Many economic indicators in Texas and the U.S. continued to decline in 2010 even though the recession ended in 2009. While Texas still lags behind in certain key measures of citizens’ well-being, some of the gaps appear to be narrowing.Economic conditions - Texas

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Research Papers in Economics

SouthwestEconomy    FEDERAL RESERVE BANK OF DALLAS • FOURTH QUARTER 2011 14
NoteWorthy
QUOTABLE: “Texas’ exports face headwinds from two sources: a slowdown 
in Mexico and emerging Asia—particularly China—and a stronger dollar.” 
—Anil Kumar, Senior Research Economist
DEFENSE SPENDING: Economic Benefit Likely to Diminish in Texas
RECORD DROUGHT: Agriculture Losses Estimated at $5.2 Billion 
National defense strongly influences the Texas economy 
through 20 area military installations and the companies pro-
viding them with goods and services. Additional benefits arise 
from spending by military personnel and by the Defense De-
partment on aircraft and equipment produced by area manu-
facturers such as Lockheed Martin and Bell Helicopter.
All told, defense purchases and pay for military and civil-
ian personnel in Texas amounted to $65.6 billion in 2009, or 
about 9.7 percent of U.S. defense spending. After accounting 
for spillover effects in the local economy from inputs used by 
defense contractors and goods purchased by military person-
nel, total spending in Texas was estimated at $108.6 billion.
Compared with other large states, Texas ranked second 
behind California in terms of spending. However, on a per 
capita basis, Texas was ninth at just under $3,500. 
The Base Realignment and Closure program instituted 
in 2005 and ongoing conflicts in Iraq and Afghanistan led to 
a military influx that had boosted Texas infrastructure invest-
ment, particularly benefiting Fort Bliss in El Paso and Fort 
Sam Houston in San Antonio. 
However, the outlook is less rosy. Military spending in 
Texas will likely fall amid overall defense reductions begin-
ning in 2012 as part of deficit-cutting measures by Congress. 
Spending in Texas will decline to $51.7 billion by 2015, a 21.2 
percent drop from 2009, Defense Department estimates show.
—Jackson Thies
Texas’ agricultural sector is tallying up record losses 
due to an unprecedented drought. The 12 months ended 
in September were the driest since recordkeeping began 
in 1895. The U.S. Drought Monitor found 92 percent of the 
state in extreme or exceptional drought as of mid-October. 
Crop and livestock losses are estimated at $5.2 billion, 
or 25 percent of usual agricultural production value, ac-
cording to the Texas AgriLife Extension Service at Texas 
A&M University. The total surpasses the previous record for 
costliest drought of $4.1 billion in 2006. 
Low yields and crop abandonment at a time of high 
commodity prices produced losses of $1.8 billion in cotton, 
$750 million in hay, $327 million in corn, $243 million in 
wheat and $63 million in sorghum production. Crop insur-
ance lessened the impact of income losses for many farmers. 
The cost to the livestock sector was $2.1 billion, with 
82 percent of pastures and rangeland in very poor condi-
tion and hay prices increasing twofold to threefold from a 
year ago. Ranchers culled herds due to water and feed con-
ditions, depressing market prices in the short term. How-
ever, prices remain relatively high, mitigating the effect. 
In addition, the drought lowered income for agricul-
ture workers and sales of farm services and supplies such 
as gins, elevators and fertilizer. AgriLife Extension estimates 
the sum of direct and indirect losses at $8.7 billion this year. 
—Yingda Bi
PERSONAL INCOME: Further Declines Seen in Texas and U.S.
Many economic indicators in Texas and the U.S. con-
tinued to decline in 2010 even though the recession ended 
in 2009. While Texas still lags behind in certain key mea-
sures of citizens’ well-being, some of the gaps appear to be 
narrowing.
Texas’ real median household income fell 1.6 percent 
to $47,464 in 2010, compared with a U.S. reduction of 2.3 
percent, or more than $1,100, to $49,445, according to the 
2011 Current Population Survey Annual Social and Eco-
nomic Supplement. 
Texas’ lesser decline allowed it to move closer to the 
national income level than it has been since 2001.
The share of Texas residents without health insurance 
decreased 1.5 percentage points during 2010 to 24.6 per-
cent. The U.S. recorded a 0.4 percentage-point drop to 
16.3 percent. While Texas experienced the fourth-largest 
decline in such coverage gaps in the U.S., the state con-
tinues to have the largest percentage of people without 
health insurance—3 percentage points greater than in New 
Mexico, the next-highest state.
The Texas poverty rate increased to 18.4 percent in 
2010, a year-over-year increase of 1.1 percentage points. 
The national poverty rate rose to 15.1 percent, up 0.8 per-
centage points. The national and state rates climbed to 
their highest levels since the early 1990s. 
—Christina Daly

Noteworthy: Personal income, record drought, defense spending

http://www.dallasfed.org/assets/documents/research/swe/2011/swe1104f.pdf

Noteworthy: Personal income, record drought, defense spending

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