WHILE it remains the hot topic, I want to add one more perspective to the Texas jobs picture. I think most economists are operating under the assumption that most of America's employment shortfall can be explained by the country's growth shortfall. It's therefore worth considering Texas' growth performance in recent years:

A few people have pointed out that Texas turned in a relatively poor growth performance from 2009 to 2010. That's true, but it's mainly due to the fact that the state had less room to catch up to its trend. Texas was growing faster than the country as a whole prior to the recession, and output fell less during the recession. Since then growth has come back close to the pre-recession trend.

This is somewhat interesting. If we're looking at level changes in employment post-recession, which is what most people are focusing on, we would have expected New York to have added more jobs from 2009 to 2010 than Texas. It didn't. New York lost 2,400 jobs in 2010 while Texas gained 34,800. What gives? We can get some sense of the dynamic here by looking at the contributors to output growth:

These are the absolute increases in real output, and we'd expect them to correspond, more or less, to absolute job creation amounts. A few big differences stand out. The biggest contributors to Texas' growth, from 2009 to 2010 anyway, occurred in government and the mining industry (which includes oil and gas extraction). Now, oil and gas haven't directly added that many jobs, but the addition to the state's wealth supports private and government consumption that drive employment growth elsewhere. For New York's part, growth is heavily reliant on finance. That's not surprising. It also helps explain New York's job shortfall. Finance itself is not a labour-intensive industry. The strength of the financial sector is reflected in the positive contribution of government and real estate. In many other states those sectors were net drags on output.

Here's a broader look at Texas' growth since the beginning of the recession:

After all of this, what can we say about the Texas economy? I think we shouldn't understate the extent to which oil and gas helped the state. Direct industry job creation may not have added that much to employment, but the contribution to growth—and growth expectations—supported job creation elsewhere. Then one has to consider the growth Texas has enjoyed in government and health care, and the relatively small decline in construction. I think Matt Yglesias is right to say that this shows the benefits of immigration, domestic and international. And I think Matthias Shapiro has a point when he says:

This is speculative, but it *seems* that people are moving to Texas looking for jobs rather than moving to Texas for a job they already have lined up.

Moving somewhere isn't free. Job or no, you pay for housing, food, and basic consumption goods. That boosts local demand, generating jobs and tax revenue that supports other jobs. Conveniently, some newcomers fill those jobs.

There are a lot of ways of looking at the Texas miracle, and I don't think one can or should write off structural factors entirely, whether tax policy, regulatory burden, housing costs, or oil and gas. But the dynamic above is an example of a virtuous cycle of self-fulfilling expectations. People come because Texas is where the jobs are, and because people come Texas is where the jobs are. Firms anticipate that growth will continue, and they hire accordingly, which ensures that growth continues. And migration ensures steady, stabilising growth in labour-intensive government, education, and health jobs.

There's a lot of talk about whether the Texas model is generalisable. It is, and not just because America as a whole should allow in more immigrants from abroad (which it should). The Texas model is generalisable because the Federal Reserve has the ability to change the prevailing economic equilibrium from the low-growth, low-employment state to the high-growth, high-employment state. The simplest way to do that, of course, would be to set a nominal growth target. Any policy change that convinces markets it is ready to push the economy to trend growth and keep it there, at least until inflation looks uncomfortably high, would do the trick.

Others will draw the lesson that the government can and should accomplish the same thing, borrowing cheaply to boost spending and investment, in the process creating jobs and changing the prevailing equilibrium. They're right too, assuming that the Fed allows it. The downside to that strategy is that it adds to the debt and is politically difficult. Either way, I think there is a clear Keynesian lesson to be drawn from the Texas experience (though of course that is not the only one).