Krugman’s blog, 6/4/15

There was one post yesterday, “Fracking and the Texas Non-Miracle:”

Grr. I’ve been meaning to write about the Texas economic stumble, but have to some extent been scooped by the business desk. Still, there’s more to say, particularly about the role of the energy sector in the previous boom.

There are various estimates out there, many of which seem to me to understate the case. Here’s the approach that makes sense to me: look at the BEA data on state-level real GDP by sector, and ask how much of the growth in overall GDP can be accounted for by growth in mining, including both direct output and support activities. Here’s what I get, for Texas and the nation as a whole:

How I read this: if mining growth had been the only thing driving overall Texas growth, it would have caused the state economy to grow by 6.7 percent over the period 2005-2013, compared with 1 percent for the nation as a whole. Meanwhile, overall Texas growth was 22 points more than overall US growth; so I’d say that a quarter of the difference can be attributed to the energy-sector surge.

But we don’t want to stop there: there’s also a multiplier effect, as energy jobs boost demand for other goods and services. Nakamura and Steinsson put regional multipliers at 1.5. Including that effect, I get the mining boom accounting for 35 or more percent of the excess Texas growth — let’s say a third.

It’s not the whole story; cheap housing and the still-ongoing southward shift thanks to air conditioning are also likely factors. But fracking-related growth has been big enough that the Texas slowdown now that oil prices are way down makes a lot of sense.

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One Response to “Krugman’s blog, 6/4/15”

  1. Mumbo Jumbo Says:

    So you’re talking about the Eagle Ford and Permian Basin drilling rigs? Of course this is a political point now that Perry is running. Regardless we all knew it would trample over their plans as sure as dust settles on top. The thing to see is whether the fallout changes the global face. That is where the road to profits ends and wars begin. I wouldn’t drop off a cliff predicting what oil futures are going to be.

    A more vital question is why the barrel stayed at par for so long while drilling and expansion were going on. I think I even read that Anadarko was pulling out of the Israeli formation. There is no news here. We saw this in the 80’s after Volcker and Reagan ran roughshod through the economy instead of finding ways to expand after the Arabs boycotted Israel in their efforts to raise the price of the barrel. It is no coincidence that global boycott efforts are streaming forward including Stanford and Paris. I hate to bring this point out but while the Times thinks it’s at the forefront of news it is far behind. Perhaps the only people further behind the news are the ones at NSA. I think u mentioned briefly the news ticker is more about creating a headline than actually reporting and analyzing.

    So let’s say Vodaphone and Time Warner continue the trend in M&A does that matter? Probably not. Nor does SLB taking over BHI. That to me is a development long in the pipeline. Regardless it may be oil prices u think of but it’s American foreign policy being driven by the Arabs once again. We can’t seem to get out of our own way. Is it Taliban or ISIS? We are actually not able to figure that out. Quagmire. If political parties could just find their own brain they’d perhaps think smart.

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