As the oil surge came to an end with the decline in crude prices late last year and earlier this year, the fallout for the Texas economy naturally became a source of concern.
Clearly, drilling and exploration activity had been a major source of new jobs, both in oil-producing regions (such as the Permian Basin and south Texas) and in metropolitan areas with a large industry presence (including Houston). Spillover benefits boosted the economies of every corner of the state, and with retrenching in the industry, a slowdown in the state’s growth was no surprise. Even so, we’re already seeing employment recover and move ahead, though at a slower pace.
One notable reason for the continued growth is that a spectrum of industries has been involved in the expansion of the state economy. A key contributor to gains—past, present, and future—is technology-oriented businesses.
For most of the past 20 years, employment in computer systems design and related services has grown rapidly, even when the sharp drop in investment and employment following the dot-com bust in 2000 is considered. Data from the US Bureau of Labor Statistics (BLS) indicates that between 2003 and 2013, the information technology (IT) industry grew by 37 percent. During the recession (December 2007 to June 2009), the industry did lose about one percent of its workforce, but had recovered and passed its prior peak by 2010 (unlike most of the economy). Over the past few years, growth in the industry has generated tens of thousands of very well-paying jobs.
The Computing Technology Industry Association (CompTIA) tracks the industry and recently reported in its “Cyberstates 2015” publication that the US tech industry group added 129,600 jobs in 2014, bringing total employment to 6.5 million. CompTIA defines and tracks five major industry sectors: tech manufacturing; telecommunications and Internet services; software publishing; IT services; and research and development, testing, and engineering services. According to CompTIA’s definition and data, the industry employs 5.7 percent of the private sector workforce and generates 7.1 percent of gross domestic product.
Texas has long been an important center for the IT industry and continues to expand into various aspects of the industry cluster. Although CompTIA’s data indicate California added more technology jobs in 2014 than Texas (with gains of 32,900 and 20,100, respectively), Texas saw a faster rate of growth of almost 3.5 percent compared to about 3.0 percent in California. Florida, Massachusetts, and Michigan are other states experiencing notable gains in technology employment.
Technology jobs tend to pay well, averaging about twice the typical private-sector wage. A report (the “2015 IT Services Industry Report”) by the Economic Development and Tourism Business research office (part of the Office of the Governor Texas) points out that more than 203,700 IT professionals are directly employed at over 17,600 Texas IT services firms (with about 129,500 more Texans more working in the IT arena in other types of businesses such as manufacturing, health care, and financial services). Between 2009 and 2013, employment in major IT services sectors in Texas increased by more than 29 percent, and workers in the industry in Texas earn an average annual salary exceeding $96,600 (more than twice the overall average).
The largest Texas technology subsector is computer systems design (custom computer programming, software consulting, systems integration, computer facilities management, and related services). The IT Services Industry Report indicates that this subsector accounts for nearly 73 percent of IT services employment in Texas. A number of major companies in the industry are headquartered here, and hundreds more have significant operations in the state.
It’s no accident that IT in Texas continues to grow; concerted efforts to attract and expand the industry began more than a decade ago. In 2003, the Texas Legislature created the $295 million Texas Enterprise Fund (TEF) to help close deals on major corporate locations in target industries (including technology) and has continued to reauthorize it since that time. About $92.1 million has been paid out to 18 IT services-related corporate expansions which employed 15,346 Texans at last count. The Texas Emerging Technology Fund (TETF), which was established in 2005 to support commercialization of technological innovations across multiple industries, has been the source of $33.1 million for another 26 IT services-related projects ranging from startup commercialization to university projects. The TETF is being replaced by a plan to encourage more research professors at Texas universities, which will also spawn additional development. The state legislature has also passed tax law encouraging the location of data centers; we recently saw this one pay off with a large Facebook facility in Fort Worth.
The BLS projects that employment and output in computer systems design and related services will continue to grow rapidly over the next decade, at a rate faster than that for similar professional, scientific, and technical industries and the economy as a whole. New areas continue to open up such as cloud computing, and consumers are using more IT services than ever.
We may not yet have seen the full effects of the decline in oil prices, as there are companies trying to hold on to employees by drilling their best prospects which may scale back in a few months if prices don’t start to trend upward. However, the fact that the past few months of data have indicated a return to aggregate growth is certainly promising. Technology businesses are clearly one reason for the resilience of the state economy, providing well-paying jobs to hundreds of thousands of Texans.
Editor’s Note: The main image accompanying this op-ed shows an artist’s rendition of what the new Facebook Data Center in Fort Worth will look like.