Why Does Midland Texas Have the Fastest Growing Economy in the US?

Midland’s economy grew by 24.1% last year, more than twice the rate of San Angelo, Texas, the metro area with the next largest economic growth. The exceptional gross domestic product growth rate in Midland and other parts of Texas is largely due to fracking activity over the past five years, which has pumped billions of dollars into the state’s economy. Just 2% of the U.S. employed population worked in the mining sector, which also includes agriculture, forestry, fishing and hunting. In Midland, 21.5% of the labor force worked in the sector, predominantly in mining.

While Midland’s oil industry appears to be very healthy, there are signs that the growth is unsustainable. Oil prices fell rapidly over the first half of this year, already hurting the industry’s revenue. If prices continue to decline, production eventually will decline as well. According to The Dallas Morning News, drilling applications fell over the 10 months through January of this year, and the number of rigs in the region is dropping at a record pace.

Midland is not one of the largest metro areas in the United States. Its population is less than 300,000. By contrast, the population of the largest metro area — New York — is over 20 million.

U.S. metro areas are the largest contributors to U.S. economic growth. The Bureau of Economic Analysis (BEA) recently released GDP growth estimates for U.S. metro areas. Midland, Texas, led the nation by a wide margin, and as mentioned, its 24.1% economic growth in 2014 more than doubled the growth rate of second-place San Angelo.

Five of the 10 fastest-growing local economies are in Texas, the nation’s leader in crude oil reserves and production. Oil and natural resources mining were major industry drivers in these areas, including natural gas hubs like Midland. However, the price of oil has declined sharply since the middle of last year, and a downturn that so often follows such large economic booms may be imminent, even in the nation’s fastest-growing areas.

To identify the metropolitan areas with the fastest growing and shrinking economies, 24/7 Wall St. reviewed the highest and lowest real GDP growth rates in 2014 among the nation’s 381 metropolitan statistical areas from the BEA. We also used last year’s unemployment rates, which are annual averages and are from the Bureau of Labor Statistics.

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