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Manufacturing growth trends in Texas.

Although U.S. manufacturing employment has declined in recent years, manufacturing activity in Texas has been expanding. Nationwide, manufacturing employment reached its most recent peak in 1989 and has declined by 7.2 percent since then. The nationwide decrease in manufacturing jobs since 1989 has been more than 1.4 million. Although Texas manufacturing employment dropped slightly from 1989 to 1990, subsequent years have seen growth, with a gain of about 42,500 manufacturing jobs since the 1988 low point. While the gain has not been overwhelming, any growth by a major state in the face of a severe national decline is somewhat remarkable. Table 1 shows national and state trends in manufacturing jobs for the last six years for which data are available.

Another indicator of increasing manufacturing activity in Texas can be found in the Directory of Texas Manufacturers, published by the Bureau of Business Research at the University of Texas at Austin. The new 1993 edition, which provides data for firms in operation in 1992, lists a record total of 17,020 plants. This total represents an increase of 11.5 percent from the number of plants listed five years earlier.
Table 1
Manufacturing Employment, United States and Texas, 1987-1992
Year United States Texas
1987 19,104 956.4
1988 19,593 947.6
1989 19,659 972.9
1990 19,131 963.3
1991 18,402 980.0
1992 18,242 990.1
Note: Data are for July of each year.
Source: Employment and Earnings, Bureau of Labor Statistics,
U.S. Department of Labor, various issues.

Battered by adverse trends in the energy industry and other factors in the mid-1980s, the Texas economy has been recovering for most of the past five years. Some of the subsequent growth could be described as recovery of lost ground. Nevertheless, both the Texas economy and the Texas manufacturing sector are growing.

Texas and U.S. Manufacturing Employment Trends

Nationwide, total nonagricultural civilian employment increased by almost 6.5 million jobs during the past five years while the manufacturing sector lost about 862,000 jobs. In Texas, total employment increased by about 767,000 jobs, and manufacturing gained about 34,000 jobs. All but three of the 28 metropolitan areas registered gains in total nonagricultural civilian employment. The biggest increases have been along the border and in southeast Texas. The metropolitan areas with the largest percentage increases in job growth are Laredo, Brazoria, Brownsville, Beaumont, McAllen, Bryan, El Paso, and Fort Worth, all of which registered increases of 15 percent or more. The three areas with decreases in total employment are Sherman, Abilene, and Wichita Falls.

Manufacturing employment in Texas increased by 3.52 percent from 1987 to 1992 with most of the increase concentrated in metropolitan areas. Table 2 shows total manufacturing employment for Texas metropolitan areas during the period. The overall growth rate for manufacturing employment in Texas metropolitan areas was 4.02 percent against 0.87 percent in the nonmetropolitan countries. The metropolitan areas with the largest increases in manufacturing employment were Bryan-College Station, Austin, Brownsville, El Paso, Odessa, and Corpus Christi. The increase in manufacturing employment was not universal among Texas metropolitan areas: 14 of the 28 areas showed decreases. Midland, Texarkana, San Angelo, TABULAR DATA OMITTED Sherman, Laredo, and Amarillo, all of which experienced decreases in manufacturing employment of 10 percent or more, showed the most severe declines in manufacturing employment.

Growth in Texas Manufacturing Establishments

The number of manufacturing plants listed in the Directory of Texas Manufacturers has increased in recent years, with 1,758 plants added between the 1988 and 1993 editions. Most of this net increase has been concentrated in metropolitan areas. The number of manufacturing plants in the state's 28 metropolitan areas increased by 1,566 plants between 1988 and 1993. In contrast, non-metropolitan counties across Texas registered a net increase of 192 plants during that period.

As would be expected, the largest absolute net increases in the numbers of manufacturing plants are in the state's largest metropolitan areas. With more than 427 new plants, Houston showed the largest gain. Austin ranked second with 301 and Dallas and Fort Worth were next with 267 and 210, respectively. Other metropolitan areas with increases of more than 50 new plants were San Antonio, Beaumont, and El Paso.

Seven Texas metropolitan areas recorded losses in manufacturing plant numbers during the five-year period. The Longview-Marshall area had the largest decrease, with 20 fewer plants than were listed five years earlier. Odessa, McAllen, Wichita Falls, Texarkana, Laredo, and Amarillo also lost manufacturing plants.

In relative terms, the areas exhibiting the largest increases in manufacturing plants were Victoria, Austin, Midland, and Beaumont. Each of these areas registered increases of more than 30 percent in the number of manufacturing plants over the 1988 levels. Interestingly, in both Victoria and Midland the relative numbers of manufacturing plants grew during that period, but total manufacturing employment decreased.

Smaller Plants Most Numerous

Most Texas manufacturing plants are relatively small. Among the 16,170 plants listed in the 1993 Directory that specified numbers of employees, 12,738, or almost 79 percent, had fewer than 50 employees. The number of these smaller plants increased by 1,624 during the past five years, representing about 93 percent of the new increase in plants for which employment data are available. Texas plants with between 50 and 499 employees number 3,125, an increase of 69 facilities from five years earlier. The number of large plants (more than 500 employees) also increased, from 260 in 1988 to 307 in 1993. There are 850 plants listed in 1993 for which employment data are not available, an increase of 18 from the 1988 level.

Changes by Industrial Category

Because many Texas manufacturing plants produce more than one type of product, data for the various industrial categories do not compare precisely with the overall total number of manufacturing plants. Nevertheless, some insight into the changing nature of Texas manufacturing can be gained by examining changes in the number of plants active in each industrial category. For example, Standard Industrial Classification (SIC) Major Group 35, i.e., "machinery including selected electrical and electronic machinery," has both the largest number of active plants and the largest increase (305 plants) of any of the SIC major groups. Other industries with increases of more than 200 plants between 1988 and 1993 were miscellaneous manufacturing (291 plants), rubber and plastics products (269 plants), and instruments (253 plants). Five additional categories saw increases of at least 100 plants. These industries were electronics, printing, apparel, fabricated metal products, and chemicals. Only three industries--stone, clay, glass, and concrete products; products recovered from natural gas; and food processing--registered declines in the numbers of active Texas plants.

Why Has Texas Gained?

With nationwide manufacturing activity in decline, why has Texas manufacturing grown during the past five years? Possible contributing TABULAR DATA OMITTED factors include a relatively favorable tax and business climate. Despite recent tax increases and probable future increases, Texas continues a tradition of relatively low taxes for its level of economic activity. In comparison with the rest of the nation, Texas continues to be regarded as a favorable location in which to do business.
Table 4
Texas Manufacturing Plants by Standard Industrial
Classification Major Group, 1988 and 1993
SIC major group number and name Number of plants(*)
 1988 1993
13 Products recovered from natural gas 289 224
14 Mined sulphur 2 2
20 Food and kindred products 1,174 1,148
21 Tobacco Products 1 2
22 Textile mill products 90 108
23 Apparel and related products 723 905
24 Lumber and wood products 893 948
25 Furniture and fixtures 662 747
26 Paper and allied products 415 468
27 Printing and allied industries 2,657 2,841
28 Chemicals and allied products 1,096 1,202
29 Petroleum refining 219 236
30 Rubber and plastics products 1,015 1,284
31 Leather and leather products 170 197
32 Stone, clay, and glass products 1,276 1,177
33 Primary metal industries 396 427
34 Fabricated metal products 2,904 3,055
35 Machinery 2,876 3,181
36 Electrical and electronic machinery 989 1,177
37 Transportation equipment 624 683
38 Instruments and related products 641 894
39 Miscellaneous manufacturing 973 1,264
 Total number of plants in directory 15,262 17,020
 Total number of plants in Texas 15,241 17,003
* Many plants produce in more than one category.
Source: Directory of Texas Manufacturers, Bureau of Business
Research, The University of Texas at Austin, 1988 and 1993

The high productivity of Texas workers could also be a factor contributing to manufacturing growth in the state. Positive evidence exists that Texas manufacturing workers are more productive than most U.S. manufacturing workers, relative to their compensation. In terms of value added by manufacturing relative to production worker wages, Texas ranks third among all states and second among the major manufacturing states. Some of this edge can be attributed to the type of industries in which Texas specializes, but Texas workers outperform the national average in fourteen of the seventeen industrial categories for which detailed data are available. It should also be noted that low-wage workers and low-wage states are not among the winners in the worker payroll productivity race. The five leading major industrial states in payroll productivity are Louisiana, Texas, New York, New Jersey, and California. Of these, the latter three are certainly not considered low-wage areas.

Finally, the hard times in Texas brought about by the events of the mid-1980s stimulated a certain amount of entrepreneurial activity. Commercial and industrial properties were available in most parts of the state at bargain prices. The numerous "now leasing" and "for sale" signs that blanketed Texas provided many new industrial plants with suitable facilities at favorable prices. Similarly, many areas had available labor either already trained or willing to be retrained and eager to work. Texans have always been adaptable, and some of the new manufacturing activity doubtless resulted from adaptation to hard times.


An Economic Compass: Texas Business Review in 1992

December Retailing in Texas: Beyond Sales Forecasts, Larry G. Gresham Total Quality Management in the Private Sector: Lockheed Austin, Sylvia Simpson

October The Commercialization of New Technologies: The case of DTM Corp, David V. Gibson and Paul F. McClure

Total Quality Management in the Public Sector: The University of Texas Quality Center, Edwin R. Sharpe and Michelle O'Reilly

August The Size, Distribution, and Growth of the Texas Population, 1980-1990, Robert K. Holz

June Reaction to Recession: State and Local Government in Texas, Jerry Olson

The Impact of the U.S.-Mexico Free Trade Agreement on Texas Cotton Producers, Mina Mohammadioun, Jerry Olson, and Allen Blackman

April Texas and U.S. Families, 1990, Deanna Schexnayder and Leslie Lawson

Texas Family Law: Changing Times, Changing Laws, Gaylord A. Jentz

February Natural Gas Substitution Under the "National Energy Strategy," Stephen L. McDonald and Mina Mohammadioun
COPYRIGHT 1993 University of Texas at Austin, Bureau of Business Research
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Zlatkovich, Charles P.
Publication:Texas Business Review
Date:Apr 1, 1993
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