Watson Township is and always has been a largely unpopulated area. It is mountainous and covered with a thriving second growth forest. During the late 1800s much of the land was stripped of its virgin forests. At the time central Pennsylvania, and the city of Williamsport was the center of the lumber industry in the United States. Trees were cut down and floated down Pine Creek, which flows through Watson Township. There were several sawmills along Pine Creek in the township. Other early attempts at industry included an iron forge. There were several deposits of iron ore in Watson Township. The ore proved to be of low quality and the investors in the iron furnaces struggled to turn a profit. The furnaces were abandoned and little evidence of their existence remains.
According to the United States Census Bureau, the township has a total area of 23.5 square miles (61.0 km²).23.2 square miles (60.1 km²) of it is land and 0.3 square miles (0.9 km²) of it (1.49%) is water.
There were 220 households out of which 25.5% had children under the age of 18 living with them, 68.6% were married couples living together, 4.1% had a female householder with no husband present, and 23.6% were non-families. 19.1% of all households were made up of individuals and 7.3% had someone living alone who was 65 years of age or older. The average household size was 2.50 and the average family size was 2.83.
In the township the population was spread out with 18.9% under the age of 18, 10.7% from 18 to 24, 22.2% from 25 to 44, 36.5% from 45 to 64, and 11.6% who were 65 years of age or older. The median age was 44 years. For every 100 females there were 107.5 males. For every 100 females age 18 and over, there were 105.5 males.
The median income for a household in the township was $40,250, and the median income for a family was $45,526. Males had a median income of $33,558 versus $21,607 for females. The per capita income for the township was $19,406. About 9.5% of families and 10.5% of the population were below the poverty line, including 8.0% of those under age 18 and 13.0% of those age 65 or over.