Industry Cluster Analysis for the Coastal Bend Workforce Development Area, Report for the Coastal Bend Workforce Development Board, 2004

Industry Cluster Analysis for the Coastal Bend Workforce Development Area, Report for the Coastal Bend Workforce Development Board, 2004

INDUSTRY CLUSTER ANALYSIS FOR THE COASTAL BEND WORKFORCE DEVELOPMENT AREA Final Report Prepared for Prepared by Jim Lee Professor of Economics Texas A&M University-Corpus Christi Corpus Christi, Texas 78412 361.825.5831 [email protected] February 2010 TABLE OF CONTENTS Page EXECUTIVE SUMMARY iv I. INTRODUCTION 1 Objective 1 Data Sources 1 Area Profile 2 II. INDUSTRY CLUSTER ANALYSIS 11 Methodology 11 Results of Economic Base Analysis 15 SOCRATES Analysis 20 Identifying Industry Clusters 23 III. DETAILS OF INDUSTRY CLUSTERS 27 Major Employers 27 Occupations and Wage Earnings 27 Potential of Clusters as Industry Targets 31 Existing Target Industries 34 IV. FINAL OBSERVATIONS 36 REFERENCES 37 APPENDICES Appendix A: Coastal Bend Employer List and Details A.1 Appendix B: Coastal Bend Industry Staffing Patterns B.1 ii LIST OF EXHIBITS Page Exhibit 1: Counties of the Coastal Bend WDA. 3 Exhibit 2: Coastal Bend WDA Economic Profile. 5 Exhibit 3: Employment Composition by Sector. 7 Exhibit 4: Sector Composition by Output, 2008. 9 Exhibit 5: Average Hourly Wages, 2008. 10 Exhibit 6: Hypothetical Industry Clusters. 12 Exhibit 7: Location Quotients and Shift-Share Ratios. 16 Exhibit 8: Performance of Sectors. 17 Exhibit 9: Comparison of Employment and Wages. 19 Exhibit 10: SOCRATES Shift-Share Analysis, 2003-08. 22 Exhibit 11: Employment of Coastal Bend Industry Clusters. 24 Exhibit 12: Firms and Wages in Coastal Bend Industry Clusters, 2008. 28 Exhibit 13: Largest Employers in Coastal Bend Industry Clusters. 30 Exhibit 14: Strengths and Weakness of Industry Clusters. 32 Exhibit 15: Existing Target Industries. 35 iii EXECUTIVE SUMMARY The objective of this study is to describe the economic base of the Coastal Bend Workforce Development Area and to identify the leading industry clusters that will help drive future employment growth in the region. Basic techniques of economic base analysis, including location quotients and shift-share ratios, are applied to historical and projected employment data over the 2003-2018 period. Some industries that demonstrate regional economic strengths and growth potentials are aggregated to form clusters. For each of the five identified clusters, this report lists its major employers, occupations and wage earnings. This report also contains a synopsis of the identified clusters’ strengths and weaknesses as targets for future development. • The economic base of the Coastal Bend region is represented by a well-balanced mix of industries. As in the nation as a whole, employment in the region has shifted from manufacturing-oriented to service-oriented industries. Regional employment growth since 2003 has followed more the relatively faster pace of the Texas state than of the U.S. as a whole. • A diverse mix of industry clusters contributes to the Coastal Bend economy— construction, energy, education, healthcare and tourism. Together, these five clusters account for nearly half of regional total employment. The largest clusters are healthcare, education and tourism, each of which shares a roughly 10 percent of the regional workforce. • The five industry clusters accounted for 45 percent of total employment in the Coastal Bend WDA during 2008. Between 2008 and 2018, these clusters are expected to gain a total of 26,000 jobs, or approximately 60 percent of the projected total employment growth in the region. Some industries in the energy cluster, including oil and gas extraction, are expected to experience protracted declines in employment. • The five industry clusters together account for approximately 40 percent of all private firms in the Coastal Bend WDA. Employers in those clusters also yield a wide variety of occupations, some of which pay the highest (oil and gas extraction) wages and salaries in the area while others pay the lowest (restaurants). Overall, the typical wage rate of those clusters together is higher than the average wage rate in the region. iv I. INTRODUCTION This report presents the economic base analysis for the Coastal Bend Workforce Development Area (WDA). The region has some comparative advantages that are responsible for the growth of certain industries and their industrial make-up. Those industries form the regional economic base, which generates the largest amount of income and employment in excess of the demand within the regional community. Knowledge about the economic activities that are key drivers of the regional economy is helpful for economic and workforce development. This study is commissioned by the Workforce Solutions of the Coastal Bend. As an update to an earlier economic basic analysis for the Area by Lee (2004), this report provides an understanding of the extent to which the regional economic base has evolved in recent years and how the regional economy will potentially evolve in the next decade. Objective The objective of this report is to document the major findings of an economic base analysis for the Coastal Bend WDA using both recently available and projected data. The analysis draws on an approach commonly referred to as industry cluster analysis, which identifies groups of industries that comprise the Area’s economic base as the cornerstone of the regional economy. Why is industry cluster analysis important? Industry clusters have been recognized as critical elements that determine the competitiveness of a region in the global marketplace (Porter 1990). As the key drivers of economic growth, industry clusters have increasingly been incorporated into regional policy strategies for workforce and economic development. Some notable clusters are in Silicon Valley for its microelectronics and information technology industries; and the Research Triangle in North Carolina for its agricultural, pharmaceutical and telecommunications industries. Industry clusters are the “engines” of an economy, driving its growth in the long run. As such, an understanding of their recent and future trends as well as their strengths and weaknesses is an important first step toward building a successful regional economic development strategy. In 2004, Texas Governor Rick Perry officially adopted a strategic plan that targets the development of several industry clusters (Perry 2004). Data Sources For planning purposes, employment and wage data are the key components of this study. The primary sources for the regional- and state-level data are Texas Workforce Commission’s online databases: SOCRATES, TRACER, and Wage Coastal Bend Industry Cluster Study Page 1 Information Network (WIN). The U.S. Census Bureau, the Bureau of Labor Statistics and the Bureau of Economic Analysis provide other economic data, particularly those at the national level. Industries are classified using the industry definitions of North American Industry Classification System (NAICS) wherever possible. One distinctive aspect of the industry cluster analysis in this study is the use of future projected data, rather than historical data. While historical data help identify industries that have flourished or declined, future data projections are more instrumental for workforce development and economic planning. The TRACER database contains current industry and occupational employment estimates for both the Coastal Bend WDA and the state of Texas, as well as projected data through 2016. In this study, data projections for the period through 2018 are performed using interpolations of the data from TRACER and other sources. The benchmark period of this study is Year 2008. Data in 2009 are omitted intentionally for the following reason: The national economy has suffered the most severe recession since the Great Depression. In 2009, employment particularly at the national level dropped substantially. The U.S. unemployment rate was 9.3 percent in 2009, as compared to 5.8 percent a year earlier. By early 2010, the labor market had shown signs of recovery. However, the economy in the Coastal Bend WDA was relatively more stable. The disparity between the local economy and the national business cycle in 2009 can lead to bias in an economic base analysis that relies on comparing local data with national or state data (Froeschle 2005). Because data in 2009 are not representative of long-term economic trends, they are ignored in this study. Area Profile Geographical Definition The Coastal Bend WDA consists of 12 counties in South Texas: Aransas, Bee, Brooks, Duval, Jim Wells, Kenedy, Kleberg, Live Oak, McMullen, Nueces, Refugio, and San Patricio (see Exhibit 1). The counties of Aransas, Nueces and San Patricio comprise the Corpus Christi Metropolitan Statistical Area (MSA). The Port of Corpus Christi, the fourth largest port in the U.S. by cargo tonnage, supports shipping and offshore oil and gas drilling on the Gulf of Mexico. Coastal Bend Industry Cluster Study Page 2 Exhibit 1 Counties of the Coastal Bend WDA. Coastal Bend Industry Cluster Study Page 3 Regional Economic Profile The 12 counties of the Coastal Bend WDA have a total population of about 560,000 (see Exhibit 2). The Corpus Christi MSA is the largest populated area in the Coastal Bend WDA and has a population of about 415,300, or 75 percent of the regional total. Between 2003 and 2008, the population in the region grew at an average annual rate of 0.5 percent, which was remarkably lower than the Texas state average of 2 percent and the national average of 0.9 percent. According to the Census Bureau, the regional population is projected to grow through 2020 at about the same pace as in the past decade. As in most parts of Texas, economic growth in the Coastal Bend WDA accelerated in recent years. Between 2003 and 2008, the area’s gross domestic product in current dollars—the broadest measure of the size of an economy—grew at 9 percent per year on average, which was appreciably higher than the national average of 6 percent. In real terms, output grew at an annual rate of over about 5 percent, which was still significantly higher the growth rate of about 2 percent in the observation period of the previous study (1990-2002). Economic activity is the driving force for job creations and household earnings.

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