Establishments in these transportation industries design and manufacture everything from airplanes and rockets to boats and motorcycles. The largest of these industries in terms of Texas employment and economic impact is the aerospace manufacturing industry, which designs and builds aircraft, missiles, space vehicles and their components, including engines and auxiliary parts. The industry uses innovative production processes such as 3-D modeling to design prototypes for parts and components. It contributes heavily to research and development investment and export activity.
The aerospace and railroad rolling stock industries are considered “advanced industries,” as defined by the Brookings Institution. Such industries have two distinguishing criteria: R&D spending per worker ranks in the top 20 percent of industries, and their share of workers with high levels of scientific and technical knowledge exceeds the national average. Their emphasis on innovation and highly skilled workers makes the advanced industries essential to growing prosperity and rising standards of living.
The aerospace industry also employs a highly educated and skilled workforce. About 60 percent of its Texas employees have at least some college experience, compared to 47 percent of all employed Texans in 2016. But many workers are reaching retirement age. About 32 percent of them were aged 55 and older in 2016, compared to just 20 percent for all Texas jobs. These trends are spurring concerns about a skills shortage in the industry.
Long-term employment data is not available for other industries in this subsector.
Aerospace product and parts manufacturing employment fell precipitously in the U.S. and Texas in the early 1990s, largely due to declines in federal defense spending following the end of the Cold War. Texas aerospace employment fell from 71,700 in 1990 to 42,800 in 1996, a 40 percent drop. Texas employment was about the same in 2016, at 44,600 jobs. Between January and August 2017, the industry added 1,600 Texas jobs, 3.7 percent increase (Exhibit 4).
Sources: Texas Workforce Commission and Texas Comptroller of Public Accounts
Sources: U.S. Bureau of Economic Analysis and Texas Comptroller of Public Accounts
From 1997 through 2006, inflation-adjusted GDP contributions from the aerospace and other transportation equipment industries remained essentially stagnant in both Texas and the U.S. as a whole. Their Texas GDP began rising sharply in 2006, however, and increased at an average 29 percent annually from 2006 through 2009. In 2015, the Texas GDP for aerospace and other transportation equipment manufacturing was 112 percent above 1997 levels, compared to a 22 percent increase in the U.S. (Exhibit 5).
The subsector and most of its industries have a lower share of employment 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. Only one industry — jewelry and silverware manufacturing — has an employment share in the state that is larger than the national share. Its 1.10 LQ means its share is 10 percent higher in Texas than nationally (Exhibit 6).
The medical equipment and supplies industry LQ was 0.47 in 2016 (or 47 percent of the national share), down from a 0.63 LQ in 2001. A low and falling LQ generally indicates that the industry would require large investments to achieve any growth. The Upper East region, however, in areas such as Jacksonville and Athens, contains pockets of regional industry competitiveness.
|Description||NAICS Code||2016 Jobs||2001 to 2010
|2010 to 2016
|2016 Average Salaries||2001 Location Quotient||2016 Location Quotient|
|Aerospace Product and Parts Manufacturing||3364||44,639||17.0%||-7.1%||$103,498||1.13||1.10|
|Railroad Rolling Stock Manufacturing||3365||3,060||-51.5%||61.0%||$65,754||1.96||1.42|
|Ship and Boat Building||3366||3,713||-27.6%||-22.7%||$62,575||0.62||0.33|
Sources: Emsi and Texas Comptroller of Public Accounts
Manufacturing continues to drive output and productivity in the Texas economy, creating jobs paying well above the statewide average. It also contributes significantly to job creation in other industries, particularly in design operations and services.
Unlike many manufacturing industries, the aerospace industry generates a trade surplus ($86.8 billion in 2016), as the U.S. leads in innovative production processes. Recent U.S. aerospace business earnings have been strong, benefiting from global economic growth, rising incomes and greater demand for leisure travel in emerging economies.