For more than half a century, Texas has grown faster than the rest of the country. Its economy has expanded more quickly, and its employers have added jobs at a pace that other states struggle to match.
Pia Orrenius, a vice president and senior economist at the Federal Reserve Bank of Dallas, said that performance is no accident. She laid out four main reasons Texas has consistently outpaced the nation: Geography, industry mix, population gains and policy choices have produced Texas’ long running growth.
Texas’ $2.7 trillion economy ranks as the eighth-largest in the world, surpassing countries such as Russia, Canada and Italy, according to the Texas Economic Development Corporation. That scale matters for leaders who want the state to keep growing, as millions of people are projected to move to North Texas by 2050 for new jobs. Yet parts of the region still struggle with persistent poverty, which can limit local residents’ ability to gain skills and move into better paying work, advocates say.
Orrenius compared Texas employment growth with job growth in the rest of the nation, with Texas stripped out. The gap, she said, has been clear since at least the 1970s. There were downturns and recessions along the way, including “especially tough times for Texas” in the 1980s, but the state repeatedly came out of recessions faster than the rest of the country.
She then addressed gross domestic product, the value of everything produced in the economy. The gap there has been even more striking in recent decades. In measuring growth by GDP, “it’s almost kind of embarrassing for the rest of the U.S.” because the difference in Texas’ favor appears to be widening, she said.
Here are four main reasons why Texas grows faster than the nation.
Geography
Geography is the first reason Orrenius identified. Texas’ location in the middle of the country, its large landmass and its mix of urban and rural areas provide built-in advantages. It has sea and land ports, including Port Houston and Port Laredo, which rank among the biggest nationwide. Its border with Mexico has become a major source of growth, especially since the North American Free Trade Agreement took effect in the mid-1990s. (The United States-Mexico-Canada Agreement replaced NAFTA in 2020.)
She also highlighted the role of big metropolitan areas and what economists call cluster economies. Large cities, she said, are bastions of job creation, high wages and skilled job creation.
“In cities where their industries cluster, and they share resources and they share a workforce, that enables them to grow faster and to pay higher wages and increase the standards of living in cities faster than rural areas,” she said.
Texas has several major metro regions that have benefited from that clustering effect, including Dallas-Fort Worth, Houston, San Antonio and Austin. Austin has been Texas’ fastest-growing metro area for years due to technology services.
Industry
The second reason is industry mix. Texas started the 1970s dominated by what Orrenius called “the traditional cotton, cattle and oil economy.” Since then, it has added new sectors while updating old ones.
The implementation of NAFTA in 1994 accelerated manufacturing and cross-border trade. Over time, the state also built a huge transportation and logistics sector, driven by its highways, railroads and airports for both cargo and passengers. Construction has grown with the state’s population and business investment.
Energy has remained important, but differs greatly from the old stereotype. Texas still dominates nationwide in oil and natural gas production, but Orrenius said Texas is also No. 1 for wind-powered electricity generation and solar energy.
That mix has allowed Texas to build its power grid and export energy products while adapting to changing technologies and markets, she said.
Population
The third factor is population. Orrenius said Texas’ rapid job growth would not have been possible without a steady flow of new workers. Texas has drawn people from other countries, and it often ranks first or second among states for people moving between states.
Looking back to 2001, Orrenius said 2022 through 2024 had “record high rates of migration, mostly immigration to Texas” and across the country overall. The newcomers helped fill jobs across sectors such as energy, construction, technology, health care and logistics.
She also acknowledged that those population gains are beginning to slow, which will create challenges in the years ahead.
“Last year, migration, both domestic and international, dropped by half, and we’re expecting this year will drop by another half,” she said, questioning how Texas can sustain its edge in the future.
Policy
The final reason Orrenius cited is policy, which includes taxes and public investment. She highlighted Texas’ “open and flexible markets.” The state leans on “relatively low taxes and less regulation” to attract companies and capital, and she said it comes in below the national average and high tax states such as California and New York on per capita state and local tax burden.
She coupled that with cost of living, which has stayed comparatively low even after housing prices rose. Texas’ cost of living is below the national average, though Orrenius joked residents might disagree when they open their property tax bills. But how Texas spends those tax dollars matters.
“Spending on infrastructure is really one of the most important things for growth,” she said, arguing that Texas has done well on roads, ports and related infrastructure, often using public-private partnerships and toll roads. She also highlighted investment in education and workforce training as another pillar of the state’s model.
All of these elements have helped create a favorable business climate that draws companies and entrepreneurs. That said, Orrenius said the real secret behind Texas’ long-running outperformance is its capacity to adapt.
“The future really depends on the ability to change and roll with whatever it is that’s coming,” she said.
This reporting is part of the Future of North Texas, a community-funded journalism initiative supported by the Commit Partnership, Communities Foundation of Texas, The Dallas Foundation, the Dallas Mavericks, the Dallas Regional Chamber, Deedie Rose, Lisa and Charles Siegel, the McCune-Losinger Family Fund, The Meadows Foundation, the Perot Foundation, the United Way of Metropolitan Dallas and the University of Texas at Dallas. The News retains full editorial control of this coverage.