In the years following the 2009 recession, Texas was one of the most economically resilient states, experiencing compounding annual growth in excess of 7% from 2009 to 2014. Throughout the economic recovery, the strongest growth industries were related to energy, construction and technology. The Texas economy's long-standing ties to the energy sector helped drive employment and income expansion amid rising oil and gas prices, though commodity price depreciation in 2015 has challenged further growth over the past year.
Technology hardware and software firms have grown rapidly in Texas, which has managed to lure business from other states such as California. Like the rest of the United States, the largest employment sectors in Texas are retail trade, professional services, leisure and hospitality, and health care. None of these sectors are exhibiting exceptional growth, but they form the economic backbone of the state and represent the majority of jobs and income. Assessment of a state's economy requires examination of these basic industries.
1) The Supersector
Constituency of the trade, transportation and utilities sector is broadly defined by the Bureau of Labor Statistics (BLS). Many economists consider this group a supersector because it encompasses so many subindustries As of June 2015, the supersector employed 2.369 million people in Texas, representing 20.1% of total nonfarm employment. The state is slightly more exposed to trade, transportation and utilities relative to the U.S. as a whole. The sector's 2.8% annualized growth rate means it is not a significant contributor to employment or income growth.
The retail trade industry employed almost 1.3 million people in 2014, and motor vehicle parts dealers and food and beverage stores were the fastest growing subcategories. Machinery, equipment and supplies merchant subcategories fueled wholesale trade growth, bringing total sector employment above 560,000. Transportation, warehousing and utilities employed 492,600 people at the end of 2014 following 6.6% growth during the year. Industries within this supersector are generally mature and have benefited from increased economic activity in Texas. Growth for these categories is responsive to success in other industries, such as energy and technology.
2) Business Services
As of June 2015, the professional and business services sector employed 13.5% of the Texas nonfarm workforce, a proportion higher than that of the entire U.S. Modest overall industry growth was highly variable among constituent subindustries. Architectural and engineering employment grew in excess of 10% alongside increased construction demand. Movement of people and business into Texas and improving general economic conditions stimulate construction spending and capital investment. Employment services and computer system design were also rapid growth segments.
3) Education and Health
According to a June 2015 BLS report, education and health services employed 1.585 million people in Texas, representing 4% growth over the prior year. This is not an industry from which rapid growth can ever be expected, but it is an important source of employment. Modest, positive health care sector growth is a sign of stability and continues to create more jobs moving forward. Eight of the 25 largest employers in the state are hospitals or research facilities. Home health care providers were the quickest growth segment of the Texan health care industry, expanding 6% in 2014 as more people elected to receive care in their own homes instead of inpatient settings.
4) Leisure and Hospitality
The leisure and hospitality industry employed 1.249 million people as of June 2015, or 10.6% of the nonfarm labor force. This is proportionately higher than the rest of the U.S., indicating high tourism and disposable income. Sector-wide growth of 6% was one of the highest among major industries in Texas. The food and drinking places subsegment contributed more than 75% of the sector's additional jobs over the prior year. Accommodations were another strong growth category. This industry is expanding due to growth in other sectors, namely productive activities.
According to the BLS, the manufacturing industry employs 864,000 people in Texas, or 7.3% of all nonfarm workers. This sector actually declined versus the prior year, though 2014 gross state product attributable to the manufacturing industry grew by 6%. Certain key subcategories exhibited strength and catalyzed the gross domestic product (GDP) growth. Durable goods, especially machine manufacturing, were especially strong amid improving business investment conditions. Chemical manufacturing has been one of the most rapid growth categories, and performance of this industry is supported by Texas' large petroleum industry. Overall manufacturing growth has been dampened by declines in technology manufacturing, which is being reduced through outsourcing and automation.
6) Financial Services
The financial services industry employs 712,000 people in Texas as of June 2015, or 6% of the state’s total nonfarm employment. Financial activities represent large, mature sectors that generally grow in line with the wider economy. Retail banking has represented the strongest growth element of the financial sector in the U.S. The sector continues to operate as an important employer in Texas, which contributes income disproportionately relative to people employed.
The construction industry is one of the largest and fastest growing in Texas. There are 665,000 people employed by the industry, constituting 6% of the total nonfarm workforce. Construction of buildings is the leading subindustry driving this growth, with multifamily housing starts outpacing single-family starts and permit volume. Commercial construction is also trending positively, though infrastructure spending has been limited. Construction is fueled by population growth, an improving housing market and a healthier business investment environment. Construction is an important driver of the Texas economy as the recovery from 2009 continues, and building activity tends to reflect and catalyze economic activity in other sectors.
According to June 2015 BLS statistics, there are 295,000 Texans employed by mining and logging firms, most of which are energy firms. Texas ranks highest among states in the energy sector in terms of employment and total energy production. Energy firms also contribute disproportionately to GDP relative to total employment, underlining the importance of this industry to the Texan economy. Rising energy prices and economic recovery in the U.S. previously stimulated rapid industry growth, which experienced a 9% increase in employment from August 2013 to August 2014. Falling energy prices in 2015 have led to layoffs and reduced income. Growth and contraction in the energy industry are some of the most important factors determining the rate of expansion in other industries such as trade, hospitality and professional services.
9) Information and Technology
The information industry includes digital and physical publishing firms. As of June 2015, the information industry employed 206,500 Texans. However, the information industry does not include all of the firms operating in the more broadly defined technology sector, such as computer systems design, technology manufacturers, telecommunications providers, IT consultants and infrastructure-as-a-service firms.
Large tech companies such as Dell, Inc., Texas Instruments, Inc. and Rackspace Hosting, Inc. are headquartered in Texas, while AT&T, Inc. and Hewlett-Packard Company are the 12th and 13th largest employers in the state, respectively. The broader tech sector employs 270,000 people in Texas, which is a new high above the previous peak reached during the tech bubble in 2000. The more recent boom has allowed Texas to rise above California as the nation’s top exporter of technology. Alongside the energy sector, technology is an important productive economic element with the potential to influence growth in service industries.