Industry Dynamics and Job Growth in Houston

Despite strong job growth, our region struggles with skill gaps

While industrial diversity remains relatively strong throughout the Houston region, gaps in opportunity persist across our workforce.

Why industry dynamics and job growth matter to Houston

While Houston is known globally for its role in the energy industry, our economy is strengthened by several other industries including medicine, finance, agriculture, transportation and trade. However, a growing skills gap threatens to undermine what we’ve built. In the Houston metro area, 27% of Houston-area jobs require a bachelor’s degree and pay higher wages, while just 24% of jobs are considered accessible to workers without a bachelor’s degree and pay good wages, and 49% are considered lower-wage.1 Meanwhile, across the three-county area, only 37% of employed workers had a bachelor’s degree.2 The vitality of the region’s economy and the livelihood of its residents depends on our ability to educate our workforce and produce jobs that provide a good standard of living.

When we invest in empowering residents to participate in the workforce at a higher level, we can increase employability, promote economic mobility and improve business productivity in our region.3

The data

GDP and inflation in the Houston-area economy

Understanding industry dynamics in Houston requires understanding the state of economic activity as a whole and its trends.

Gross Domestic Product in the Houston area

Here, we discuss Gross Domestic Product (GDP) — the monetary value of all finished goods and services within the Houston metro region on an annual basis. This provides an economic snapshot of the region to estimate the size of the economy. 

The U.S. Bureau of Economic Analysis estimates Houston metro’s GDP at $490 billion in 2017, ranking it the 7th among the top 50 metropolitan areas in the country. It accounts for almost 29 percent of the state’s GDP.4

Within the three-county area, the annual change in real GDP is 6.5% in Harris County between 2014 and 2015, followed by Fort Bend County at 4%. The inflation-adjusted GDP dropped by 2.3% in Montgomery County.

The GDP in metro Houston increased by 3.8% between 2016 and 2017. The overall economy in Texas has grown 5.8%, faster than the nation (4.3%) and the Houston metro area.

However, the total per capita real GDP for metro Houston dropped 1.3% from a year ago and we see a slight downward trend over time, meaning the economy may not be keeping pace with our growing population.

Furthermore, the inflation rate has been stable in the past few years with Houston seeing lower inflation rates consistently below the U.S. by about 20 points. Inflation refers to increases in the price of goods and services relative to the value of the currency used to purchase, thus the cost of living in Houston is relatively low.

-2.3% change in GDP

Montgomery is the only county in the region to lose GDP from 2014 to 2015.

Industrial diversity in the Houston area

More diversity of business means less reliance on one particular industry, and less risk of a collapsing labor market should that one industry fail or decline. Diversity in establishments also affords residents more options for work, play and cultural engagement, improving quality of life in the process. 

The Entropy Index is one way to measure how evenly jobs are distributed across industries in a given area. Higher Entropy Index values indicate higher industrial diversity. 

In 2017, the Houston metro area has a higher degree of industry diversity, meaning jobs were spread more evenly across different industries, compared to the nation and other major Texas cities, although the index value dropped from 2.203 in 2012 to 2.183 in 2017.4

Breaking down Houston-area establishments and jobs by industry

Across the board, the three-county economy relies far more on mining and oil and gas extraction than the rest of the nation, accounting for 1.3% of regional industry compared to 0.3% nationwide. But when it comes to educational and health services, the region lags behind the nation by 2.7 percentage points. Additionally, government services account for a drastically smaller percentage of industry in the region at only 0.6% compared to 2.5% across the state and 3% across the nation. By county, we see Fort Bend is the exception, with the county seeing a similar share of education and health services as the nation and Montgomery County seeing even higher proportions of mining, oil and gas, and construction than the other counties, state and nation.

Understanding how many Houstonians work in certain industries sheds light on the opportunities available to Houston-area workers, and how heavily we rely on specific industries for jobs. Even if there are high levels of diversity and quality in business establishments, that doesn’t always translate to more jobs for workers.

Generally, employment trends follow the same patterns as industrial diversity, including a greater concentration of jobs in the production of goods, quarrying/mining and professional services compared to the rest of the nation, and a lower share in educational and health services and government. Interestingly, while we saw a slightly lower proportion of construction establishments compared to the state and nation, we see a greater proportion of jobs available in construction across the three-county area. The average job per establishment for the construction industry is 13.6 for the U.S. but 29.7 for the three-county area, meaning the average size of construction establishment/business is larger in the three-county area.

Within the three-county area, Montgomery County relies most heavily on goods-producing jobs, which account for 17.4% of employment in the county — 2.6 percentage points higher than the national share. Harris County leads the region in professional services jobs at 17.9%, which is above both the state and national averages but lags behind Fort Bend and Montgomery counties in financial activities jobs at just 9.5%.

“The three-county area lags behind the state and the nation in its proportion of educational and government establishments.”

Compared to the nation and state, the three-county area lacks arts, entertainment and recreation establishments and has fewer construction business establishments per 1,000 residents than the U.S. and Texas. Noticeably, Montgomery County has slightly fewer health care and social assistance establishments per 1,000 residents, while Fort Bend County has the fewest in construction and arts, entertainment and recreation establishments compared to the other two counties.

Industry growth in the Houston area

Industry growth — both in diversity and performance — is vital to the local economy, creating jobs, reducing unemployment and opening new opportunities for community improvements.5

Overall, the rate of growth of new business establishments in Texas and the three-county area outpaced the national rate in every major industry, with the exception of health care and social assistance. Between 2000–2017 the three-county area saw the greatest increase in the number of establishments among management of companies and enterprises (up 145%), health care and social assistance (up 119%), and educational services (up 111%). 

Most of the three-county growth has been centered in Fort Bend and Montgomery counties, which is expected given the rapid growth in population and their emerging economies. Given that Harris County has long had a robust set of establishments across these sectors, this slower rate of growth is not surprising. Harris County still outpaces the nation in all categories except healthcare and social assistance, and arts and entertainment — often by a high percentage.

500%+

Management establishments have seen explosive growth in Fort Bend County since 2000.

Employment in the Houston area

The same way industrial diversity strengthens Houston, more diverse employment opportunities help more Houston-area residents contribute and participate in our local economy. Here we explore employment by occupation, which illustrates the number of jobs for residents based on specific skill sets.

Employment by occupation 

Compared to the state and the nation, the three-county area has higher percentages of workers in construction and extraction (7.6%), outpacing the nation by 2.4%, business and financial operations (5.6%), and architecture and engineering (3%). The three-county area falls behind the state and nation in protective services, community and social services, personal care services, office and administrative support, and educational professions. The gap is most significant in office and administrative support jobs, which account for only 11.6% of jobs in our region compared to 12.7% nationally. 

Fort Bend County boasts a high percentage of employees in computer and mathematical (4.5%) and architecture and engineering occupations (4.1%) compared to Harris (2.7% and 2.9%) and Montgomery (2.4% and 2.1%) counties. Meanwhile, Harris County drastically outpaces the nation, state and region in construction and extraction occupations (8.4%), transportation and material moving occupations (7.1%), production occupations (5.6%) and building and grounds cleaning and maintenance occupations (5%). 

Employment change by occupation

Understanding growth trends in employment categories helps us make sense of the effects a changing economy can have on our communities. Across the nation, state and three-county area, most employment categories saw noteworthy growth with some important exceptions. 

From 2010 to 2017, computer and mathematical occupations saw great growth across the nation, our state and our region, with the three-county area outpacing national growth at 45.5% compared to national growth of 37%, with Fort Bend County experiencing the greatest boom (57.1% increase).

In general, Fort Bend County and Montgomery County both lead the way in occupational growth, with Montgomery County experiencing a remarkable 87.1% increase in business and financial operations occupations and the personal care and service occupations doubled. Personal care and service occupations are low-paying jobs with a median annual wage of $24,420 in May 2018, compared to the median annual wage for all occupations of $38,640. Nationally, employment of personal care and service occupations is projected to grow 17% from 2018 to 2028, much faster than the average for all occupations, which will result in about 1.2 million new jobs. Demand for personal care aides is expected to grow as the elderly population increases. Fort Bend County has drastically outpaced both the nation and the state with its growth in arts professions (102.5%) and transportation professions (106.5%). 

However, the three-county area has experienced some decline in certain employment sectors. Despite modest growth (0.3%) nationally, farming, fishing and forestry occupations fell by 62.9% in Harris County, with Fort Bend and Montgomery counties experiencing varying growth (0.2% and 13.6%, respectively). Additionally, Montgomery County has experienced a potentially troubling 26.3% decline in life, physical and social science occupations, a sector that has seen growth in the nation, state and in the rest of our region.

45.5% growth

Math and computer jobs are growing faster in the 3-county area than the nation at-large.

Job growth in the Houston area

Job growth measures economic health by showing how much of the economy is expanding, where and in which industries. 

Since 2010, the three-county area experienced 19% job growth, higher than the nation (13%) and the same as the state average. Meanwhile, the job growth has skyrocketed for Montgomery and Fort Bend counties (up 33% and 38% respectively) between 2010 and 2017, much higher than 16% in Harris County, which is expected for these emerging economies.

Our vibrant region is projected to continue its already impressive growth over the next 25+ years in all three main counties, with Harris County projected to achieve the most growth in total number of jobs. 

Job growth by industry

Since 2010, Fort Bend County has experienced growth in all employment categories except for farming, with a 104.1% growth in transportation and warehousing compared to just 40.2% growth across the nation. In Harris County, employment in mining quarrying and extraction has declined by 1.8% despite growth nationally and in Fort Bend and Montgomery counties, where the category grew by 59.2% and 60.6%, respectively. 

Montgomery County far-and-away leads growth in management professions, with 197.8% growth compared to 32.2% nationally. Montgomery County also saw significant growth in utilities at 63% (49% more growth than the rest of the nation) plus growth throughout all categories minus farming and forestry, fishing and related activities. In the latter category, Montgomery was the only county in the region to post a loss, a potentially telling factor for the county’s future when considered against its explosive growth and the growing number of jobs in other sectors. 

Earnings in the Houston area

Availability of jobs is crucial, but it’s equally important that those jobs offer fair and livable compensation. Across the nation, state and three-county area, workers that are paid more than $3,333 a month make up the greatest share of employment opportunities, especially in the Houston three-county area where they make up a majority (51%) of jobs. 

While the Census defines the terms and categories for low-wage, medium-wage, and high-wage as noted below, it’s important to point out that “high-wage” indicates anything more than $40,000 annually, which is below what studies like ALICE indicate are needed to fulfill living costs. 

About 19% of the three-county area residents make low wages or earnings of $1,250 a month or less. The three-county area fares better than both the U.S. and Texas.

When comparing across the three-counties, Montgomery County has the largest percentage of residents making a high wage (54%) compared to Fort Bend County (43%) and Harris County (51%). On the opposite end, 19% of residents in Montgomery and Harris counties make low wages, compared to 24% of residents in Fort Bend County. 

Job changes by earnings

As degreed, skilled positions become more common throughout the three-county area, area earnings are growing alongside them; high-income earnings have seen significant growth beyond the national average throughout the three-county area, with Fort Bend County leading the way at a 56% increase. Low- and mid-wage earnings have also seen significant increases in Fort Bend County, at 40.1% and 31.5% respectively, well above both the state and national averages.

“About 51% of three-county area residents are earning at least $3,333 per month.”

Median earnings by occupation

Across most occupations, Montgomery and Fort Bend counties have higher median earnings than Harris County, the state and the nation. 

Across the nation, technical professions involving math and computers have the highest median earnings at $79,429. In Texas and throughout the three-county area, architecture and engineering occupations maintain the highest median earnings. 

In Fort Bend County, architecture and engineering occupations hold the highest annual median earnings at $101,983. Residents who hold computer and mathematical occupations enjoy $94,617 annual median earnings, followed closely by those in life, physical and social science occupations ($93,428) and management occupations ($91,743). The lowest-paid occupations in Fort Bend County are firefighting and prevention and other protective service workers including supervisors’ occupations ($11,991), personal care and service occupations ($15,778), and food preparation and serving related occupations ($16,375). Architecture and engineering positions also hold the highest annual median earnings in Harris County at $86,028, followed closely by legal occupations ($80,457), computer and mathematical occupations ($75,784), and health diagnosing and trading practitioners and other technical occupations ($72,157). Alternately, the lowest-paid occupations in Harris County are personal care and service occupations ($15,778), food preparation and serving related occupations ($16,375), and building and grounds and maintenance occupations ($17,487). 

The highest paying occupations across Montgomery County are architecture and engineering occupations ($116,174), computer and mathematical occupations ($96,278), management occupations ($88,591), and health diagnosing and treating practitioners and other technical occupations ($78,364). High-paying jobs account for 24.6% of workers in the area, the highest percentage of the Houston area. On the opposite end, food preparation and serving related occupations ($15,080), building and grounds cleaning and maintenance occupations ($15,774), and personal care and service occupations ($16,087) account for the lowest-paying occupations in the area.

Gaps in opportunity threaten our job market

Although high-paying jobs are common throughout our region, accessibility remains an issue, as low-paying jobs and skills gaps remain — particularly in Harris County. And without action, the gap will only continue to grow. 

By 2020, 65% of all American jobs will require education beyond high school.6 As it currently stands, 60% of residents 25 years and over in the three-county area have a bachelor’s degree or above, or some college — putting us above the state (59%) but behind the nation (61%). 

Opportunity employment

However, not all mid- to high-paying careers require a degree. Opportunity employment refers to employment accessible to workers with lower levels of education (without a bachelor’s degree) that pays above the national median wage ($37,690 annually) and reflects the local cost of living.

Nationally, 21.6% of total employment is characterized as opportunity employment, while across the Houston metro area, 24% of employment is classified as opportunity employment. In the Houston area, 26.7% of jobs require a bachelor’s degree and 49.3% of employment is considered lower-wage.1 The top 10 opportunity occupations in 2017 represent the largest cross-section of jobs available in today’s economy for workers without a bachelor’s degree.

The highest paying opportunity occupations in the Houston metropolitan area are registered nurses and police and sheriff’s patrol officers; however, more people are employed in heavy tractor-trailer truck driver occupations. There are fewer employed in licensed practical and licensed vocational nurses and supervisors of food preparation and service workers, though their annual median wage is $47,300 and $42,700, respectively.

Resources

References:

  1. U.S. Federal Reserve Banks of Cleveland and Philadelphia, Opportunity Occupations Revisited: Exploring Employment for Sub-Baccalaureate Workers Across Metro Areas and Over Time, by Kyle Fee, Keith Wardrip and Lisa Nelson, 2019. Web. 
  2. U.S. Census Bureau, Educational Attainment by Employment Status for the Population 25 to 64 Years American Community Survey 1-year estimates, 2018. Web.
  3. U.S. Federal Reserve System, Investing in America’s Workforce: Report on Workforce Development Needs and Opportunities, by Noelle St. Clair, 2017. Web.
  4. U.S. Bureau of Economic Analysis, Gross Domestic Product by Metropolitan Area, 2017, 2018. Web.
  5. Geoff Riley, “Benefits and Costs of Economic Growth.Tutor 2 U (blog).
  6. Carnevale, Anthony P., Nicole Smith, and Jeff Strohl. “Recovery: Job growth and education requirements through 2020.” Georgetown University Center on Education and the Workforce (2013).