Have you noticed that it seems like there are more trucks on the highway nowadays? Some people might construe that as bad news because of the increased traffic. For me, however, it’s good news because it indicates our economy is very healthy and that products are being manufactured and shipped.
A recent Commerce Department report noted that during the last quarter (April-June), the nation’s total gross domestic product (GDP or output) grew at a 3.4% annual rate, the best quarterly increase since the first three months of 2006.
Although we are an increasingly service-oriented economy, it is expected that future economic advancement will nonetheless depend heavily on manufacturing. This will especially be true in Texas where there are a significant number of positives that favor this industry. Among them are a central geographic location; a fast-growing labor pool, excellent distribution facilities, economical land and construction costs, and an attractive business-friendly climate, as well as a low cost of living and good quality of life. In addition, the proximity of the maquiladora plants has influenced many manufacturers to locate or expand their operations in the state in order to utilize Mexican partners as effective links in their highly efficient supply chains.
From 1990 and 2005, Texas emerged as the fastest-growing manufacturing hub in the US. The Lone Star State now produces more than 8% of the nation’s output, ranking second behind California in factory production. Furthermore, Texas is the country’s leading exporter of manufactured goods. Despite recent weaknesses in some of the economies of the state’s main trading partners, shipment of products and services are up some 7.4% above year-ago levels.
Across the nation, construction activity has slowed due to the difficulties in the housing market. This situation has restricted the manufacture of construction-related products. Even with all the wet weather across the state, however, construction is better in Texas compared with the rest of the nation, and forecasters predict a rebound in this aspect of manufacturing over the next several months.
Demand still remains strong for transportation manufacturing in Texas. Refinery utilization is up slightly despite several unplanned outages and shortage of skilled labor to fill important maintenance roles. While high-tech manufacturing has stalled somewhat after an early start this year, the sector’s growth rate is still ahead of the nation as a whole and is likely to accelerate with new advances in the coming years.
Texas has experienced relatively consistent and ongoing increases in productivity due to use of efficiency-enhancing technologies and has effectively shifted the composition of its output to meet the demands of a dynamic global market. In many cases, the state has mirrored the national manufacturing trend, i.e., keeping the value-added production opportunities and moving the less-productive operations abroad.
Manufacturing, of course, is cyclically sensitive, more so than the other industrial sectors. As a result, manufacturers sometimes experience swings in business activity quicker and at a more intense level. The outlook for goods producers in the Lone Star State over the rest of the year is highly positive with the majority of firms expecting production and orders to soon pick up. In 2006, Texas created approximately 26,300 manufacturing jobs. An additional 12,000 new manufacturing jobs are expected to be added this year with about the same number in 2008. The statistics for last year are truly remarkable, as virtually every other state and the nation as a whole continued a trend of declining manufacturing jobs.
Innovation, as well as the implementation of new technologies, techniques, and the best business practices, will continue to promote increases in production. There is a myth that the US is no longer a manufacturing economy. That is simply not true. We set a record virtually every year in the output of goods. We do so, however, with fewer workers, a reflection of the inexorable march of technology and automated processes. Texas is in the enviable position of growing both manufacturing jobs and production. Perhaps more than any other measure, the gains in employment in the face of a notable national trend to the contrary speak to the underlying vitality of the Texas economy.