DATA POINTS

By

THE CAPITAL AREA COUNCIL OF GOVERNMENTS

www.datapoints.org MARCH 2012 BACK TO THE FUTURE OF ECONOMIC DEVELOPMENT
During the 1990s, communities throughout the country identified biotechnology as the hot employment sector. By 2000, data centers emerged as the next big thing. Toward the decades end, economic development practitioners across the country were courting clean energy investment. And today, after years of dismissal, manufacturing is back. The renewed focus on manufacturing is based on several encouraging trends. After decades of job losses, manufacturing employment has increased by 200,000 during the past year. Additionally, the American manufacturing sector is becoming more globally competitive. According to a recent analysis by the Boston Consulting Group, U.S. production costs will soon rival those of China; although Chinese workers remain substantially cheaper than their U.S. counterparts, American manufacturers deliver higher levels of productivity and quality control while simultaneously reducing transportation costs and delivery times. As demonstrated by the relationship between Apple and Austin, however, even regions that successfully attract manufacturing investment encounter difficulties in fueling a broad resurgence in employment within the sector. The vast majority of the components behind Apples devices are produced and assembled abroad. The A5 chip, which powers the iPad 2 and iPhone 4S, is a notable exception. Manufactured by Samsung in Austin, the A5 chip is the result of an extraordinary level of investment. Samsungs sprawling 1.6 million square feet plant expansion cost $3.6 billion, making the facility the largest single source of foreign direct investment in Texas. Samsungs decision to expand in Austin is an unqualified triumph for the region. Furthermore, Austin powerfully demonstrates that American manufacturing workers can profitably produce the worlds most innovative technology. At the same time, however, Samsungs expansion also underscores the limits of high-tech manufacturing to spur job growth. Thanks in large part to Samsung (and by proxy Apple), the value of manufactured goods produced in the Austin region last year increased by more than $2.4 billion, a 20 percent increase. At the same time, however, production of the A5 chip in Austin requires just 1,100 local workers. While Samsung and other companies have helped produce modest job growth in the manufacturing sector (employment in the region has increased for 7 consecutive quarters), the industrys presence in Austin remains far smaller than in past years; manufacturers have shed more than 25,000 jobs in the Austin region during the past decade. Clearly, the days when a single company such as General Motors or Kodak could determine the economic vibrancy of an entire region are gone. The iPhone is a particularly illustrative example of the dynamics that govern employment within the consumer electronics sector. Although the assembly of all Apple products occurs abroad, most of the value remains in America. A few years ago, for example, researchers at the University of California examined the valueadded inputs of an iPhome. Of the iPhones $600 unsubsidized retail price, these researchers calculated that American companies and workers captured more than half of this total. Chinese workers, responsible for the final assembly of the product, represented less than 2 percent of this total.

EMPLOYMENT UPDATE - JANUARY

6.5% -0.6% + 23,000

COUNTY

CAPCOG UNEMPLOYMENT RATE CHANGE SINCE JANUARY 2010 JOBS GAINED DURING PAST YEAR

UNEMPLOYMENT JOBS + / -

Bastrop Blanco Burnet Caldwell Fayette Hays Lee Llano Travis Williamson

7.1% 6.2% 6.1% 7.6% 5.3% 6.5% 5.6% 7.6% 6.4% 6.6%

837 -85 110 389 210 1,994 536 4 13,646 5,359

SOURCE: Texas Workforce Commission

RETAIL SALES TAX COLLECTION MAR.

COUNTY TOTAL CHANGE SINCE OCT 2010

Bastrop $488,925 Blanco $43,907 Burnet $609,745 Caldwell $248,862 Fayette $204,731 Hays $2,025,790 Lee $169,070 Llano $57,520 Travis $13,024,682 Williamson $7,915,664
SOURCE: Texas Comptroller

16.8% 18.2% 3.2% 7.1% 13.9% 4.7% 22.6% 0.0% 5.8% 2.7%

AUSTIN METRO REAL ESTATE - FEB

SEP '11 SEP '10 CHANGE Sales 1,405 1,210 16.1% Average Price $250.3K $238,9K 4.8% Total Listings 7,738 9,795 -21.0% Inventory (Months)

4.3

5.9 -27.1%

SOURCE: Texas State Real Estate Center For questions about Data Points, please contact John Rees 512.916.6183 jrees@capcog.org

DATA POINTS
By

THE CAPITAL AREA COUNCIL OF GOVERNMENTS

www.datapoints.org MARCH 2012 BACK TO THE FUTURE OF ECONOMIC DEVELOPMENT
During a meeting last year with Steve Jobs, President Obama reportedly pressed the Apple CEO on what it would take to make iPhones in the U.S. Jobs reply was characteristically bluntThose jobs arent coming back. Given the comparatively small value represented by Chinese labor, its unlikely that manufacturing products such as the iPhone and iPad within the U.S. would generate many high-paying jobs. Too often, however, observers fail to understand that Apple and other similar companies deliver value not through manufacturing, but rather through the design and sale of innovative products. Apples employment trends within America underscore this reality. Earlier this month, for example, Apple announced plans to create an additional 3,600 jobs within the Austin region over the next decade. Such plans would nearly double the number of Apple employees within Austin (up from just 1,000 workers in 2004). The new Apple positions are expected to help the companys customer support, sales and accounting capabilities. Austins economic vibrancy demonstrates that communities can succeed by spurring employment in sectors outside of manufacturing. Since 2001, manufacturing employment in the Austin region has declined more than 35 percent. During this same period, non-manufacturing employment has jumped 20 percent. Which brings us back to the future of economic development. While domestic manufacturing may once again thrive, future growth will produce fewer jobs compared to past eras. Furthermore, such work will increasingly be characterized by high-skill, high-wage positions. As a result, successful communities must work tirelessly to ensure an adequate pipeline of human capital. Ultimately, regions that effectively deliver a skilled workforce will not only be better positioned to land additional manufacturing positions, but also related functions in such areas as research and development and professional services. As the example of Austin illustrates, creating a compelling business environment ensures that a region delivers value across many sectors, from biotechnology to manufacturing to tomorrows hot sector. AUSTIN MANUFACTURING EMPLOYMENT
TOTAL MANUFACTURING EMPLOYMENT IN AUSTIN MSA

80,000 60,000 40,000 20,000 0

01

02

03

04

05

06

07

08

09

10

Source: Bureau of Labor Statistics

AUSTIN MANUFACTURING VALUE CREATION

MANUFACTURING GROSS REGIONAL PRODUCT (MILLIONS OF CURRENT DOLLARS)

$15,000 $12,000 $9,000 $6,000 $3,000 $0

01

02

03

04

05

06

07

08

09

10

Source: Bureau of Economic Analysis

AUSTIN ANNUAL WAGE BY INDUSTRY

AVERAGE WAGE (2011, Q3)

Manufacturing Natural Resources Information Financial Activities Professional & Business Services Public Administration Construction Trade & Transportation Education & Health Leisure $K $30K $60K $90K

Source: Texas Workforce Commission

DATA POINTS
By

THE CAPITAL AREA COUNCIL OF GOVERNMENTS

www.datapoints.org WHAT AUSTIN MAKES
There are approximately 50,000 manufacturing jobs within the Austin metropolitan statistical area, a significant decline from the more than 76,000 jobs supported ten years ago. Today, manufacturing employment represents less than 6.5 percent of all jobs within the region. Given Austins status as a high-tech hub, it should come as no surprise that the single largest subsector of the regions manufacturing base is Computer and Electronics. The sheer size of the subsector, however, remains rather startlingapproximately half of all manufacturing in the Austin region is comprised of Computer and Electronics products employment. The remaining 21 manufacturing subsectors, representing everything from food to plastics to machinery, employ just 3.3 percent of workers in the Austin region. Despite the decline of manufacturing within the Austin region, workers in the industry still enjoy handsome wages. In 2011, the average manufacturing worker earned more than $87,000 annually; no other employment sector features higher average wages.

MARCH 2012

Metropolitan Austin Employment

NONMANUFACTURING (93.5%) MANUFACTURING (6.5%)

Austin Employment by Manufacturing Subsector

TEXTILE PRODUCTS (150) ELECTRIC EQUIPMENT & APPLIANCES (2,000)

FABRICATED METALS (3,500)

CHEMICALS (2,200)

BEVERAGE & TOBACCCO (650) FOOD (1,900) NONMETALLIC MINERALS (2,100) TRANSPORT EQUIPMENT (950) FURNITURE (1,300) COMPUTER & ELECTRONICS (24,900) PAPER (100)

TEXTILES (60)

WOOD PRODUCTS (800)

PRINTING (2,250)

MACHINERY (3,100)
PRIMARY PLASTICS & METAL RUBBER (1050) PETROLEUM & COAL (30) (500) APPAREL (50) LEATHER (20)
Source: Bureau of Labor Statistics

MISCELLANEOUS (2,700)