(Bloomberg) -- The “Texas Miracle” could become more like a mirage.
For years, politicians in the second-largest U.S. state bragged that low taxes and loose regulations kept employment high while the rest of the country was mired in economic doldrums following the 2008 crash. Turns out it was just its deep pockets of oil and gas.
Unemployment may surpass the national rate in the next year for the first time since 2006, according to Prestige Economics LLC, JPMorgan Chase & Co. and ING Bank NV. Texas is already experiencing a “rapid deceleration” in job growth to just a third of what it was last year following a slump in oil prices, said Wood Mackenzie Ltd.
“The Texas miracle was predicated on high oil prices, which are probably gone for a while,” said Jason Schenker, president of Prestige Economics in Austin, Texas.
Texas’s unemployment rate, which dropped as low as 4.1 percent earlier this year, will rise to 4.9 percent in June, exceeding the projected national level by then for the first time since October 2006, according to forecasts from Prestige Economics. James Glassman, a New York-based senior economist at JPMorgan, sees the unemployment rates crossing over each other toward the end of next year.
There is “definitely a chance” that Texas could surpass the U.S. unemployment rate, though this will depend on how long oil prices stay low and the national rate could be affected by the future path of U.S. interest rates, said Rob Carnell, chief international economist for ING in London.
It’s a far cry from four years ago, when joblessness in Texas was more than a full percentage point below the national average. Then-Governor Rick Perry extolled the state’s economic success in his failed run for the Republican nomination for president. He mentioned taxes 10 times in his announcement speech in August 2011. Oil wasn’t mentioned once.
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