The Texas Economy: Full Recovery on the Horizon

Special to the Texas Municipal League
by Glenn Hegar

March 2022

As Texas Comptroller, I’m charged with keeping a watchful eye on the state economy and providing Texans with up-to-date information about how it’s doing and where it’s heading. But as we’ve seen over the past couple of years, it’s not always a pretty picture.

In 2020, the COVID-19 pandemic caused a short but severe recession in Texas, resulting in record high unemployment, business closures, and a sharp decline in revenue collections by state and local governments.

Then, as the initial shock wore off, supply chain issues took center stage. In 2021, many economic indicators reached pre-pandemic levels, but problems lingered across supply chains and prevented a full economic recovery. As I write this, supply chains are still reeling from the recession and may not normalize until 2023.

Of course, 2021 was not without its own rough start. Winter Storm Uri knocked out power for nearly 70 percent of Texans and disrupted water utilities statewide. As a result, the storm claimed more than 200 lives and at least $80 billion in economic costs.

That said, I have high hopes for the Texas economy this year. We took major steps forward in 2021 despite a slew of obstacles, including COVID-19 surges, widespread labor shortages, inflation, and volatile energy prices.


The Texas economy added 682,200 nonfarm jobs from August 2020 to August 2021, an increase of 5.6 percent. Over those 12 months, Texas added more new jobs than any other state except California. We expect employment to grow by 3.7 percent in fiscal 2022 and 2.7 percent in fiscal 2023.

As of December 2021, Texas’ unemployment rate was 5 percent, which was higher than the United States rate of 3.9 percent, but nearly 2 percent lower than it was in December 2020. The gradual decline in unemployment throughout 2021 is a promising trend for our state.

It’s hard to believe that Texas lost more than 1.4 million jobs between February and April 2020. But from July to December 2021, Texas added an average of 72,000 jobs each month, and now employment is up 89,600, or 0.7 percent, from its pre-pandemic peak in February 2020.

Texas recently made the headlines (along with Arizona, Utah, and Idaho) for recovering all the jobs we lost during the shaky early months of the pandemic. This is more than welcome news.

Revenue Collections

The fact remains that Texas still is recovering from the deep but short recession caused by the pandemic. But the good news is the Texas economy and state tax collections have been exceeding our expectations since April 2021.

Texas relies on sales taxes to generate a substantial portion of its monthly revenue. For the three-month period ending March 2021, Texas’ average sales tax revenue was down more than 5 percent compared with the same period a year earlier. By December, however, the three-month average revenue was up nearly 23 percent compared with the same period a year earlier. We can confidently say that Texas ended the year in a strong sales tax position.

Other forms of tax revenue also have been on the rise. In December 2021, natural gas production tax revenue, for instance, totaled $384 million, up 349 percent compared with December 2020. It was the highest monthly natural gas production tax revenue on record.

We are projecting substantial growth in revenue available for general-purpose spending in the 2022-23 biennium. In fact, this available revenue will total an estimated $135.3 billion, which is more than 15 percent higher than the revenue available for the 2020-21 biennium.

Ahead of the 88th Legislature in January 2023, we anticipate the state to have an estimated $12 billion ending balance — compare that to the state’s $946 million negative balance right before last year’s Legislature gaveled in.

Supply Chains

Supply chains are the building blocks of our modern economy — they facilitate the trade of intermediate goods, which have a trade value twice that of final goods. Supply chains, however, have been hit hard by the pandemic, resulting in shipping backlogs and higher prices for goods on a global scale.

More than 1.1 million Texas jobs were supported by exports in 2019, which is by far the most among states. Texas also led exports in 2020, shipping more than $276 billion in goods — 19 precent of the national total. So, it’s no secret that limiting supply chain disruptions is vital to the Texas economy.

Our Good for Texas Tour: Supply Chains Edition kicked off in October last year with a visit to Texas Instruments in Dallas, followed by visits to several other industry titans that are closely connected to supply chains. The tour helped us better understand the supply chain problems plaguing so many businesses around the state. But just as important, we learned about some of the innovative ways business leaders are bolstering supply chain resiliency.

Federal Funds

As of January 2022, the federal government has allocated more than $25.5 billion to local entities in Texas from various pandemic relief packages, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan Act (ARPA). These funds have helped our local entities shore up revenue losses stemming from the pandemic in essential areas such as health and human services, education, housing and transportation.

Texas businesses have received more than $103.9 billion in economic assistance from the CARES Act and ARPA. This includes allocations and loans from the Paycheck Protection Program, Coronavirus Food Assistance Program, and other pandemic-related federal programs.

Summing Up

I’m excited to report that the Texas economy is healthy and performing well, but as usual, I must urge us to remain cautiously optimistic. We never know when we will face the next unpredictable event that could adversely affect our state and local economies — whether it’s a natural disaster or a worldwide virus.

At the same time, we cannot overstate the economic progress we have made since the pandemic first hit, especially over the last year or so. And as for the future, we project continued economic growth in 2022 and 2023.

Texans are resilient and experienced at weathering hardships. And because of those traits, our businesses and industries have responded to recent economic turmoil with determination, innovation, and grit. Despite the turbulence we’ve felt in the last two years, the state of Texas is poised to return stronger than ever.