Where the New Jobs Are (Hint: In Texas, Not California)

The September state unemployment numbers came out last Friday, and we couldn't help noticing that three of the four states with the highest job losses were California (-63,500), New York (-37,600) and New Jersey (-20,200). The other was Massachusetts (-20,900). Texas, meanwhile, gained 4,000 jobs.

This continues a longer term trend.Over the last year, as the economy was beginning to grow again, the Lone Star State has led the nation with the addition of nearly 153,000 jobs, while California surrendered 43,700, New Jersey lost 42,300 and New York dropped 14,600. This superior jobs recovery builds on the fact that Texas also weathered the national recession better than most states. According to a new Texas Public Policy Foundation study, Texas experienced a decline of 2.3% from its peak employment, while California fell nearly four times further, with 8.7% of jobs vanishing.

These hiring statistics confirm that for business Texas is the new California—as the likes of Austin, Dallas and San Antonio have become destinations for investment and entrepreneurship. Texas has become a mecca for high tech, venture capital, aeronautics, health care and even industrial manufacturing like the building of cars and trucks.

Meanwhile, the Golden State, New York and New Jersey have been slouching toward slow-growth European status. New Jersey is at least working to get its spending and taxes under control with Chris Christie as Governor, though its state and local tax burden remains the nation's highest and its business tax climate is the worst, according to the Tax Foundation.

The migration of factories, capital and jobs to states like Texas is no accident. Texas is a right to work state, meaning that workers cannot be compelled to join a union. Texas also has no income tax, which gives its firms a roughly 10% cost advantage over a "progressive" state like California.

There is also a lesson here for Washington. The job-free zones of California, New Jersey and New York each tax the rich more than nearly all other states. In these states the top 1% wealthiest taxpayers bear roughly 40% of the state income tax burden, but their budgets are still a mess and the job losses continue. If the next crop of Governors and the 112th Congress want faster growth and more job creation, they'll avoid the mistakes of California and New York and learn from Texas.

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From the Wall Street Journal | Oct 27, 2010