Liberals and the Texas Unemployment Miracle

With Texas Republican Governor Rick Perry officially entering the presidential race last week, liberals have started attacking Texas' economic record.

Paul Krugman in the New York Times went first last Sunday. "So what you need to know is that the Texas miracle is a myth, and more broadly that Texan experience offers no useful lessons on how to restore national full employment," Krugman claimed.

With the latest Gallup poll showing that just 26 percent of Americans approve of President Obama's performance on the economy, liberals have little choice but to try to distort what is happening in Texas.

"In June 2011, the Texas unemployment rate was 8.2 percent. That was less than unemployment in collapsed-bubble states like California and Florida, but it was slightly higher than the unemployment rate in New York, and significantly higher than the rate in Massachusetts. . . ."

The Texas unemployment rate is about one percentage point lower than the national average, and it is true that other states such as New York and Massachusetts also have very similar rates (see the diagram here).

But things in America are a lot worse than the simple unemployment rate number indicates, and they are worse for a simple reason: people have given up looking for work and have completely left the labor force. People can stop being unemployed either when they get a job or when they give up looking for a job.

Obviously, everyone wants to lower the unemployment rate through only the first option. Yet, unfortunately, people giving up looking for work has been the hallmark of the Obama administration. People are supposed to start looking for work during recoveries. It is during a recession that Americans give up looking for work.

During the Obama "recovery" about 2.8 million more Americans have given up and completely stopped looking for work. That’s the key to why, even though Texas has created lots of jobs, its official unemployment rate is similar to “blue states” like New York and Massachusetts. While Texas' labor force has grown by 350,000 since the recession ended in June 2009, Massachusetts has remained virtually unchanged and New York's has fallen by 140,000 (figure for the percentage changes is available here).

Keeping a similar unemployment rate to Texas isn't quite the wonderful accomplishment when so many people have given up looking for work. The rest of the states will suffer a long term unemployment problem that Texas won't face because eventually when the economy does recover those who have given up looking for work will start looking again.

"So where does the notion of a Texas miracle come from? Mainly from widespread misunderstanding of the economic effects of population growth. For this much is true about Texas: It has, for many decades, had much faster population growth than the rest of America — about twice as fast since 1990. . . ." Yet, if population growth creates jobs, why don't we see this nationally?

The working age population has also been growing nationally by about five million since the beginning of the Obama administration. But, instead of growing with the working age population, the number of jobs has shrunk by 2.91 million. Krugman claims that Texas has more jobs simply because its population has grown, but the reverse is really the case. The ability to get a job in Texas continues to lure other Americans as well as Mexicans there.

"It’s true that Texas entered recession a bit later than the rest of America, mainly because the state’s still energy-heavy economy was buoyed by high oil prices through the first half of 2008... " If Krugman can see significant swings in either the number of people employed or the number in the labor force as gas prices change, he has better eyes than I do. (See the diagram here.) Krugman notes that Texas benefited from gas prices rising in 2008, but he fails to mention how Texas still did well relative to other states even when gas prices plummeted in late 2008 and stayed low through most of 2010. Krugman's views have been echoed in other publications, such as articles in the Washington Post by Brad Plumer and Harold Meyerson. They also mention Texas' "oil boom" economy and then go after the high rate that Texans earn the minimum wage.

Plumer: "The state boasts the highest percentage of minimum-wage workers in the country . . . ." Meyerson: "It has the fourth-highest poverty rate of any state. . . ."

Unfortunately, neither of these writers really understand what these numbers mean. The biggest problem with both claims is that Texas has the second largest percent of its population under age 18. Children ages 0 to 17 don't make much income if any, but obviously they go into calculating per capita income numbers.

To compare what people are making across states, a much more useful approach is to compare GDP per adult and in 2008 Texas ranked 14th -- not too shabby. But more importantly, from the period when Perry became governor in 2000 until 2010, Texas ranked 10th in terms of growth in terms of real per adult GDP. California ranked at 24th.

Krugman and his cronies might not realize it, but Texas' very young population also dramatically raises the rate that people in the population are earning the minimum wage.

Given that single women with kids make up such a large portion of those in poverty, it isn't surprising that this high rate of having children also drives up the poverty rate.

With unemployment stuck over 9 percent and the only reason that it isn't worse is because millions of Americans have given up looking for work, President Obama and his supporters can't really convince Americans that they know what they are doing. The only option is to convince Americans that Republicans don't have a solution.

If the attacks on Rick Perry's record are the best that Democrats can do, the election might already be over.

John R. Lott Jr. is a FOXNews.com contributor. He is an economist and the author of "More Guns, Less Crime (University of Chicago Press, 2010), the third edition of which was published in May.".