economy

Manufacturing In TexasAn Overview

Statewide Manufacturing Snapshot |Printable (PDF)

Texas has an unusually diverse manufacturing economy. Its resources make it a natural leader in petroleum and chemical manufacturing; its research institutions have fostered computer and other high-tech manufacturing; and its business-friendly environment and skilled labor have nurtured a burgeoning automotive manufacturing sector. In all, Texas manufacturing contributed $218 billion to the Texas’ gross domestic product (GDP) in 2016, an amount larger than the entire economy of Portugal.

Technological improvements and efficient business processes have transformed much manufacturing from basic, labor-intensive activities to more advanced and highly skilled operations. Although direct manufacturing employment has declined, the industry stimulates employment in related sectors and services and remains a vital spark to innovation; many advanced manufacturing industries invest heavily in scientific and technological research and development (R&D).

Today, Texas has 845,000 direct manufacturing jobs, as well as another 2.2 million indirect jobs. Average annual Texas wages in manufacturing approached $73,000 in 2016, much higher than the statewide average of $53,500.

Diverging Paths: Employment and GDP

While Texas’ manufacturing employment has diminished, its economic output has increased. From 1997 through 2016, Texas’ manufacturing job count fell by 19 percent, but its real GDP rose by 94 percent, more than double the U.S. manufacturing gains of 40 percent. This divergence is largely due to productivity gains. Notably, U.S. manufacturing’s GDP has yet to reach its pre-recessionary levels (Exhibit 1).

Exhibit 1: Cumulative Percent Change in Real Gross Domestic Product, 1997 to 2016, Texas vs. U.S.

Percent Change in Real Gross Domestic Product, 1997 to 2016

Year	US Total	US Manufacturing	Texas Total	Texas Manufacturing
1997	0.0%	0.0%	0.0%	0.0%
1998	4.3%	4.8%	6.2%	8.3%
1999	9.2%	10.6%	10.3%	6.6%
2000	13.5%	17.4%	14.0%	13.5%
2001	14.5%	12.7%	16.9%	16.7%
2002	16.6%	13.8%	18.6%	20.1%
2003	19.6%	19.6%	19.6%	24.5%
2004	23.8%	27.3%	25.3%	59.4%
2005	27.7%	30.2%	28.2%	54.5%
2006	31.2%	36.6%	36.2%	72.7%
2007	33.1%	41.0%	42.9%	86.7%
2008	32.4%	36.9%	43.7%	67.5%
2009	28.8%	26.5%	42.9%	59.5%
2010	31.6%	33.2%	46.6%	77.5%
2011	33.4%	33.6%	51.9%	85.7%
2012	36.0%	34.0%	60.5%	83.9%
2013	38.0%	36.6%	68.6%	103.1%
2014	41.4%	38.7%	74.5%	89.0%
2015	45.2%	39.9%	81.8%	94.8%
2016	47.4%	40.6%	81.3%	93.9%

Sources: U.S. Bureau of Economic Analysis and Texas Comptroller of Public Accounts

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Texas’ manufacturing GDP growth is largely led by three subsectors – computer and electronic products, motor vehicles and parts and machinery manufacturing. The computer and electronic products subsector’s contribution to Texas GDP rose by a staggering 585 percent from 1997 through 2015 (though the U.S. increase was even larger, at 679 percent). The state’s motor vehicles and parts manufacturing subsector GDP rose by 352 percent, followed by a 123 percent rise in machinery manufacturing (Exhibit 2). The U.S. GDP changes during this period, by contrast, were a 71 percent rise in motor vehicle and parts manufacturing and a rise of just 4 percent for machinery manufacturing.

Exhibit 2: Texas Manufacturing Subsectors: Largest Percent Changes in Real GDP* from 1997 to 2015(GDP in Billions)

Subsector	1997 Real GDP (in Billions)	2015 Real GDP (in Billions)	Percent Change in GDP
Chemical products manufacturing	$27.894	$44.001	58%
Computer and electronic products manufacturing	$4.441	$30.403	585%
Motor vehicles, bodies and trailers, and parts manufacturing	$2.752	$12.451	352%
Machinery manufacturing	$7.504	$16.709	123%
Fabricated metal products	$10.173	$13.149	29%
Aerospace and other transportation equipment manufacturing	$5.381	$9.939	85%
Primary metals manufacturing	$1.639	$3.026	85%
Petroleum and coal products manufacturing	$18.211	$28.913	59%
Motor vehicles, bodies and trailers, and parts manufacturing	$2.752	$12.451	352%

*GDP values inflation-adjusted to 2009 dollars.
Note: GDP data for subsectors are only available through 2015

Sources: U.S. Bureau of Economic Analysis and Texas Comptroller of Public Accounts

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Texas Manufacturing Subsectors

Texas’ chemical manufacturing GDP reached $56.1 billion in 2015, the highest among the state’s manufacturing subsectors, followed by petroleum and coal products manufacturing at $43.4 billion. Computer and electronic products had the third-highest GDP value, at $28.7 billion (values are current dollars). These three subsectors also offer the highest average wages, reaching well above $100,000 annually (Exhibit 3).

Manufacturing employment in Texas is less concentrated in Texas than nationally, as gauged by location quotient (LQ), a measure of employment concentration in a given area; the higher the LQ value, the more “concentrated” the industry. Employment concentration can indicate a regional “industry cluster,” a group of interrelated firms that provide related products or services and share similar needs for workers and suppliers. A high LQ also helps identify inherent industrial strengths.

Subsectors in energy-related manufacturing are highly concentrated in Texas, led by petroleum and coal products manufacturing and followed by chemical products manufacturing.

A regional assessment of employment concentration is often necessary, as the size of Texas’ economy and workforce can obscure regional industry strengths. For example, Texas’ motor vehicle and parts employment share is just half its share nationally (as measured by its 0.49 LQ). But a regional analysis of this subsector in the San Antonio-New Braunfels metro area shows a burgeoning industry, with a regional employment share 33 percent above the U.S. share.

Exhibit 3: Texas Manufacturing Subsectors – Jobs, Average Annual Wages and Gross Domestic Product and Location Quotient

Sources: Emsi, U.S. Bureau of Economic Analysis and Texas Comptroller of Public Accounts