How coronavirus impacted the Texas economy
Texas lost 1.4 million jobs in the spring of 2020 due to COVID-19 and the unemployment rate peaked at 12.9%in April 2020. Sales tax revenue dropped by almost $2 billion in one year. By May 2021, there were strong signs of recovery — 1 million jobs and $1.6 billion in revenue were regained.
When Gov. Greg Abbott ordered a shutdown in response to the coronavirus pandemic in April 2020, the unemployment rate in Texas surged to a record high of 12.9%.
The virus would continue to ravage the state for the next year, and throughout the pandemic, the state’s outdated and understaffed unemployment insurance office often left countless Texans struggling to receive unemployment benefits as they navigated the Texas Workforce Commission’s confusing processes. Business shutdowns and limits battered Texas companies. A decline in Texas’ sales tax revenue — the largest source of funding for the state budget — initially spurred concerns about a budget shortfall.
As more Texans got vaccinated and businesses began to open back up in 2021, economists were hopeful that the state's economy would stabilize and improve. By May 2021, the state comptroller said access to vaccines and increased economic activity spurred him to dramatically revise revenue estimates upward. Here’s a look at how the coronavirus impacted the Texas economy and how the state was recovering in May 2021.
After surpassing Great Recession levels in April 2020, the unemployment rate went down
The statewide unemployment rate had been slowly declining for nearly a decade until April 2020, when the rate surpassed Great Recession highs as Texas scrambled to shut down its businesses. More than 1.4 million Texans lost their jobs due to the pandemic in March and April 2020, according to the TWC.
But as of May 2021, the state had gained back around 1 million jobs since the previous spring. In April and May 2021 alone, 47,400 jobs were added in Texas. The unemployment rate dropped to 6.5% in May 2021 — higher than pre-pandemic levels, but around half of the record-high 12.9% in April 2020.
Although more people have been hired recently, many are still facing obstacles reentering the workforce. On June 26, hundreds of thousands of Texans will lose the assistance they received through two federal unemployment aid programs after Abbott opted the state out of federal aid.
Unemployment rate in Texas
Every major industry in Texas suffered losses in jobs when the coronavirus began spreading last spring. Employment in leisure and hospitality, which includes jobs in restaurants, hotels and entertainment, dropped by 38% — over 500,000 jobs — from March to April 2020. Almost 150,000 jobs in that sector were added back the next month. The mining and logging sector, which includes the oil and gas industry, saw employment decrease by 11% from March to April 2020 and continue to drop for several more months. Jobs in education and health services also fell by 10% in April 2020.
Percent change in employment from previous month by industry
All of the major sectors in Texas saw job losses in April 2020, after the state shut down in response to the pandemic. The trade, transportation and utilities, professional and business services, and financial activities sectors added more jobs than they lost between March 2020 and May 2021.
The impact of the coronavirus recession varied across Texas
The unemployment rate during the height of the pandemic varied across the state. Joblessness was the worst in South Texas, where many people work in oil fields. During the pandemic, Starr County recorded the highest unemployment rate out of all Texas counties at 21.7% — one in five of its residents age 16 and older were unemployed in April 2020. (The rate does not include institutionalized residents or those on active military duty.)
Some of the biggest jumps in unemployment rate were in Yoakum, Crane and Ector counties, which are all in the oil-rich Permian Basin. In 2020, there were sustained job losses in the manufacturing, natural resources and mining and trade and transportation sectors in those counties compared with the same period in 2019, according to the Quarterly Census of Employment and Wages. Large urban counties also saw significant decreases in employment, but these areas were slowly recovering by May 2021.
Unemployment rate by county
Snapshots at four points show how the unemployment rate changed across the state before and during the pandemic. Unemployment was the worst in April 2020, when the state shut down. But rates reported more than a year later in May 2021 indicated that counties were rebounding, though most were not down to pre-pandemic levels.
|County||Unemployment rate change, Feb. 2020 to May 2021||Peak compared to Feb. 2020|
Sales tax revenue began rebounding after a year of decreased funds
For the majority of the first year of the pandemic, sales tax revenue each month remained below what was collected during the same period the previous year. In May 2020, the sales tax revenue was down 13% from what the state collected in May 2019, a decrease of around $395 million.
But the May 2021 receipts showed that spending was picking back up. Sales tax revenue in May 2021 was up 30.1% compared to May 2020 and up 12.9% compared to May 2019. The retail sector saw a particularly significant increase as customers returned to stores opening at full capacity. Restaurants also saw more business compared to the previous year’s levels.
Percent change in sales tax revenue from previous year
Before the pandemic, revenue was consistently higher than what was collected the previous year.
About this data
The unemployment rate data for Texas is from the Bureau of Labor Statistics Local Area Unemployment Statistics program and the Texas Workforce Commission. Sales tax revenue data is from the Texas Comptroller of Public Accounts. Employment by industry is from the Federal Reserve Bank of Dallas.
Disclosure: The Texas Comptroller of Public Accounts has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
Correction: An earlier version of this story listed state sales tax revenue incorrectly. The amounts are in billions of dollars.
Illustrations by Emily Albracht. Brandon Formby contributed to this report.