Houston Economy: Cost of Living, Jobs, and Industries

The Houston metro area — formally Houston-The Woodlands-Sugar Land — is the fifth-largest metro economy in the United States and the energy capital of the country. It is also the home of the largest medical complex in the world by employment, a major port, and one of the most ethnically diverse big cities in the U.S. Houston's economic story is bigger and broader than its oil-town reputation suggests.

This is a plain-English tour of how the Houston metro economy works. For the state-level picture, see Texas Economy. For the country-level view, see The State of the U.S. Economy and the broader Economy hub and city cluster.

How big is the Houston metro economy?

For example, recent metro GDP for Houston-The Woodlands-Sugar Land has run around $700 billion, according to the Bureau of Economic Analysis. Metro population is roughly 7.5 million, per the U.S. Census Bureau. That makes Houston larger than several U.S. states by both population and output.

The biggest industries

A few sectors do most of the work in the Houston metro economy:

• Energy — Houston is the U.S. corporate capital of oil and natural gas, with the headquarters of major exploration, refining, pipeline, and oilfield-services companies. The metro is also a fast-growing center for solar, wind, hydrogen, and carbon-capture work.
• Healthcare — the Texas Medical Center is the largest medical complex in the world by employment, anchored by MD Anderson, Houston Methodist, Memorial Hermann, Texas Children's, and Baylor College of Medicine.
• Trade and logistics — the Port of Houston is one of the busiest U.S. ports by tonnage, especially for petrochemical exports, and the metro is a major rail and trucking hub.
• Aerospace — NASA's Johnson Space Center, the home of U.S. human spaceflight, anchors a meaningful aerospace and contractor workforce.
• Manufacturing — petrochemicals, plastics, machinery, and food processing.
• Construction — fast metro growth keeps residential and commercial construction busy.
• Professional services — law, engineering, and consulting firms cluster around the energy and healthcare sectors.

Jobs and wages

Metro labor data is published by the Bureau of Labor Statistics Southwest region. For example, the Houston metro unemployment rate has typically run close to the national average, sometimes a tick above when oil prices fall and a tick below when they rise.

Texas follows the federal minimum wage of $7.25 per hour, and Houston does not set its own local minimum. Many large Houston employers pay well above that floor on their own to compete for workers, especially in healthcare and energy.

Cost of living

Houston's cost of living tends to run below the national average, especially for housing. For example, recent HUD Fair Market Rent for a two-bedroom in the metro has run around $1,500 a month, with the Inner Loop higher and most suburbs lower. Current county-level numbers are at HUD User.

The federal government tracks region-specific inflation data through the BLS Southwest region. Houston's CPI tends to track close to the national average month to month.

Taxes in Houston

Texas has no state income tax, so Houston residents pay no state or local tax on wages. Combined sales tax in the City of Houston is 8.25%, made up of the state's 6.25% base plus city and transit-district pieces. Property taxes are high — among the highest effective rates in the country — because Texas leans on property tax to fund schools and local government in place of income tax. State rules live at the Texas Comptroller, and you can read more about how sales tax works in our glossary.

How the Houston metro fits into the national picture

Houston is the U.S. swing city for energy. When oil and natural gas prices rise, Houston hires aggressively across exploration, services, refining, and the law and engineering firms that support them. When prices fall, the same chain reaction works in reverse, though the metro is far less exposed to oil swings than it was 20 years ago. The growth of healthcare, the medical center, and the Port of Houston has steadied the metro through energy-price cycles.

Houston and global energy

Most major U.S. and many international energy companies run their North American operations from Houston. That makes the metro unusually connected to events overseas — OPEC decisions, conflict in oil-producing regions, and changes in European energy demand all show up in Houston job postings and office rents within weeks. The federal data on U.S. energy production and prices lives at the U.S. Energy Information Administration.

A note on the numbers

Numbers in this article change every quarter — always check the latest from BEA, BLS, and HUD User for the most current data on the Houston metro.