Hurricane Harvey won't sink the Texas economy

Texas, one of America’s strongest economic engines, is currently underwater.

With the waters still rising and the full scope of the human tragedy yet to be determined, it’s next to impossible to predict the full economic impact of Hurricane Harvey — though early estimates from Goldman Sachs suggest the property damage alone could cost the state $30 billion and the U.S. economy’s third-quarter growth as much as 0.2 percentage points.

However, any storm-related sputter in the Texas economy will likely be short-lived. Similar disasters — Katrina and Sandy, for instance — were followed by a surge of investment in rebuilding that spurred a mini-construction boom, ultimately boosting local employment and wages.

That’s a good thing, and not just for the obvious reason — since the Great Recession, Texas has been a key engine of economic and income growth for everyday people. During the first quarter of 2017, Texas posted the fastest economic growth in the country, as the state economy expanded at a 3.9 percent annual pace. Since 2005, quarterly economic growth in Texas has averaged an annualized 3.3 percent, more than double the 1.4 percent pace of the country as a whole.

And while Texas is far from a perfect place, growth in the state has translated into some real gains for some regular Americans. Over the decade between 2005 and 2015 — the most recent dataset available — the income of a typical Texas household rose by 36 percent — compared to a nationwide rise of just 27 percent over the same time period, in non-inflation-adjusted terms.

Many Texans think the state’s prosperity is a testament to a conservative policy mix that emphasizes low taxes and limited social spending. And some of it may be. But a lot of it is simply because of oil and gas. Texas in particular enjoyed considerable exposure to the global commodities boom that marked China’s emergence as a large consumer of raw materials over the last decade and a half. And the people living in the state’s energy-rich areas have enjoyed some of the largest gains in standard of living anywhere in the country over that period.

For instance, a report from Pew Research published last year showed energy-rich Texas cities such as Midland and Odessa had some of the sharpest increases in household incomes in the nation between 1999 and 2014.

With the opportunity to earn high wages, and Texas’ cheap housing costs, it shouldn’t come as a surprise that Texas cities have been some of the fastest-growing in the country in recent years. Over the next couple years, expect another influx as demand for workers surges when the floodwaters recede.