Texas Border Affairs
Despite the importance of its energy, food, and fiber, Texas’ economy is increasingly service-oriented. This result is not surprising given the sophisticated nature of the state’s industrial base; it is a pattern common to all highly developed economies. Let’s take a look at the past and predicted future trends.
You can basically think of private sector activity as falling into two broad categories: goods-producing industries and service-producing industries. Goods-producing sectors include manufacturing, construction, agriculture, and mining (which includes oil and gas extraction). Services are everything else.
Twenty years ago, services accounted for about 63% of employment and nearly 55% of real gross product (RGP) in Texas. By 2021, we estimate it had risen to 69% of employment and around 60% of RGP. Twenty years from now, our projections indicate that it will account for almost 73% of employment and still around 60% of RGP.
The reason why the share of services in GDP is lower than that of employment is simply because it is possible to create a lot of output in certain goods-producing industries with relatively few workers. In an automated manufacturing facility, for example, a few people may monitor equipment producing many products. Likewise, a relatively small number of employees can sustain extremely valuable oil and gas production after a well is completed. In contrast, many jobs in service businesses are interpersonal in nature, while others do not lend themselves to automation. My late friend and great economist William Baumol once said that it would be extremely difficult for two people to play a string quartet.
The service sector comprises a diverse set of industries. Professional and business services include areas such as accounting and legal firms, engineering and consulting firms, and advertising agencies, among others. Health care is included, as is the entire wholesale and retail trade segment. Education, transportation, entertainment and recreation, hospitality, restaurants and financial services are also important components.
Some of the fastest growth has been in transportation and warehousing, where employment has grown nearly 62% over the past 20 years. Several categories of financial services also grew by 60% or more, including insurance companies. Professional and business services, education, waste management and remediation, outpatient health care and social assistance also recorded strong gains.
Looking ahead, we expect the fastest pace of expansion to occur in social work and waste management and remediation, although the professional and business services category will generate the most new positions. net.
Over time, jobs will continue to be created at a faster rate in service-producing industries. The composition of occupations will certainly change as the economy evolves and technology alters the character and skill requirements of each job, but the general trend is well established. Be careful!
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of more than 2,500 customers over the past four decades.