policies.
"The answer is the industries that we're in have done fairly well in the past recession," Hamermesh said. "The other issue is the continuing movement of everyone and everything towards the Southwest."
Lori Taylor, an associate professor at the Bush School of Government and Public Service, Texas A&M University, said public education has been relatively insulated from the recession because of the two-year budget cycle, but that may change this academic year.
Legislators approved a budget with $4 billion in spending cuts for K-to-12 public education, about 6 percent per district, along with deep cuts in higher-education and Medicaid funding.
"I think that's there's no doubt it will have a negative impact on education on the state," Taylor said. "Some school districts will weather the storm pretty well. Others already pinching every penny 'til it hurts will be much more affected."
A large number of Texas school districts have announced layoffs for the fall and class sizes are likely to increase, according to Taylor.
While there is not definitive research that indicates class sizes always affect learning, Taylor said, "it's something that has a number of Texas parents worried."
Also, Taylor is concerned a large fraction of the workforce will be poorly educated. Low wages may be tolerable now because of the state's low cost of living, but they may not be sustainable for growth and prosperity, she said.
"Jobs of the future won't be those that require a strong back and a willing heart," Taylor said. "It's not the same thing as saying everyone needs to go to college, but everyone needs skills in the labor force."