What’s Driving Economic Growth in U.S. Cities? Chemicals

The chemicals and plastics sector has emerged as a key driver of economic growth across a large number of U.S. cities, according to a study by IHS Global Insight prepared for The United States Conference of Mayors (Washington). IHS is the parent company of IHS Chemical Week.

“The industry surge this decade in investment, jobs, and incomes has been largely spurred by low natural gas prices, a result of the rapid incorporation of new drilling techniques to extract shale and other unconventional gas supplies in the U.S.,” according to the report. “Investment in the U.S. is now competitive with overseas locations. And the new gas fields have spurred investment not only in the Gulf of Mexico region, but across the U.S.” The report cites Shell's plans to a build a cracker in the Pittsburgh area because of its proximity to shale gas supplies as one example.

Houston surprisingly is not the top metro area for chemical manufacturing employment. “Chicago narrowly leads Houston with 43,000 jobs, led by its plastic products manufacturers,” the report says. “Twenty eight metros have employment in excess of 10,000 in this sector, and 206 metros employ more than 1,000 in the chemicals and plastics industries." Notably fast growth occurred in 2011 in Minneapolis, MN; Dallas, TX; San Diego, CA; and Milwaukee, WI among large metros, and in Muskegon,MI; Greeley, CO; Spokane, WA; Gadsden, AL; and Warren, MI, according to the study.

The chemical and plastics industry already generates over $760 billion in U.S. sales, is one of the top exporting sectors at almost $200 billion annually, over 8% of all U.S. exports, and invests $50 billion per year in U.S. research and development, according to the report. “These are vital contributions to our future prosperity,” the IHS report says. “Export demand will be a key driver for U.S. business in the coming decade, as households and government remain constrained by debt burdens. R&D spending in investment that boosts productivity is a critical contributor to economic growth.”