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Domestic migration to Texas slows as national labor markets tighten

Keith R. Phillips and Alexander T. Abraham

Despite a strong economy and historically low unemployment rates in Texas, net domestic migration to Texas from other states has slowed since 2015.

Has Texas lost its edge, or is there something else going on that has reduced the incentive for people to pack up their belongings and head to the Lone Star State?

“With nearly half its workers born outside of the state, Texas depends on—and is shaped by—migration,” an article in Southwest Economy noted in first quarter 2018. State population growth is about double that of the nation, due primarily to strong international and domestic migration, the authors wrote. Also, since 2010, Texas has ranked second after Florida in the net number of domestic migrants, and surveys show that just over half of cross-state movers to Texas relocated for a job.

Texas’ strong economic growth in recent years has driven unemployment rates across the state to multidecade lows, likely restraining economic activity, according to a 2019 Southwest Economy article. It noted that the recent slowing of domestic migration has contributed to labor market tightness and that, since 2016, the share of the population increase in Texas attributable to net domestic migration has been almost halved.

Domestic migration rates fall

Domestic migration is a zero-sum game—net domestic migration across U.S. states is always zero, meaning that as some states gain migrants, others must lose. What matters and is measurable is the total number of people who move across state lines.

A study published by the Journal of Economic Perspectives in 2011 looks at different data sources and finds that domestic migration rates have slid since the early 1980s. One factor possibly influencing the falloff is the steady decline in the variance of economic performance across states (Chart 1).

Chart 1: Variance of States' Annual Job Growth Steadily Declines

Downloadable chart | Chart data

This highlights a factor that may be important for domestic migration: a state economy’s relative performance, not just its absolute strength or weakness. Job seekers move to areas with more employment opportunities relative to where they currently reside. As these differences shrink, there may be less reason to move.

Texas continues seeing net inflows

Net domestic migration to Texas has not followed the same pattern as gross U.S. interstate migration flows (Chart 2).

Chart 2: Migration Flows Differ Between U.S. and Texas

Downloadable chart | Chart data

After declining somewhat between the mid-1990s and the mid-2000s, net domestic migration to Texas jumped in the mid-2000s. While it has declined somewhat since then, overall migration to Texas has remained elevated since 2007 relative to the 1991 to 2005 period.

Much of the spike in Texas migration in 2006 was due to the exodus from Louisiana following Hurricane Katrina. Even after subtracting the net inflows attributable to Louisiana from 2006 to 2008, net domestic migration to Texas generally increased from 2003 through 2009 (Chart 3).

Chart 3: Net Domestic Migration to Texas Slows as National, Texas Labor Markets Become Similarly Tight

Downloadable chart | Chart data

Chart 3 also depicts the difference between the U.S. and Texas unemployment rates. A stronger economic performance in Texas following the 2007–09 Great Recession drove the Texas unemployment rate below that of the nation and likely increased the incentive to move to Texas, where jobs were more plentiful.

Conditions improve elsewhere

During the 2015–16 oil bust, the state economy downshifted, the Texas unemployment rate grew closer to the national average and net domestic migration slowed. While economic growth improved in Texas in 2017 and 2018, conditions were also strong throughout the U.S., and the unemployment rates for the two areas were almost the same.

During the period of net domestic migration from July 2018 to July 2019, the unemployment rate in Texas averaged 3.6 percent, while the U.S averaged 3.8 percent. A simple regression with one lag of net domestic migration and the unemployment rate differential suggests that net domestic migration in Texas this year will be about 90,500—above the 2018 figure of about 82,500, but more than 25 percent below the post-Great Recession average of 123,000.

As the 2018 Southwest Economy article noted, low taxes, less regulation and an accommodating business climate in Texas have likely stimulated strong economic growth and persistently positive net domestic migration.

While Texas continues to attract migrants, it also appears that employers’ ongoing struggles to attract more out-of-state workers will likely continue as long as the Texas and national economies stay strong and maintain similarly low unemployment rates.

About the Authors

Keith R. Phillips

Phillips is an assistant vice president and senior economist in the San Antonio Branch at the Federal Reserve Bank of Dallas.

Alexander T. Abraham

Abraham is an economic programmer in the Research Department at the Federal Reserve Bank of Dallas.

The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.