Texas Industry Performance

Manufacturing Is Still Alive and Growing in Texas

In Texas the manufacturing industry added 20,700 jobs in fiscal 2011. Reflecting weak demand for consumer goods, these jobs were mostly in the production and processing of equipment and machinery related to oil and natural gas drilling. Nearly 10,000 Texas jobs were added in machinery manufacturing, with almost as many in the fabricated metal products sector. Durable manufacturing jobs grew by 3.7 percent. As in most of the nation, weakness still grips nondurable goods manufacturing sectors affected by outsourcing, productivity improvements, and technology, with ongoing erosion in printing, paper, and chemical jobs. But even in the manufacturing of nondurable goods, Texas added a net 2,600 jobs (0.9 percent) during the year. In addition to the jobs related to energy exploration, computers and electronics resumed growth with 1,800 jobs and manufacturing sectors related to transportation and aerospace added 2,100. Job losses continued in wood, cement/concrete, architectural and structural metals, electrical equipment, and miscellaneous manufacturing.

According to the World Institute for Strategic Economic Research (WISER) Trade service, Texas is the nation's leading exporting state, as it has been since 2002.

Exports continued to boost Texas manufacturing during the fiscal year. After being battered by the recession and currency fluctuations in fiscal 2009, the total value of Texas exports increased by 20.9 percent in fiscal 2010 and another 21.6 percent in fiscal 2011, even in the face of economic doldrums in European Union markets. According to the World Institute for Strategic Economic Research (WISER) Trade service, Texas is the nation's leading exporting state, as it has been since 2002. Due in large part to a surge in sales to North American Free Trade Agreement partners and the rising demand for Texas exports in Asia, the value of Texas exports has grown more quickly than the national average. Texas exports totaled $236.8 billion in fiscal 2011, which was over 16 percent of the U.S. total and 18.9 percent of the state's gross domestic product. With growth spurred by demands from the state's energy industry, the economic value of Texas manufacturing increased in fiscal 2011, from $156.9 billion in fiscal 2010 to an estimated $169.1 billion in 2011, according to the U.S. Bureau of Economic Analysis and the Texas Comptroller's estimates of gross domestic product. Productivity improvements and Texas manufacturing employment growth of 2.5 percent in 2011 have contributed to this increase. The Texas manufacturing industry fared better over the last year than the industry nationally, where employment grew by 1.8 percent. The state's manufacturing employment was estimated at 833,700 in August 2011, up from 813,000 in August 2010.

Mining and Logging Was Texas’ Fastest Growing Industry

The fastest growing major industry in Texas in fiscal 2011 was the mining and logging industry, propelled by increased oil and natural gas exploration reflecting firmer market prices. The number of operating oil and natural gas drilling rigs in the state increased by over 170 percent since its recent low of 329 rigs in June 2009 to 897 rigs in September 2011, with a 24 percent increase in fiscal 2011. The mining and logging industry lost 20 percent of its jobs from a peak of 238,100 in October 2008 to a subsequent low of 190,400 jobs in October 2009. Since October 2009, however, the industry has gained back all these jobs and more, to total 245,300 in August 2011. Mining and logging employment grew by a robust 16.8 percent in fiscal 2011, while the remaining Texas industries combined for job growth of 2.1 percent.

Although the impact of the oil and natural gas on Texas’ economy has moderated, its 15.5 percent share of the Texas gross product remains four to five times greater than the share of oil and natural gas in the nation’s economy. As such, the oil and natural gas sectors serve to support the Texas economy when energy prices are high, even with the negative effect of the high prices on energy-consuming households and industries. In addition to exploration activities within the state and offshore, Texas is the headquarters for many of the nation’s oil and natural gas firms.

Construction Aided by Heavy Engineering and Utility Projects

Although the Texas construction industry lost jobs in the previous two fiscal years, and lost more than 17 percent of its workforce during the recession, it has recovered almost one-third of the jobs lost since the industry started growing again in the middle of fiscal 2010. With 4.8 percent job growth during fiscal 2011, most of the construction jobs added have been in heavy and civil construction, as well as utility construction work by specialty trade contractors. Only one-fourth of the 27,100 industry jobs added during the year have been in the construction of buildings and residences, as single-family residential construction remains depressed. Most sectors of the construction industry have grown, but highway, street, and bridge construction and building finishing contractors have continued to see declines.

Without the growth in Texas construction jobs in 2011, the national construction industry would have seen another year of job declines.

A positive sign for the Texas industry is that the number of multi-family building permits in fiscal 2011 was up by 63 percent over the count in fiscal 2010, increasing from 16,108 units to 26,193 units. Since available housing stock continues to suppress single-family housing construction, total single-family building permits were down 11 percent in fiscal 2011. The median sale price for an existing single-family home in the state, unlike much of the country, continues to rise slightly, with the average annual sales price increasing by 1 percent during 2011. According to McGraw-Hill Construction Dodge, the total value of the contracts in fiscal 2011 for nonresidential building construction of offices, fabrication facilities, and warehouses in Texas increased by 10.6 percent over the value in fiscal 2010.

Without the growth in Texas construction jobs in 2011, the national construction industry would have seen another year of job declines. Texas total construction employment increased by 27,100 during the year, for a solid 4.8 percent rate of growth. Statewide construction employment totaled 594,500 in August 2011.

Service-Providing Industries Add Jobs at a 2 Percent Pace

Texas’ service-providing industries, which account for more than 84 percent of the state’s total nonfarm employment, underperformed the goods-producing industries in the rate of job growth in fiscal 2011, but still accounted for 67 percent of the added jobs. Six of the eight service-providing industries had job expansions during the year. Over the past 20 years, average annual growth in service-providing jobs has been 2.2 percent, ranging from losses in fiscal 2002 and 2009 to 4 percent growth in 1997. The state’s 2 percent growth of service-providing jobs in 2011 was only slightly below the historical average, but the rate was muted when compared to previous recovery periods.

Professional and Business Services is the Fastest Growing Service Industry

The professional and business services industry, often leading the state’s job growth, was once again the fastest-growing service-providing industry in fiscal 2011. This industry, which accounts for one-eighth of the state’s employment, accounted for nearly one-fifth of the state’s employment growth. Industry job growth was a solid 3.8 percent for the year with a net gain of 49,100 jobs in 2011, of which employment services accounted for 20,100 of the job gain.

Employment changes varied considerably between individual sectors of the professional and business services industry, with a large increase in administrative and support services jobs partially countered by job losses in legal services, architectural services, and computer systems design. Employment services, at 8.6 percent job growth for the year, was one of the fastest growing service sectors; this includes the hiring of temporary and part-time workers. Another 4,000 jobs were added in building and dwelling services, such as apartment and building personnel. Total professional and business services employment was 1,329,800 in August 2011.

Education and Health Industry Boosted by Home Health Care Jobs

The third greatest source of job growth in Texas over the past year was in the education and health services industry. The industry added 42,100 jobs, at a 3 percent rate that was faster than overall state employment growth. Even so, the private education sector of this industry actually lost 3.2 percent of its jobs, meaning that all the net job growth was in the health services sector. Social assistance and child day care services also lost jobs, but every other sector of health care added employees. Home health care, with 9.6 percent growth, was the fastest-growing service-providing sector, adding 21,700 new workers. Another rapidly growing sector—ambulatory health care, including physicians’ offices—added jobs at a pace of 6.6 percent during the year. Overall, education and health services employment in Texas reached 1,432,100 at the close of fiscal 2011.

Financial Activities Advances with Recovering Real Estate Activity

The relative stability in Texas home prices has protected the state from foreclosure rates that have distressed real estate elsewhere in the nation.

The financial activities industry grew more slowly than the overall state economy, adding 10,200 jobs in fiscal 2011, mostly in real estate activities. Maintenance of home equity values in Texas has shielded the state from the worst of the nation’s retrenchment in financial activities. The median sale price for an existing single-family home in Texas increased by a modest 1 percent in fiscal 2011—following a 2 percent increase in 2010 and a 2 percent decline in 2009—and this relative stability in Texas home prices has protected the state from foreclosure rates that have distressed real estate elsewhere in the nation. For example, the Texas foreclosure rate in August 2011 was one in every 958 mortgages, markedly better than other southwestern states, such as Nevada’s one in 118, California’s one in 226, and Arizona’s one in 248. This comparative strength has bolstered employment in Texas real estate, rental and leasing services, which grew by 4.5 percent, finding a foundation for growth in the midst of weak residential construction activity.

Depository and non-depository credit institutions such as banks, savings associations, and credit unions added 3,600 jobs (1.5 percent) and securities and financial investment businesses added 1,700 jobs (3.5 percent). According to the Federal Deposit Insurance Corporation, 8.8 percent of Texas depository institutions were unprofitable during the period ending June 30, 2011, substantially better than the national average of 20.6 percent; 66 percent of Texas savings institutions had earnings gains to slightly outperform the national rate of 64 percent; and 60 percent of Texas commercial banks posted an earnings gain, a fraction of a percentage point better than the national rate.

Although the finance and real estate sectors are comparatively healthy, weakness among insurance carriers and related insurance activities led to another year of job losses in this sector, with a 1.4 percent job loss in fiscal 2011. Overall, financial activities employment in Texas totaled 631,300, with a fiscal year growth rate of 1.6 percent.

Trade, Transportation and Utilities Add More Jobs than any Other Industry

The Texas trade, transportation and utilities industry added jobs at the same rate as the overall economy (2.4 percent) during fiscal 2011. Retail trade, wholesale trade, utilities, and transportation employment each increased over the period, with only a handful of the industry’s sectors seeing declines. Employment in retail trade increased by 25,000 jobs, with the largest increases in automobile and parts dealerships (up 9,100 jobs), grocery stores (5,600) and gasoline stations (4,800). Building material and garden equipment stores added 3,800. Significant job losses persisted among furniture and home furnishings stores (down 1,400) and non-store retailers (down 900). Employment in wholesale trade grew by 13,700 jobs (2.7 percent), with the majority of the job growth among merchant wholesalers of durable goods.

In the transportation and warehousing sector, employment increased by 2 percent in fiscal 2011, an improvement after substantial losses during the recession. The beleaguered air transportation industry resumed growth, adding 600 jobs (1 percent) even with the consolidation and loss of in-state headquarters for Continental Airlines. Truck transportation tacked on a solid 3,500 jobs (3.2 percent). The industry’s smallest sector, utilities, also added jobs faster than the all-industry rate, with a job increase of 3.5 percent. Overall, the trade, transportation and utilities industry, the state’s largest, provided 2,104,500 Texas jobs in August 2011.

Information Jobs Down

The information industry remained in the doldrums in fiscal 2011. Information is the smallest service-providing industry in Texas, and it contracted by a further 7,700 jobs in 2011. Information is a multifaceted industry that includes old and new technologies, such as printing, publishing, data processing, television broadcasting, wired telephone services, cellular telephone providers, Internet providers, digital subscriber line (DSL) and software services. For the eleventh straight fiscal year—since the unraveling of the “dot-com” boom in 2000—the Texas information industry has seen job losses. As in much of the nation, information is by far the weakest major industry in the state, with job losses in each of its reported subsectors for the year ending August 2011.

The largest percentage job decline was in the Internet/web portal/data processing subsector, which lost 4.7 percent of its jobs, although the largest absolute decline was in the telecommunications subsector, which surrendered 3,700 net jobs (down 4.3 percent). The information industry’s total employment fell 4 percent during fiscal 2011, ending the year with 186,900 jobs.

Travel and Restaurants Reenergize the Leisure and Hospitality Industry

The leisure and hospitality services industry experienced a resurgent hotel and motel business, leading to a 6 percent increase in accommodation services employment in fiscal 2011. In addition to 6,300 more hotel and motel jobs, restaurants and drinking places increased employment by 4.2 percent, and because of the large size of the restaurant and bar sector this represented a substantial 33,900 job gain, more than one of every eight new Texas jobs. Amusement, entertainment, arts and recreation services took a hit, however, with a loss of 2,200 jobs, as amusement parks and racetracks struggled to remain profitable in the face of competing entertainment options. Arts also struggled. Even with these challenges, the state’s leisure and hospitality industry added a net 36,200 jobs, to grow by 3.6 percent and total 1,042,400 jobs in August 2011.

Other Services Has Ups and Downs

The other services industry is a catch-all mix of sectors that encompass activities from repair and maintenance services; laundry services; religious, political, and civic services; funeral services; parking garages; beauty salons; and a wide range of personal services. Personal and laundry services added a robust 5.5 percent to its job count in fiscal 2011, and there were job gains of 1.5 percent in religious, grant-making, civic and professional associations. With evidence that consumers have been wringing more years out of their automobiles and appliances, it is not surprising that repair and maintenance services also tacked on 4,100 jobs (up 3.8 percent). In sum, all sectors of the industry added jobs, with overall employment growth of 9,700 from August 2010 to August 2011, for an increase of 2.7 percent to 370,200 overall jobs.