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Be Careful With State-Level Job Growth Stats

Be Careful With State-Level Job Growth Stats
Profile photo of Robert P. Murphy

There is a very intriguing chart making the rounds on social media, showing the impressive job growth in Texas versus the rest of the United States:

Texas Jobs

 

Here is AEI’s Mark Perry writing up the full discussion to accompany the above chart. Naturally, the story here is that Texas is “largely responsible” for the job growth in the United States, and that this reflects favorably on the energy sector and relatively limited government.

To be sure, as long-time Mises Canada readers know, I am a strong advocate of energy development and think that interventionist States are the main obstacle to human prosperity. So I am totally on board with the spirit of Perry’s post.

However, I just want to warn people to be careful with these types of statistics. As a general rule, a chart like the one above doesn’t actually prove what many of the Texas fans were saying that it proved.

In particular, it is NOT true to say that Texas was the only state to create a lot of jobs since 2007. For example, using BLS data, I was able to roughly reproduce Perry’s figure–I found that from July 2007 to July 2014, Texas added 1.19 million jobs. (Perhaps Perry was using annual averages and got a different number that way; I was just making a point.) Using that same metric, I found that New York State added about 315,000 jobs during the same period, while North Dakota added 107,500, a whopping 30% increase. So these two other data points show that it was not just “red states” that grew significantly in absolute numbers, and that Texas didn’t have the largest percentage growth.

As a final point, let me give an exaggerated example to make the logical case crystal clear. Suppose over a certain period, 49 states each added 100,000 jobs on net. Looking just at those states, then, the U.S. would have added 4.9 million jobs during the period. However, further suppose that during that same period, one state lost 4.85 million jobs on net, meaning that the country as a whole only added 50,000 jobs net.

Now think through the implications of these hypothetical numbers. You could take any of the 49 states, and truthfully say, “This state contributed all of the net gains to the county’s job growth. The state added 100,000 jobs during the period, while the U.S. as a whole only added 50,000. If it weren’t for this one state adding its 100,000 jobs, the rest of the country put together would have lost 50,000 jobs.”

However, by construction in this contrived example, there would be nothing special about the state in question; it had identical performance to 48 other states.

In conclusion, I want to emphasize that Perry didn’t say anything false in his article. My point with the present post is just to clarify the situation and make sure people don’t generalize beyond the facts to conclude something erroneously. Especially with Paul Krugman jumping on people for getting some facts wrong, we free marketeers have to be very careful not to commit an unforced error–that’s Krugman’s job!

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Profile photo of Robert P. Murphy

Robert P. Murphy is the Senior Economist at the Institute for Energy Research, and a Senior Fellow with the Fraser Institute. He holds a PhD in economics from New York University. Murphy is the author of Choice: Cooperation, Enterprise, and Human Action (Independent Institute, 2015) as well as numerous other books and hundreds of articles.

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