< Previous16 TE X A S E C ONOMI C D E V E L OP ME NT G U I D E freeze-induced setback. While employment is still about 600,000 below the prior peak, there has been notable improvement. Initial unemployment claims are now generally under 50,000 per week, several times higher than optimal but well below the spring and summer of last year. Activity in the energy sector is beginning to be restored and Texas rig counts are in the 200 range, almost double the level last summer, and current prices support additional activity. During normal times, the oil and gas sector supports about 15% of economic activity when the state’s extensive network of oil field service companies, pipelines, processing facilities, headquarters operations, and a spectrum of other firms are considered. This sector is likely to expand markedly going forward, as global demand resurfaces and increases, costs continue to fall, and the carbon footprint of oil and natural gas continues to improve. The other recent challenge the Texas economy has faced is the extreme weather in February 2021. Records were shattered across the state and the cold lingered for an unusually long period of time. The demands on the power grid were exceptional, and when brutal conditions took down about 40% of generation capacity (wind turbines and conventional plants alike), rolling blackouts were implemented to avoid catastrophic damage to the grid. Most households and businesses had to deal with power outages (sometimes for days in freezing temperatures) and millions had no water (again for an extended period). The reasons for the problems with the power grid are complex, but they can certainly be dealt with. Work is underway to pinpoint causes and find solutions. In some instances, changes will be relatively simple, though others will require significant investments. The unprecedented weather identified weaknesses which thoughtful action can address, with the result being a stronger supply going forward. Looking ahead, the outlook for the Texas economy is strong. Drivers of future growth include a wide range of industries, from longtime cornerstones such as oil and gas to emerging technology-oriented sectors. Texas has long led the way in attracting major corporate locations and expansions and will remain highly competitive for the foreseeable future. In fact, the state has won this magazine’s “Governors Cup” for the most significant locations and investments for the past nine consecutive years, usually by a wide margin. In 2020, the state had more than 700 qualifying projects in the midst of the pandemic. Texas also obtained the “Deal of the Year” with the Tesla gigafactory, as well as other high-profile announcements. Advantages such as a lower cost structure, friendly business environment, large workforce, strong system of higher education and training, highly praised incentive programs, and a mix of industries primed for growth will keep the state on many short lists for locations. Continued support for economic development at the State and local level will help seal the deals. “Looking ahead, the outlook for the Texas economy is strong. Drivers of future growth include a wide range of industries, from longtime cornerstones such as oil and gas to emerging technology-oriented sectors. ” — Dr. M. Ray Perryman, President, CEO, The Perryman Group TE X A S E C ONOMI C D E V E L OP ME NT G U I D E 17 “Looking ahead, the outlook for the Texas economy is strong. Drivers of future growth include a wide range of industries, from longtime cornerstones such as oil and gas to emerging technology-oriented sectors. ” — Dr. M. Ray Perryman, President, CEO, The Perryman Group The Perryman Group’s latest long-term forecast indicates recovery from recent issues and expansion in the decades ahead. Nearly 6.8 million jobs are projected to be added, for a 2045 total of 19.5 million and a 1.72% annual rate of growth over the period. Population is likely to grow by more than 11.0 million to reach 40.3 by 2045. Output (real gross product) is anticipated to expand from an estimated 2020 level of 1.7 trillion to 4.0 trillion in 2045, a 3.43% annual rate of gain. This growth is widespread across the state, with its many diverse regions seeing opportunities in a variety of traditional and emerging sectors. The large metropolitan regions and the Permian Basin oil region will continue to be at the forefront, but opportunities abound throughout Texas. As COVID-19 becomes more controlled, what was a remarkably strong economy going into the health crisis is recovering. While it may take another year or two for some industries and regions of the state to reach pre-pandemic levels, the long-term outlook is clearly positive. The Texas economy is saddled up and ready to ride! Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 2,500 clients over the past four decades.18 TE X A S E C ONOMI C D E V E L OP ME NT G U I D E by RON STARNER G O V E RNOR I NTE R V I E W Photo courtesy Governor’s Office The Recruiter In Chief The Recruiter In ChiefTE X A S E C ONOMI C D E V E L OP ME NT G U I D E 19 When your state has won the coveted Site Selection Governor’s Cup a record nine years in a row, you may be tempted to rest on your laurels. There won’t be any of that going on in Austin this year, if Texas Gov. Greg Abbott has his way. Far from it, Abbott is doubling down on his pursuit of corporate plant investment and private sector job creation. In a candid interview for this publication, the 48th Governor of Texas said he isn’t done persuading CEOs and other business leaders to choose Texas for their various operations. From corporate headquarters to manufacturing plants and logistics facilities, companies are investing into new and expanded projects in the Lone Star State at an unprecedented pace. In 2020, Texas outpaced every other state in the nation by landing 781 corporate facility deals, nearly doubling the total of second-place Ohio, which tallied 419. No other state in America even came close to reaching half of Texas’ total. A big reason behind Texas’ windfall last year was the Governor’s decision to reopen his state while many others were still closed for business. “We undertook a number of measures that were focused on trying to maximize businesses being allowed to remain open and operate safely and to minimize any type of shutdown,” the Governor told Site Selection Editor-in-Chief Mark Arend, “and find the right blend of that and maximum public safety. We focused on keeping businesses open as much as possible and providing them the guidance and the tools, meaning we were able to surge testing supplies through chambers of commerce to help businesses be able to test employees, for example.” The result was only a minor drop-off in corporate plant expansions from 2019 to 2020. In 2019, Texas landed 859 facility projects. In 2020, it secured 781. In his more recent interview with us, the Governor pledged to pursue a balanced Texas’ ultimate deal closer resides in the Governor’s Mansion.20 TE X A S E C ONOMI C D E V E L OP ME NT G U I D E approach once again as he makes daily decisions on how best to protect both public health and business viability. On March 2, he announced that businesses in his state could reopen 100% on March 10 as long as certain public health attainment rates were being achieved. Then, he went back to work, which for him meant getting busy on the phones talking to CEOs from around the country. Here’s what the Governor had to say about that: You talk to corporate executives around the country all the time. Many of them would like to relocate their companies to Texas because they are not happy where they are. What typically are their two or three biggest frustrations with their current location? GOV. ABBOTT: The pace of CEOs calling me really has increased over the past year. They are frustrated with the governance of other states and the approach that their states take with businesses on things like taxes and regulations. We tell them that we want them, we embrace them, we support them, and we will help them achieve their vision for their companies. We then provide them with the resources and tools they need to get that done, whether that’s incentives or workforce training or whatever they need. We embrace them and partner with our business leaders. And they know that they have a governor who is on their side and will work to make sure they succeed when they move to Texas. What is it about Texas that people don’t learn until they’ve been there for a year or two? ABBOTT: Here is what they say to me after they moved here: “We always believed that Texas would have a greater sense of freedom, but we had no idea how dramatic that difference would be.” Businesses have almost total freedom to run their company the way they see best. We can’t run their businesses better than they can. We get out of their way and let them do what they do best. Over the last year, you’ve had to deal with a global pandemic, unprecedented recession, social upheaval and a massive winter storm. What’s the biggest lesson you’ve learned about Texas and your job during that year? ABBOTT: It is so important to show resilience and resolve and perseverance. Life is always going to give you challenges to face. You just have to do your best and move on. Both the House and Senate this week passed substantial legislation to ensure that the Texas power grid will be better than ever before. Here’s an analogy that I like to share. At the very beginning of Texas was the fall of the Alamo, but Texans did not give up. They fought another battle a couple of weeks later and won our independence. In Texas, we don’t let challenges get in our way. We overcome them. “The pace of CEOs calling me really has increased over the past year. They are frustrated with the governance of other states and the approach that their states take with businesses on things like taxes and regulations. ” — Greg Abbott, Governor of Texas are frustrated with the governance of other states and the approach that their states take with businesses on things like taxes and regulations. — Greg Abbott,TE X A S E C ONOMI C D E V E L OP ME NT G U I D E 21 Reshoring has become a hot topic over the past year. Which industries do you think are poised now to come back to America and to Texas in particular? ABBOTT: One of the biggest lessons we learned from the pandemic was the mistake that had been made in offshoring so many critical aspects of our nation’s health care. In Texas, we are now manufacturing PPE in addition to other critical medical supplies. A soon-to-be-announced vaccine is going to be manufactured at Texas A&M. From medical supplies and equipment to life- saving medicine, we understand the importance of having the immediate capability. Speaking of success, Texas recently put two teams in the Final Four of the Men’s NCAA Basketball Tournament: Baylor and Houston. What do you have to say about that? ABBOTT: We have half the final four from the state of Texas. We play great basketball here and we are great at economic development too. That’s what we say! 22 TE X A S E C ONOMI C D E V E L OP ME NT G U I D E E X E C U TI V E D I RE C T OR I NTE R V I E W Photo courtesy Governor’s Office How Texas Keeps Winning It takes a coordinated effort, says state economic development chief. by RON STARNER Despite the global pandemic, or perhaps because of it, many people and companies decided that 2020 was the year to move to Texas. For a record ninth year in a row, Texas led the nation in corporate facility expansion activity, according to Site Selection magazine — and this time that included a slew of corporate headquarters relocations. Texas also led the nation in 2020 in household relocations, as folks in droves packed up their homes in places like California, New York and Illinois and high-tailed it to the Lone Star State in search of a better life for themselves and their families. A big reason why Texas lures so many employers and workers alike is all the work that goes on behind the scenes at the Economic Development & Tourism Office of Texas Governor Greg Abbott. Leading that team is Executive Director Adriana Cruz. We recently caught up with Cruz for a discussion on the events of the past year and her plans for continuing this unprecedented run of success in economic development for Texas. 2020 and 2021 have been full of news stories about people and companies moving to Texas. What’s driving this mass migration? CRUZ: Texas has always been known as a land of opportunity and freedom. Texas ranks No. 1 in the country in population growth. It did in 2019 and it has for the past 19 years. The No. 1 location they’re coming from is California. Texas ranks second in relocation activity in the nation, according to Texas Realtors. What brought this on? Our governor announced the process last April of how Texas would reopen the state. I was a member of that Strike Force. We asked, how can you be safe and still have your doors open? That common- sense approach appealed to a lot of companies and CEOs. They started questioning why they were located where they were. A lot of prospect activity came in because of that. They were not just calling our office, but calling the governor directly. We were thinking as economic developers that companies would put things on hold during an election year. We thought they would take a wait-and-see attitude. But the pandemic started accelerating companies’ decisions. Your state won the prestigious Site Selection Governor’s Cup yet again this year. How were you able to perform at such a high level in 2020 despite the global pandemic and recession?TE X A S E C ONOMI C D E V E L OP ME NT G U I D E 23 CRUZ: It is such an honor to win that award and to have the projects recognized nationally. To do it in a pandemic year is even more amazing. We had just under $13 billion in capital investment. A lot of that had to do with the methodical and strategic way the governor went about reopening the state. It takes a lot of people working on this together — state agency partners and local and regional groups. Without them, we could not accomplish this. Gov. Abbott made the decision to open your state fully recently. How was that decision greeted by the business community? CRUZ: He implemented measures to protect our communities to make sure Texans could earn a paycheck and put food on their tables. On March 2 , he announced that businesses could reopen 100 % on March 10 . Even at 75 %, many Texans were still sidelined and could not pay their bills. But given the improvement in our COVID numbers, Gov. Abbott recognized that it was time to open Texas 100 %. Texas is in a far different situation today than we were at the beginning of the pandemic. For a year, Texans have mastered the safety protocols. Today (March 22 ), 8 million vaccines have been given to Texans. We are vaccinating about a million people a week. The positivity rate is down. Hospitalizations are down. We have learned the strategies to keep ourselves safe. How hard was Texas hit by the pandemic last year? Which industries absorbed the biggest blow? CRUZ: Texas was hit very hard. 1 .4 million jobs were lost in March and April. Leisure and hospitality were the sector that was hit the hardest — accounted for 40 % of the job losses. We are seeing a bounce-back in that sector now. Many of the businesses continued to operate and were hiring. Our unemployment rate went over 13 .5%. It is now 6 .8%. How long do you think it will take before Texas returns to peak employment? CRUZ: Economist Dr. Ray Perryman says that over the next five years, we will have GDP growth of 4 .5%. We feel very optimistic. We feel like we are on the way back and the economic recovery is taking hold. Some of our communities rank in the top 10 for job resiliency. We have had 9 consecutive months of job growth. The recent deep freeze and power outages in Texas made national Next >