Overview by Pascal Helwaser.
Economic Counselor in Houston
Regional Delegate for the Economic Department of the French Embassy
The French economy is well represented in Texas with major French companies having established their US headquarters here (Total, Air Liquide, Vallourec, and Engie to name a few). With over 60,000 employees, French companies are the second largest foreign employer in Texas. However, opportunities for French entrepreneurs and companies in Texas are still underestimated back in France.
The Texas economy is the second largest in the US (its GDP represents 8.7% of the national GDP) and if it were a sovereign country, it would be the 10th largest economy in the world by GDP ($1.775 trillion), ahead of Canada.
The Texas economy has two major specificities: the strength of its natural riches which represent over 10% of the state’s wealth and the vitality of the manufacturing industry which contributes to 13% of the state’s GDP. Today more than ever, Texas is the leading oil producer with close to 5,0 MBOED (which is a higher production level than Iraq or Kuwait). In the last 15 years, with the Shale Revolution, the production of crude oil has almost quintupled. Today, Texas represents 41% of the national oil production and hosts 30% of US refineries. It is also the first producer of natural gas with close to 27% of the national production and thriving growth prospects. 75% of the petrochemical industry is based in Texas because of its natural resources. Since 2010, over $200 billion in investments have been made in the chemical industry, mostly in Texas, stimulated by the abundance and low prices of natural gas.
The state of Texas is not just a gigantic drilling field but also a truly diversified industrial power. It concentrates 9% of the national production of manufactured goods and produces more than Ohio and Michigan combined, two states that are renowned for their industrial strength. In addition to activities related to the energy industry – with 24.2 GW of installed wind capacity as of 2019, Texas is by far the largest producer of wind power in the US. The strengths of Texas are the high-tech companies like Dell, Texas Instruments, AT&T (all have their headquarters located in Texas), as well as the transportation and logistics industry, which is based in Texas due to its central geographic position (for example, the headquarters of American Airlines is located in Dallas).
Texas is also at the forefront of the medical industry. The Texas Medical Center (TMC) in Houston is the largest medical complex in the U.S with over 20 hospitals and dozens of world-class research centers in the fields of cancer and neurology.
Despite the growth of the oil and gas industry in the last decade, the Texan economy has never been so diversified: in the 1980s, 20% of the GDP and 5% of jobs were based on the energy sector, compared to only 2,5% today. Thanks to these various strengths, Texas is the largest state exporter of goods and therefore an economic zone that is open to international business.
Although the economy of Texas used to be cyclical – the 1986 recession was an aftershock of the oil crisis – it is now defined by its long-term dynamism.
Since 2000, Texas’ economy has grown 2.9%, compared to 1.9% for the US and has only been surpassed by North Dakota’s and Utah’s growth rates. The growth of Texas’ economy has even increased since 2010 to 3.2% annually, consistently 1 point higher than the national growth rate. Nevertheless, the vitality of the Texan economy is still closely correlated with the price of energy, which has a ripple effect on all things, both positively and negatively. According to a study by the Federal Reserve of Dallas, 1/10th of US growth can be linked to the development of shale oil, which is rooted in Texas.
In the short term, the outlook seems positive for the Texan economy. After a significant increase in 2018 – the growth rate was 3.2% and the job creation rate grew 2.3% – the economic activity continues to be favorable despite some constraints from the job market. The unemployment rate is at a historical low (3.4% in July 2019), and companies often face a talent shortage which ultimately hampers their growth. Nonetheless, in the first quarter of 2019, Texas GDP grew 5.2% (annualized), driven by record production of raw materials. The employment rate is expected to grow 2.6% in 2019, still at a rate well above its long-term trend.
The French economy is well represented in Texas with major French companies having established their US headquarters here (Total, Air Liquide, Vallourec, and Engie to name a few). With over 60,000 employees, French companies are the second largest foreign employer in Texas. Given the potential of the Texan economy and its 28 million inhabitants, there is no doubt we can do better!
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