Texas Economy: Jobs, Wages, and Cost of Living

Texas has the second-largest state economy in the United States, behind only California. If you treated it like its own country, it would land somewhere in the world's top ten by GDP — the dollar value of everything a place makes and sells in a year. The Texas economy is big, broad, and unusually energy-heavy, but it is no longer just oil and cattle.

This is a plain-English tour of how the Texas economy works. For the national picture, see The State of the U.S. Economy and the Economy hub.

How big is the Texas economy?

For example, recent state GDP for Texas has run around $2.5 trillion, according to the Bureau of Economic Analysis. Population is roughly 30 million, second only to California, per the U.S. Census Bureau. Big population plus big output is what puts Texas near the top of nearly every state economic ranking.

The biggest industries

Texas is famous for energy, and energy still matters. The Permian Basin in West Texas is one of the most productive oil fields on Earth. But the state's economy has been quietly diversifying for decades. The main pillars now are:

• Energy — oil, natural gas, refining, and a fast-growing wind and solar sector.
• Technology — Austin and Dallas have become major tech hubs, with semiconductor plants, software, and data centers.
• Healthcare — the Texas Medical Center in Houston is the largest medical complex in the world by employment.
• Aerospace and defense — Fort Worth, Houston, and El Paso all host large aerospace or military operations.
• Logistics and trade — Texas borders Mexico and has the busiest land port of entry in the U.S. at Laredo.
• Agriculture — cattle, cotton, and dairy still rank among the largest in the country.

Jobs and wages

Texas tracks employment through the Texas Workforce Commission, and detailed national-level numbers come from the Bureau of Labor Statistics. For example, the Texas unemployment rate has typically run close to the national average, sometimes a tick above and sometimes a tick below.

The Texas minimum wage is tied to the federal minimum of $7.25 per hour. Many Texas employers pay more than that on their own — especially in metro areas where competition for workers is strong — but the legal floor is the federal one.

Taxes in Texas

Texas is one of a small group of states with no state income tax. That sounds great on paper, and for many households it does mean a smaller tax bill on wages. But Texas has to fund schools, roads, and police somehow, and it does that mostly through:

• Sales tax — the state rate is 6.25%, and cities and counties can add up to 2% on top, for a maximum combined rate of 8.25%.
• Property tax — Texas has some of the highest effective property tax rates in the country.
• Business franchise tax — companies above a revenue threshold pay this in place of a corporate income tax.

You can read more about how sales tax works in our glossary, and the official rules live at the Texas Comptroller.

Cost of living

Cost of living in Texas is usually below the national average, but that hides a lot of variation. Rural East Texas and the Rio Grande Valley are among the most affordable places in the country. Austin, on the other hand, has been one of the fastest-rising housing markets of the past decade and is no longer a cheap city.

The federal government tracks region-specific Consumer Price Index data through the BLS regional offices, and HUD publishes Fair Market Rents for every county at HUD User.

How does the Texas economy fit into the national picture?

A useful way to think about Texas is as a counterweight to California. Both are huge, both are growing, and both attract people and businesses from other states — but their industry mixes are different. California leans into tech, entertainment, and global trade through its Pacific ports. Texas leans into energy, logistics across the Mexican border, and a younger, faster-growing population. Neither is "winning"; they are just different bets on what drives a modern economy.

For a national snapshot of the same numbers, see The State of the U.S. Economy.

Trade with Mexico

Texas shares a long border with Mexico, and the two economies are tightly linked. The Laredo crossing alone moves hundreds of billions of dollars of goods each year — auto parts, electronics, produce, and machinery flow in both directions. When U.S.-Mexico trade rules change, Texas border cities feel it immediately. The state also hosts a large network of trucking, warehousing, and customs-broker firms that exist mainly to handle that cross-border flow. The federal trade story lives at the International Trade Administration.

Population and migration

Texas has been one of the fastest-growing large states for years, both from natural growth and from people moving in from other states. The U.S. Census Bureau tracks the year-by-year change. Faster population growth tends to mean more housing demand, more school enrollment, and more pressure on infrastructure. It is also part of why metros like Austin, Houston, and Dallas-Fort Worth are growing in jobs and home prices at the same time.

A note on the numbers

Numbers in this article change every quarter — always check the latest from BEA, BLS, and the Texas Comptroller for the most current data.