Workforce, infrastructure: The Texas two-step
By Dave Sather
July 16, 2017 at 9:45 p.m.
Updated July 17, 2017 at 1 a.m.
Every July for the last 11 years, CNBC has ranked all 50 states on 60-plus criteria across 10 categories to determine the best state for business.
In the first 10 years, Texas has ranked first or second each year, earning the Lone Star State the designation of "The Best Business State of the Decade."
Surprisingly, this year, Texas fell to fourth place. Is this stumble a reason for concern? Probably not.
In the 2017 ranking, Texas received 1,602 points out of a possible 2,500. The top state this year, Washington, received 1,621. With only 19 points separating the top contenders, you gain some perspective of how close the competition is and that much of the difference may be subjective.
As with any large economy, there is room for improvement. As Texas has grown, the cost of doing business has increased. The state's "Business Friendliness" ranked 24th.
Education and Quality of Life are both ranked as below average.
Ironically, one knock against Texas, and its friendly reputation, was its lack of inclusiveness.
Not surprisingly, Texas ranked first in the nation for infrastructure. Given large swaths of land, efficient highways, airports, waterways and rail, employers find Texas to be an ideal location.
Similarly, Texas posted top marks for its workforce. As such, the intellect and training of the Texas workforce is making it a bigger destination for many of the world's top tech firms.
Texas ranked third for access to capital behind New York and California. Bankers continue to recognize the benefits of the business-friendly environment and low-cost land throughout Texas. Furthermore, financiers recognize the Texas economy is diversified beyond just the oil patch. This has made the Lone Star economy far less cyclical.
Texas's unemployment rate of 4.8 percent is above the national average of 4.3 percent for the first time in quite a while. Given the downturn in the energy sector, this is not too surprising. Energy continues to be the largest industry in Texas.
However, a year ago, Texas held the top spot for its economy. This year, the ranking for economy fell to 25th.
As the price of oil stabilizes, that sector of the Texas economy should improve.
Most likely, Texas will do better in next year's ranking should the energy sector improve.
Despite falling to the 25th spot, Texas's economy has some huge benefits. We continue to benefit from no state or corporate income taxes.
Texas has the second-largest workforce - more workers than the total resident populations of 46 other states.
For the last five consecutive years, Texas has added more new and expanded corporate facility projects than all other states. Technology stalwarts have taken note of this investment, earning the state the 11th spot for Technology and Innovation.
Tech giants Apple, Amazon, Facebook, Google, Oracle and Microsoft have all recognized this, expanding in the Lone Star State.
Texas has been the top-exporting state for 15 years in a row as well as the top tech-exporting state.
Despite the drop to fourth in the CNBC ranking, Texas' economy continues to churn out more than $1.64 trillion in GDP. That makes Texas the second-largest economy in the U.S., trailing only California - even though Texas has a third fewer citizens. Furthermore, on a worldwide basis, that makes Texas the 10th-largest economy, outpacing entire countries like Canada, Russia, Korea and Australia.
Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.