Post on 07-Jul-2020
At the Heart of Texas: Cities’ Industry Clusters Drive Growth
Dallas Fed Special Report | Second EditionPia Orrenius, Laila Assanie and Michael Weiss
Dallas FedJune 2019
Laila Assanie
The views expressed are my own and do not necessarily reflect official positions
of the Federal Reserve System.
Overview
• Texas economic activity is concentrated in the eight key metros: • Austin, Dallas, El Paso, Fort Worth, Houston, McAllen,
Midland-Odessa and San Antonio• Smaller metros are new to the second edition and are part of the
larger Texas mosaic:• Amarillo, Beaumont-Port Arthur, Lubbock, Tyler and Longview
• Commercial make-up of each metro is unique and shaped in part by its history, geography, geology and demography
• Industrial composition drives economic expansion
It’s the Age of the City
• Cities have been centers of population, commerce, learning and economic opportunity over the long term
• Movement toward urbanization since the Industrial Revolution• Cities enjoy higher productivity and wages than non-cities• “Mankind’s greatest invention”--- Harvard economist Ed Glaeser
Texas Advantages
• Texas benefits from an outsized number of metros with 2 million or more residents
• Dallas–Fort Worth and Houston rank among the top six largest U.S. metro areas in population and economic output
• Other favorable economic factors• Central location, oil and gas deposits, land and seaports,
proximity to Mexico, young and fast growing population, low cost of living and doing business
Employment Growth in Large Texas Metros Outpaces Small Ones
95
100
105
110
115
120
125
130
2010 2011 2012 2013 2014 2015 2016 2017 2018
Large metros(>800,000)population
Small metros(<800,000)population
Index, Jan. 2010=100
NOTES: Employment data are seasonally adjusted. Small and large metros are aggregated based on 2017 population above or below 800,000. SOURCES: Bureau of Labor Statistics; Texas Workforce Commission.
Modest Job Gains in Small Metros
90
100
110
120
130
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Houston
Texas
El Paso
Lubbock
Tyler
Amarillo
Beaumont-Port Arthur
Longview
Index, Jan. 2010=100, SA
SOURCES: Texas Workforce Commission; Federal Reserve Bank of Dallas.
Unemployment in Most Metros Below Texas Rate
1
3
5
7
9
11
13
2011 2012 2013 2014 2015 2016 2017 2018 2019
Beaumont–Port Arthur
Texas
El Paso
Longview
Houston
Tyler
Lubbock
Amarillo
Percent
SOURCES: Bureau of Labor Statistics; seasonal and other adjustments by Federal Reserve Bank of Dallas.
Industry Clusters
• Cluster formation is driven by:• Geographical concentration, technology relationships• Markets • Goods and services produced• Labor skills
• Clusters comprise of multiple interdependent or interrelated industries
Measuring Cluster Concentration
• Location Quotient (LQ):𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑜𝑜𝑜𝑜 𝑚𝑚𝑆𝑆𝑚𝑚𝑆𝑆𝑜𝑜 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑚𝑚𝑒𝑒𝑒𝑒𝑜𝑜𝑒𝑒𝑚𝑚𝑆𝑆𝑒𝑒𝑚𝑚 𝑖𝑖𝑒𝑒 𝑖𝑖𝑒𝑒𝑖𝑖𝑖𝑖𝑖𝑖𝑚𝑚𝑆𝑆𝑒𝑒 𝑖𝑖
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑜𝑜𝑜𝑜 𝑈𝑈. 𝑆𝑆. 𝑆𝑆𝑚𝑚𝑒𝑒𝑒𝑒𝑜𝑜𝑒𝑒𝑚𝑚𝑆𝑆𝑒𝑒𝑚𝑚 𝑖𝑖𝑒𝑒 𝑖𝑖𝑒𝑒𝑖𝑖𝑖𝑖𝑖𝑖𝑚𝑚𝑆𝑆𝑒𝑒 𝑖𝑖• LQ >1 Clustering or specialization• LQ <1 No specialization• Period measured: 2010-2018• Clusters increase productivity, stimulate innovation and facilitate new
business formation• Higher productivity leads to higher wages
Texas Overview
Energy, IT and Business and Financial Services Help Set Texas Apart from Nation
8.6%
9.9%3.7%
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Loca
tion
quot
ient
in 2
018
Percentage-point change in employment share, 2010–18
Energy and mining
Business andfinancial services
Government Advanced materials
Construction (6%)
Mature Star
Transitioning Emerging
NOTE: Bubble size represents cluster share of metropolitan statistical area employment.SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.
Food services
Education
Informationtechnology and telecommunications
Health services
Transportation and logistics
Chemicals(1.7%)
Defense and security
Biomedical
Retail
Machinerymanufacturing
Computer manufacturing
Recreation
8.9%
9.7% 3.8%
Energy, IT and Business and Financial Services Help Set Texas Apart from Nation
8.6%
9.9%3.7%
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Loca
tion
quot
ient
in 2
018
Percentage-point change in employment share, 2010–18
Construction
Mature Star
Transitioning Emerging
NOTE: Bubble size represents cluster share of metropolitan statistical area employment.SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.
Education
Energy, IT and Business and Financial Services Help Set Texas Apart from Nation
8.6%
9.9%3.7%
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Loca
tion
quot
ient
in 2
018
Percentage-point change in employment share, 2010–18
Construction
Mature Star
Transitioning Emerging
NOTE: Bubble size represents cluster share of metropolitan statistical area employment.SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.
Recreation
Education
Energy, IT and Business and Financial Services Help Set Texas Apart from Nation
8.6%
9.9%3.7%
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Loca
tion
quot
ient
in 2
018
Percentage-point change in employment share, 2010–18
Advanced materials
Construction
Mature Star
Transitioning Emerging
NOTE: Bubble size represents cluster share of metropolitan statistical area employment.SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.
Recreation
Education
Energy, IT and Business and Financial Services Help Set Texas Apart from Nation
8.6%
9.9%3.7%
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Loca
tion
quot
ient
in 2
018
Percentage-point change in employment share, 2010–18
Energy and mining
Business andfinancial services
Government Advanced materials
Construction (6%)
Mature Star
Transitioning Emerging
NOTE: Bubble size represents cluster share of metropolitan statistical area employment.SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.
Food services
Education
Informationtechnology and telecommunications
Health services
Transportation and logistics
Chemicals(1.7%)
Defense and security
Biomedical
Retail
Machinerymanufacturing
Computer manufacturing
Recreation
8.9%
9.7% 3.8%
Transportation, Defense and Business Services Among State's Fastest-Growing Clusters
-500
177
88
910
11131414
1618
19202021
2224
2730
353636
37
-10 0 10 20 30 40Computer mfg. (0.7%)
Government (5.6%)Primary metal mfg. (0.2%)
Advanced materials (2.5%)Education (9.7%)
Utilities (0.4%)Textiles (0.4%)
Agribusiness (1.6%)Publishing (1.2%)
Machinery mfg. (0.8%)Transport equip mfg. (0.8%)Fabricated metal mfg. (1%)
Electric equip mfg. (0.2%)Glass & ceramics (0.3%)
Retail (10.8%)Biomedical (0.7%)
Health svcs (11.5%)Chemicals (1.7%)
TotalWood products (1.2%)
Energy & mining (8.9%)Information technology & telecom (5%)
Recreation (2.8%)Construction (6%)
Business & financial svcs (9.6%)Defense & security (3.3%)
Food svcs (8.8%)Transportation & logistics (3.8%)
Percent change in employment, 2010-18NOTE: Each cluster's share of total jobs is shown in parentheses.SOURCES: Texas Workforce Commission; authors' calculations.
Most Dominant Clusters Pay Better in Texas than in U.S.Texas U.S.
Cluster 2010 2014 2018 2018Energy and mining 94,829 99,133 96,846 82,731 Construction 56,698 62,167 63,752 60,742 Transportation and logistics 61,041 63,425 62,946 54,941 Education 44,951 44,567 45,925 50,880 Utilities 103,542 106,478 114,481 111,238 Food services 18,190 18,233 19,136 19,516 Chemicals 82,568 87,923 93,920 74,669 Information technology and telecommunications 95,768 98,055 104,069 110,768 Glass and ceramics 52,757 59,602 61,254 55,946 Fabricated metal manufacturing 60,024 62,803 62,488 56,077 Business and financial services 88,257 92,385 93,452 101,722 Computer manufacturing 114,084 117,186 132,138 121,829
Average earnings (total) 54,068 56,448 57,074 56,506
NOTES: Clusters are listed in order of location quotient (LQ); clusters shown are those with LQs greater than 1. Earnings are in 2018 dollars.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors' calculations.
Migration and Natural Increase Contribute AlmostEqually to Population Growth
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Natural increaseNet domestic migrationNet international migration
Thousands
NOTES: Census Bureau estimates approximate the population on July 1 of the year indicated and, thus, capture changes from the previous year. SOURCE: Census Bureau.
Hurricane Katrina
52%
25%
23%
2000-2018 Total Net Increase
Reason for Migrating to Texas Versus Elsewhere
NOTE: Data refer to 2010-2018.SOURCES: CPS-ASEC, author’s calculations.
Reason Texas Non-Texas
Relocated for job 50.9 41.3
Family Reasons 26.4 27.0
Amenities 18.4 23.9
Other 4.3 7.8
Beaumont—Port Arthur
The Golden Triangle Shines as Petrochemicals Boom
Beaumont-Port Arthur Metropolitan Division:At a Glance
• Population (2018): 409,526• Population growth (2010–18): 1.4% (Texas: 13.7%)• Median household income (2017): $49,875
• Texas: $59,206; U.S. $60,336• Median household income growth (2010-17): 7.5% (Texas: 8.3%)
Beaumont-Port Arthur: Overview
• Thriving oil and gas hub, with the nation’s largest concentrations of refineries, petrochemical plants and related businesses
• Rapid growth in chemicals, energy and energy-related manufacturing since 2010
• Other important industries such as transportation have grown in support of its outsized manufacturing and energy base
• Sizeable earnings premium in several dominant clusters• A relatively less-well-educated workforce compared with the state and
nation
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0
Loca
tion
quot
ient
in 2
018
Percentage-point change in employment share, 2010–18
Chemicals
Defense and security
Transportation and logisticsHealth
services
Energy and mining
Mature Star
Transitioning Emerging
NOTE: Bubble size represents cluster share of metropolitan statistical area employment.SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.
Food services
EducationRetail
Government MachinerymanufacturingBusiness and
financial services
Advancedmaterials
Petrochemicals and Refineries Central to Beaumont's Economy
Construction
Fabricated metal manufacturing
8.9%
11.7% 14%
5%
2.8%
Energy and Manufacturing Payrolls See Strong Growth
-41-40
-25-23
-16-14-13-11-11
-9-7
1123
567
1115
191920
2534
4379
-60 -40 -20 0 20 40 60 80 100Glass & ceramics (0.3%)
Biomedical (0.2%)Agribusiness (0.9%)
Publishing (0.4%)Wood products (0.9%)
Fabricated metal mfg (2%)Recreation (1.5%)
Government (6.4%)Primary metal mfg (0.4%)
Education (8.9%)Health svcs (11.7%)
Business & financial svcs (4.7%)Retail (12.4%)
Advanced materials (5.8%)Total
Construction (11.7%)Infotech & telecom (2%)
Utilities (0.7%)Energy & mining (14%)
Food svcs (8.8%)Defense & security (1.6%)
Transport equip mfg (0.6%)Transportation & logistics (2.8%)
Chemicals (5%)Electric equip mfg (0.1%)
Textiles (0.1%)Machinery mfg (1.3%)
Percent change in employment, 2010–18NOTE: Cluster's share of total jobs is shown in parentheses.SOURCES: Texas Workforce Commission; authors' calculations.
3
79
4334
2520 19 1920
10 814
20
37
11
36
14 12
211 12
3227 24
0
10
20
30
40
50
60
70
80
90
Total Machinery mfg(1.3%)
Textiles(0.1%)
Electric equipmfg (0.1%)
Chemicals(5%)
Transportation& logistics
(2.8%)
Transport equipmfg
(0.6%)
Defense &security (1.6%)
Beaumont-Port Arthur Texas U.S.
Percent change in employment, 2010–18
NOTE: Each cluster's share of total jobs in Beaumont is shown in parentheses.SOURCES: Texas Workforce Commission; authors' calculations.
Overall Job Growth Slower than Texas; Expansion in Select Top Sectors Outpaces State and U.S.
Earnings in Energy-Related Clusters Outpace U.S. Averages
Beaumont U.S.Cluster 2010 2014 2018 2018Chemicals 107,307 121,526 135,740 74,669Energy and mining 90,915 93,168 100,811 82,731Construction 62,892 66,807 71,632 60,741Fabricated metal manufacturing 64,952 68,229 63,132 56,077Utilities 127,936 119,551 126,586 111,238Advanced materials 92,908 107,908 123,322 88,294Machinery manufacturing 62,238 64,415 70,480 71,072Primary metal manufacturing 71,483 73,801 76,013 69,706Retail 30,083 30,491 32,159 32,066Food services 17,928 16548 17,558 19,517
Industry Cluster with LQ >1 57,306 67,990 68,791Industry Cluster with LQ <1 57,579 52,693 55,630
Average earnings (total) 50,689 53,556 55,523 56,506 NOTES: Clusters are listed in order of location quotient (LQ); clusters shown are those with LQs greater than 1. Earnings are in 2018 dollars.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors' calculations.
Sizeable Earnings Premium Prevails in Many Leading Sectors
56
136
101
7263
127 123
57
94 97
64 62
114
93
57
7583
61 56
111
88
0
20
40
60
80
100
120
140
160
Total Chemicals Energy andmining
Construction Fabricatedmetal mfg
Utilities Advancedmaterials
Beaumont-Port Arthur Texas U.S.
Thousands of 2018 dollars
NOTE: Data refer to 2018 average annual earnings.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas.
78 7667 66 65 64 63 60 59 58
53 52 51
-5
0
5
10
15
20
25
30
0
10
20
30
40
50
60
70
80
90
Midland Austin Dallas FortWorth
Houston SanAntonio
Amarillo U.S. Tyler Odessa Longview Lubbock Beaumont
Median household income (cost of living adjusted)Real income growth 2010-17 (right axis)
Median household income, thousands $2017
NOTE: Cost of living index for 2017 used to adjust for metros to regional price parity with U.S.SOURCES: Council for Community and Economic Research; Bureau of Labor Statistics; Texas Workforce Commission; Federal Reserve Bank of Dallas
Percent
Adjusted Median-Household Income Below U.S.
17.8
15.5
11.9
8.3 7.5 7.25.2
3.4 2.60.6
-0.2-202468
101214161820
Austin($73,800)
Midland-Odessa
($64,210)
Tyler($54,339)
Texas($59,206)
Beaumont-Port Arthur($49,875)
U.S.($60,336)
Houston($63,802)
Amarillo($53,922)
Longview($48,259)
SanAntonio
($56,774)
Lubbock($47,276)
Percent growth, 2010-17
NOTES: Bars show real median household income growth 2010-17. Median 2017 incomes are displayed in parentheses.SOURCE: Census Bureau, 2010 and 2017 American Community Survey 1-year estimates.
Median Household Income Growth Exceeds U.S.
Education Levels in Beaumont-Port Arthur Trail State and U.S.
42.8
37.1
32.4 32.029.7 29.6 28.1
26.7
22.921.0
18.7 18.2 17.8
9.4
14.616.4
12.014.4
16.314.4
12.9
21.620.3
34.7
16.913.6
0
5
10
15
20
25
30
35
40
45
Austin Dallas Houston U.S. Fort Worth Texas SanAntonio
Tyler El Paso Midland–Odessa
McAllen Longview Beaumont-Port Arthur
Bachelor's degree or higherNo high school diploma
Percent
NOTE: Share of population age 25 or over. SOURCE: Census Bureau, 2017 American Community Survey 1-year estimates.
Beaumont-Port Arthur is Slightly Younger than the Nation
20 22 23 22 20 22 2128 24 21 20 22 19
14 14 16 14 13 13 13
1615
14 14 1413
46
43 39 4139
42
37
37
4041
37 41 40
11 11 11 1213
1113
8 1011
1211
13
10 11 12 12 15 11 16 11 10 13 16 12 16
34.7 34.8 32.4 35.2 36.734.4
36.8
29.2 31.034.7
37.534.7
38.1
0
10
20
30
40
50
60
0102030405060708090
100
Austin Dallas El Paso Fort Worth Beaumont Houston Longview McAllen Midland–Odessa
SanAntonio
Tyler Texas U.S.
Under 15 years 15–24 years 25–54 years 55–64 years Over 64 years Median ageSOURCE: Census Bureau, 2017 American Community Survey 1-year estimates.
PercentAge (years)
Key Takeaways
• Each metro has a unique fingerprint but together they make up the Texas commercial mosaic
• Cities over time tend to grow when they can exploit their natural and economic advantages
• Size and industrial composition plays a role in pace of growth• Smaller metro areas play an important role in the state’s
economy• Small metros in Texas have grown or maintained their
standing even as smaller cities across the U.S. have shrunk
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Thank you!
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