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At the

Heart of
Cities’ Industry Clusters
Drive Growth

Featuring Four
Additional Metros
Amarillo, Beaumont–Port Arthur, Lubbock and Tyler–Longview

A special report of the Federal Reserve Bank of Dallas
Second Edition | December 2018

Staff
Executive Editor
Pia M. Orrenius
Publication Editors
Laila Assanie
Michael Weiss

Art Director
Darcy Taj

Data Analysts
Alexander T. Abraham
Stephanie Gullo
Benjamin Meier

Digital Designers
Justin Chavira
Olumide Eseyin
Kishya Mendoza Greer

Associate Editors
Kathy Thacker
Dianne Tunnell

Online Architects
Roger Morais
Demere O'Dell

For additional data, visit dallasfed.org/research/heart

At the Heart of Texas is a special report of
the Research Department at the Federal
Reserve Bank of Dallas, P.O. Box 655906,
Dallas, TX 75265-5906. Articles may be
reprinted on the condition that the source
is credited and a copy is provided to the
Research Department.
The views expressed are those of the
authors and do not necessarily reflect official
positions of the Federal Reserve System.

Contents
Section 1: Overview—At the Heart of Texas

Section 2: Austin—Round Rock

Section 3: Dallas—Plano—Irving

Section 4: El Paso

Section 5: Fort Worth—Arlington

Section 6: Houston—The Woodlands—Sugar Land

Section 7: McAllen—Edinburg—Mission

Section 8: Midland—Odessa

Section 9: San Antonio—New Braunfels

Section 10: Amarillo

Section 11: Beaumont—Port Arthur

Section 12: Lubbock

Section 13: Tyler—Longview

Appendix

At the Heart of Texas:
Overview

ith five metropolitan areas of 2 million or
more residents, Texas has more big cities per
capita than most large U.S. states.1 Dallas–Fort
Worth and Houston rank among the top six largest metropolitan areas in the U.S. in terms of both population and
economic output. In fact, Texas is the only state to have
two metros in the top 10 for both measures.
The abundance of large cities is an important growth
advantage on the state’s list of favorable economic
factors: central location, rich oil and gas deposits, wellplaced sea and land ports, proximity to Mexico, rapid
population growth, low cost of living and relatively light
regulatory burden. Thus, it is no surprise that employment has grown a percentage point faster in Texas than
in the nation on average and that state gross domestic
product growth was nearly twice that of the nation during
the economic recovery following the Great Recession.2
Amid this economic expansion and a near 40year low in unemployment, this second edition of At
the Heart of Texas, a special report on the historical,
economic and demographic profiles of Texas and its
key metropolitan areas, builds upon the first edition
released in February 2016.
Four smaller Texas metros are new to this edition—
Amarillo, Beaumont–Port Arthur, Lubbock and Tyler–
Longview. Collectively, they highlight the economic contributions of smaller cities and more rural areas, as well
as the importance within the state of certain industries,
including agriculture and refining and petrochemicals.
This edition also moves forward the time period
under study, focusing on economic developments
within Texas and its metros in the 2010–17 post-Great
Recession period—a stretch that includes the fracking
boom but also the 2015–16 energy bust, which slowed
the state’s economic expansion relative to its nonenergy
peers. As the state economy slowed notably in 2015–16
due to collapsing oil prices and related exploration
activities, metros such as Dallas and Austin with a more
diversified industrial base offset weakness in Houston,
Midland–Odessa and other energy-producing regions.

Federal Reserve Bank of Dallas

Importance of Cities
It is the age of the city. Paradoxically, as globalization
put everything and everywhere seemingly within reach,
attention has been drawn from national boundaries to
these smaller units of civilization. This is not new when
taking a longer perspective; after all, cities have been
the rock stars of history before, whether it’s Babylon, the
cradle of civilization; Athens, the birthplace of democracy; Florence, the origin of the Renaissance; or Birmingham, home of the Industrial Revolution.
Cities were centers of population, commerce, learning, wealth and economic opportunity long before economists explained why agglomeration matters to growth.
Cities are dense areas, with relatively high productivity and wages compared with noncities. The productivity advantage stems from agglomeration, which
means firms that co-locate have ready access to a deep
labor pool, the easy exchange of ideas and low transportation costs.3 When firms in like industries cluster,
they can further leverage the benefits of agglomeration.
Examples are Silicon Valley, de facto headquarters of
the U.S. high-tech industry, and Houston, home to the
bulk of the nation’s oil and gas sector. Harvard economist Ed Glaeser calls cities “mankind’s greatest invention” and argues in a 2011 book that cities have led
human progress through the ages by acting as engines
of innovation.4

Dominant Clusters Power Texas
Characteristics such as location, natural resources
and labor force contribute to an area’s long-run economic performance. Industry mix and industry agglomeration are additional important factors. Geographically, groups of firms are concentrated based on the
technologies they employ, the markets they serve, the
goods and services they produce and the labor skills
they require. Such industry clusters are important because they provide their participants (firms) with access
to specialized knowledge and/or resources, enhancing

productivity, spurring innovation and attracting new
business and investment in the area.5
An area typically has an economic base that consists
of several dominant industry clusters. These clusters
typically exceed the national average in their share of employment, output or earnings. Location quotients (LQs),
which compare the relative concentration of industry
clusters locally and nationally, are one way of assessing
these key drivers in an area’s economy. An LQ exceeding 1
indicates that a specific industry cluster is more dominant
locally than nationally. In this report, LQs are calculated
using industry cluster employment, and industry cluster
growth is measured by the percentage-point change in its
share of local employment between 2010 and 2017.6
The presentation here uses annual employment
data from the Quarterly Census of Employment and
Wages to compute location quotients. These data are
readily available at the metropolitan statistical area
(MSA) level and by three-digit-or-higher North American Industry Classification System (NAICS) code, facilitating analysis. Industry cluster definitions are taken
from Stats America, with some modifications that are
detailed in the appendix. Clusters generally comprise
multiple interdependent or interrelated industries or

NAICS classifications. The entertainment cluster in Los
Angeles and the auto manufacturing cluster in Detroit
are examples of such broad groupings that include the
main industry and its suppliers and service providers.
Chart 1.1 plots industry cluster LQs and growth
for Texas. Clusters in the top half of the chart, such as
energy and mining, information technology, business
and financial services, construction, and transportation and logistics, are referred to as base clusters. They
have a larger share of state employment relative to the
nation and, thus, an LQ exceeding 1. A base cluster is
usually vital to an area’s economy and can be expanding
relatively rapidly (star) or growing slowly or declining
(mature).
Those in the bottom half are less-dominant locally
than nationally. They generally produce services or
goods for local consumption and, hence, have an LQ
below 1. “Emerging” clusters, such as defense and
security, are relatively fast growing, while those growing
slowly or declining are termed “transitioning.”
Education and health services clusters combine
public and private sector employment. Thus, apart
from the government cluster, all others comprise only
private sector employment.

Chart 1.1: Energy, IT and Business and Financial Services Help Set Texas Apart from Nation
1.8

Energy and mining

Mature

Star
Information technology
and telecommunications

1.6

Location quotient in 2017

Construction

Education

1.4

Computer
manufacturing

1.2

Transportation
and logistics

Food services

Chemicals

Retail
1.0

Machinery
manufacturing
Defense and
security

0.8

Government

0.6

Advanced
materials

Transitioning

0.4
–1.5

–1.0

–0.5

Health
services

Business and
financial services

Recreation
Biomedical

Emerging
0.0

0.5

1.0

1.5

Percentage-point change in employment share, 2010–17
NOTE: Bubble size represents cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 1: Overview—At the Heart of Texas

Texas’ Leading Clusters

the significant presence of refineries and petrochemical
plants near the Gulf Coast.
Texas has evolved into a major high-tech hub (LQ
of 1.1 in 2017). The industry took off after World War II,
as Dallas-based Texas Instruments and other military-electronics manufacturers branched into civil
electronics. Texas also flourished during the 1990s
high-tech boom, when the IT and telecommunications
industries expanded in Austin and Dallas. Employment
in the IT and telecom cluster grew about 20 percent
in 2010–17 and now represents 5 percent of the state’s
workforce. Employment in defense and security, with
complementary ties to the state’s high-tech and energy
sectors, also rapidly expanded, rising 30 percent during
the period.
Additionally, Texas’ central U.S. location and its
border with Mexico have boosted the concentration of
the transportation and logistics industry (LQ of 1.2).
Texas is the largest exporting state in the nation, and it
is home to two large commercial airlines, a major railroad and two of the nation’s busiest ports—Houston, a
seaport, and Laredo, an inland port of entry. Education,

Texas has several dominant clusters. An abundance
of oil and gas has traditionally made energy-related
industries a major cluster—it employs 8.6 percent of the
state’s workforce and has an LQ of 1.5. Texas’ geological
makeup includes four shale formations—the Permian
Basin, Barnett, Haynesville and Eagle Ford—helping
make the state the No. 1 producer of oil and gas in the
nation. Texas produces 39 percent of all U.S. crude oil
and 23 percent of U.S. natural gas and employs 12.6
percent of the workers in the nation’s energy and mining
cluster. The employment share of the cluster was little
changed from 2010 to 2017, with the head count rising
15 percent (Chart 1.2). The slower growth relative to other sectors is due to the time period, which included both
the ongoing shale oil boom and 2015–16 energy bust.
Employment in construction (LQ of 1.2 in 2017)
grew rapidly over the period, supported by the energy
sector and overall strong economic performance that
increased demand for office, industrial and residential space. The downstream energy sector also plays a
meaningful role in Texas, which isn’t surprising given

Chart 1.2: Defense and Business Services Among State's Fastest-Growing Clusters
Transportation & logistics (3.7%)
Food svcs (8.8%)
Defense & security (3.3%)
Business & financial svcs (9.4%)
Construction (5.9%)
Recreation (2.7%)
Information technology & telecom (4.9%)
Health svcs (11.6%)
Total
Retail (11.0%)
Wood products (1.2%)
Energy & mining (8.6%)
Chemicals (1.6%)
Glass & ceramics (0.4%)
Electrical equipment mfg (0.2%)
Biomedical (0.6%)
Transportation equipment mfg (0.7%)
Fabricated metal mfg (1.0%)
Agribusiness (1.6%)
Education (9.9%)
Publishing & information (1.2%)
Utilities (0.4%)
Textiles (0.4%)
Machinery mfg (0.7%)
Government (5.6%)
Primary metal mfg (0.2%)
Advanced materials (2.5%)
Computer mfg (0.8%)

–5
–10

–1
–1
–2

–5

4
4

7
7
7
7

10
10

15
14
13

17
17

18
18

30
30

33
33

Percent change in employment, 2010–17

NOTES: Percent change in employment is shown in whole numbers. Each cluster's share of total jobs is shown in parentheses (rounded to one decimal place).
SOURCES: Texas Workforce Commission; authors' calculations.

Federal Reserve Bank of Dallas

Table 1.1: Most Dominant Clusters Pay Better in Texas than in U.S.
Cluster

Texas
2010

2012

U.S.

2014

2016

2017

Energy and mining

92,568

96,000

96,769

95,219

94,459

80,900

Construction

55,346

57,915

60,684

63,024

63,224

60,742

Transportation and logistics

59,586

62,194

61,913

60,621

60,887

53,761

Education

43,879

42,411

43,504

45,093

45,144

49,322

101,073

105,494

103,939

107,291

111,503

107,188

Food services

17,757

17,658

17,798

18,533

18,655

18,963

Glass and ceramics

51,499

53,930

57,653

58,283

60,338

55,398
106,629

Utilities

Information technology and telecommunications

93,485

95,293

95,717

99,732

101,583

Chemicals

80,600

83,663

85,827

86,810

88,128

72,887

Business and financial services

86,153

87,672

90,182

92,106

92,445

100,785

Fabricated metal manufacturing

58,593

60,538

61,305

60,056

60,736

55,830

111,364

114,313

114,392

123,805

130,458

120,226

Retail

30,496

30,776

31,075

31,531

31,591

31,216

Clusters with location quotient > 1

60,615

66,501

67,712

61,527

61,858

–

Clusters with location quotient < 1

56,206

50,620

51,267

60,812

61,243

–

Average earnings (total)

52,779

53,998

55,102

55,490

55,800

55,375

Computer manufacturing

NOTES: Clusters are listed in order of location quotient (LQ); clusters shown are those with LQs greater than 1. Earnings are in 2017 dollars.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors' calculations.

which includes elementary and secondary schools, also
has a slightly higher-than-average presence in the state,
likely due to a younger population.
Several of Texas’ dominant clusters, such as energy
and mining, computer manufacturing, chemicals, and
IT and telecommunications boast high pay (Table 1.1).
In fact, the average pay of workers in most clusters with
an LQ greater than 1 exceeds the comparable U.S. figure. Earnings in dominant clusters are also 11 percent
more than the overall average for the state ($55,800).
The Texas earnings premium in dominant industry
clusters is consistent with theory. Productivity should
be higher in dominant industries for the reasons previously noted, such as demand for workers’ specialized
skill sets; hence, employers should pay an earnings
premium over the same industry cluster in locations
where the cluster is not dominant. While the data for
the state mostly bear this out, it isn’t always the case for
the metros. Industry earnings at the metro level reflect
myriad local considerations that distort comparisons

with the nation, including cost of living and workforce
demographics and skill levels.

Popular Migrant Destination
Migration has played an important role in sustaining
the state’s long-term economic growth premium. Nearly
half of workers in the state are not native Texans. Since
2000, population gains from net migration (domestic
and international) and natural increase (births minus
deaths) have been roughly equal (Chart 1.3).7
Texas was among the first states to bounce back
from the Great Recession, and its booming economy
attracted many workers, particularly from other parts of
the U.S. where growth was still languishing. In fact, Texas was the second-largest net recipient of domestic migrants (after Florida) among the 50 states from July 2010
to July 2017, receiving 916,000 people—3.6 percent of
the state’s 2010 population. Domestic migrants to Texas
come from a variety of states, with transplants from

Section 1: Overview—At the Heart of Texas

California accounting for the largest share during this
period. Arrivals from other countries also contributed strongly to the state’s population growth during
the period, with immigrants from Mexico making up
the largest share of inflows. Texas was the recipient of
658,000 net international migrants from 2010 to 2017,
amounting to 2.6 percent of its 2010 population.8
The migrant inflow propelled the state’s population
growth rate to more than double that of the U.S. Texas
is younger and boasts a larger share of foreign born
relative to the rest of the nation.

Texas Again Outperforms Nation;
More Growth Likely
With the last plunge in oil prices, the economic landscape in the region changed, and employment growth
slowed to 1.2 percent. Payroll employment in energy-dependent metros such as Houston and Midland–
Odessa was flat or declined during the downturn. With a
strong rebound in 2017, activity in the state’s energy and

manufacturing sectors came roaring back. Texas was
the nation’s ninth-fastest-growing economy in 2017.
The Texas expansion has continued into 2018.
Annualized job growth in the first nine months of 2018
was a robust 2.4 percent—well ahead of the nation’s
1.7 percent annualized increase. Areas of the state tied
to oil and gas have grown at their strongest pace since
2014. The construction sector remains solid, the service
sector is experiencing widespread expansion and manufacturing activity is near multiyear highs.
With this strength, the Federal Reserve Bank of
Dallas projects employment growth around 2.4 percent
for 2018, well above the state’s long-term average of
2 percent. A tight labor market threatens to constrain
future growth, however.
Federal tax law changes that took effect in 2018 will
likely benefit Texas, while tariffs and uncertainty regarding future U.S. and world trade policies could cool activity
and investment plans and, ultimately, economic growth.
This decade on the whole has been good for Texas
and its metros despite the two-year energy bust. From

Chart 1.3: Migration, Natural Increase Contribute Equally to Texas Population Growth
Thousands
700

2001–17

Net domestic migration
Net international migration

600

26%

Natural increase

52%
22%

500

Hurricane Katrina

400

300

200

100

0
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

NOTE: Census Bureau estimates approximate the population on July 1 of the year indicated and, thus, capture changes from the previous year.
SOURCE: Census Bureau.

Federal Reserve Bank of Dallas

2017

December 2010 to December 2017, Texas on average
grew faster than the nation, with job gains in the state
averaging 2.4 percent per year, compared with 1.7
percent for the nation. Texas output expanded at nearly
twice the U.S. pace from 2010 to 2017.

New to the Second Edition

Individual industry cluster shares do not add to 100 because some
smaller industries at the three-digit-or-higher level in the North American
Industry Classification System (NAICS) are included in multiple clusters,
while some industries are not part of any of the clusters shown. Clusters
include other related industries. For instance, semiconductor manufacturing
(NAICS 3344) is included in both the advanced materials and information
technology and telecommunications clusters.
7
“Gone to Texas: Migration Vital to Growth in the Lone Star State,” by Pia
Orrenius, Alexander T. Abraham and Stephanie Gullo, Federal Reserve
Bank of Dallas Southwest Economy, First Quarter 2018.
8
Data are from the Census Bureau.
6

This edition has an expanded geographical breadth,
revises some cluster definitions for improved clarity
and updates economic analyses.
Modifications to the cluster methodology, used to
determine key sectors within metros, are explained in
detail in the appendix. Among the changes, the government sector covers only employment within local, state
and federal governments and excludes publicly funded
health care and education. Food services employment,
previously included in the recreation cluster, is now its
own cluster.
While such an aggregate view tells part of the story,
the industry clusters of each area define a metro’s distinctive place in the state’s economy and explain how its individual metros contribute to Texas job growth and income
gains. Conversely, the state as a whole provides useful
context with which to examine the individual metros.

Notes
Among large states, only Ohio and Pennsylvania have more big cities per
capita. Big cities refer to metropolitan statistical areas or metro divisions of
over 2 million residents in 2017.
2
Texas job growth averaged 2.0 percent per year, compared with 1.1
percent for the nation during 1990–2017. Inflation-adjusted state gross
domestic product growth averaged 3.5 percent per year, compared with 1.9
percent for the U.S. during 2010–17.
3
“The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in
the United States,” by Edward L. Glaeser and Joshua D. Gottlieb, National
Bureau of Economic Research, NBER Working Paper no. 14806, March 2009.
4
Triumph of the City: How Our Greatest Invention Makes Us Richer,
Smarter, Greener, Healthier, and Happier, by Edward L. Glaeser, New York:
Penguin Press, 2011.
5
For more information on what clusters are and how they affect competition
and innovation, see “Location, Competition and Economic Development:
Local Clusters in a Global Economy,” by Michael E. Porter, Economic
Development Quarterly, vol. 14, February 2000, pp. 15–34. Also, see “Clusters, Convergence, and Economic Performance,” by Mercedes Delgado,
Michael Porter and Scott Stern, National Bureau of Economic Research,
NBER Working Paper no. 18250, July 2012.
1

Section 1: Overview—At the Heart of Texas

Killeen

Georgetown

Marble
Falls
Cedar
Park

Belton

Round Rock

Austin

Wimberley

Bastrop

San
Marcos
Lockhart

Population (2017):
2.1 million

Population growth (2010-17):
22.5 percent (Texas: 12.1 percent)
Median household income (2017):
$73,800 (Texas: $59,206)

National MSA rank (2017): No. 31*
Kauffman Startup Index rank (2017): No. 2*

Amarillo

Plano

At a Glance
•
•
•
•

Austin’s political and educational influence
arose from its position as the state capital and
home to the University of Texas.
Today, the region is a major high-tech hub for both
the state and the U.S. and home to numerous
large and small technology companies.

Irving

Lubbock

Fort Worth

El Paso

Midland
Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Beaumont
Port Arthur

Austin

Fueling Austin’s rapid economic expansion is its
young and well-educated workforce.
Austin’s employment growth remains solid,
although very tight labor markets threaten to
constrain growth in the near term.

Dallas

San Antonio

Houston

Sugar Land

Edinburg

Mission
McAllen

*The Austin–Round Rock metropolitan statistical area (MSA) encompasses Bastrop, Caldwell, Hays, Travis and Williamson counties. The Kauffman Startup Activity
Index, a measure of business creation in the 40 largest U.S. metropolitan areas, is further explained in the appendix.

Austin–Round Rock:
Government and High Tech at the State’s Center
HISTORY: A Government, Education
and Technology Hub
Austin was established in 1839 as the capital of the
Republic of Texas. The city became the westernmost
railroad station along the Houston and Texas Central
Railway in 1871, and with no other railroad towns for
miles in most directions, it became a trading center.1
Austin’s status as Texas’ political center remained
uncertain until 1872, when the city was chosen as the
permanent capital in a statewide referendum. In 1881, it
was selected as the site for the new University of Texas.
Oil-boom growth in the early 20th century largely
bypassed Austin, and the city fell from its fourth-place
population ranking in Texas in 1880 to 10th place in
1920. Completion of two dams in the early 1940s greatly
aided the area’s subsequent growth.
Expansion of Austin’s key education and government sectors supported the region in the 1950s and
1960s. Buoyed by chamber of commerce efforts to

expand the economic base and by a flourishing research program at UT, major technology firms such as
IBM, Texas Instruments and Motorola began locating in
the area in the late 1960s and early 1970s. Austin gradually emerged as a high-tech center. Of the 108 largest
employers in the area in 2016, 56 were high-tech firms.2

INDUSTRY CLUSTERS: Hotbed
for High Tech
Cluster concentration is measured by location quotients (LQs), which compare the metro-area and U.S.
economies. Growth in a cluster is measured by the percentage-point change in its employment share between
2010 and 2017.3
Chart 2.1 displays the composition of industry
clusters in Austin–Round Rock. The top two quadrants—“mature” and “star”—display industry clusters with a larger share of employment relative to the

Chart 2.1: Austin Thrives as a High-Tech Hub
4.5

Mature

Star

4.0
Computer
manufacturing

Location quotient in 2017

3.5

Information technology
and telecommunications

3.0
Business and
financial services

2.5
Publishing and
information

Government Education

2.0

Energy and
mining

1.5

Defense and
security
Recreation

1.0
Advanced
materials

0.5
0.0

Biomedical

Transitioning

–0.5
–3.0

–2.5

–2.0

Food services

–1.5

–1.0

–0.5

Construction

0.0

0.5

1.0

Emerging
1.5

2.0

2.5

3.0

3.5

Section 2: Austin—Round Rock

As the state capital and home to the flagship UT
campus—a highly regarded research institution—Austin’s government and education sectors are large. Both
the federal and state governments and the university
are top area employers.
Other concentrated clusters include publishing and
information, defense and security, energy and mining,
and business and financial services. The defense and
security sector nearly doubled in size from 2010 to 2017,
making it the fastest-growing cluster in terms of job
growth and complementing both UT and the significant technology presence in the region (Chart 2.2). The
transportation and logistics, agribusiness, and business
and financial services sectors take the following three
spots among rapidly growing clusters.
Food services is important to the local economy,
and along with recreation services, this cluster highlights the tourist draws of such events as Austin City
Limits and South by Southwest (SXSW). An Austin
slogan, “Live Music Capital of the World,” is a nod to the
numerous live music venues.
The health cluster, which employs 8.7 percent of
Austin’s workforce, has also grown significantly in

nation (LQs exceeding 1). These clusters are vital to the
metro-area economy and can be expanding relatively
rapidly (star) or growing relatively slowly (mature).
Clusters shown in the bottom two quadrants—such as
advanced materials and biomedical—are smaller relative to the nation (LQs below 1). These less-concentrated clusters are labeled either “emerging” if they are fast
growing or “transitioning” if they are slow growing.
The underpinnings of Austin’s economy are government, education and the technology industry.
Computer manufacturing boasts nearly four times
the concentration in Austin than in the U.S., reflecting
the significant presence of manufacturers of personal
computers and related goods and services such as Dell,
Apple, Advanced Micro Devices and Applied Materials.
Dell, with 13,000 local workers, and Apple and IBM,
each with 6,000 employees, are among the area’s largest employers.4 Additionally, a sizable footprint from
numerous hardware, software, computing and systems
design companies—including tech giants Samsung,
Intel and Hewlett-Packard—make the concentration of
Austin’s information technology and telecommunications cluster 2.5 times that of the nation.5

Chart 2.2: Austin Job Gains Led by Defense, Business Services and Transportation Clusters
Defense & security (4.9%)
Transportation & logistics (1.5%)
Agribusiness (0.6%)
Business & financial svcs (13.4%)
Construction (5.8%)
Transportation equipment mfg (0.1%)
Food svcs (10.0%)
Information technology & telecom (11.6%)
Recreation (3.4%)
Wood products (0.9%)
Textiles (0.2%)
Chemicals (0.8%)
Glass & ceramics (0.3%)
Publishing & information (2.3%)
Health svcs (8.7%)
Total
Utilities (0.2%)
Retail (10.6%)
Energy & mining (6.6%)
Electrical equipment mfg (0.2%)
Machinery mfg (0.4%)
Primary metal mfg (0.0%)
Fabricated metal mfg (0.4%)
Computer mfg (2.6%)
Education (9.7%)
Biomedical (0.8%)
Advanced materials (2.7%)
Government (8.4%)

95
77
69
62
52
50
49
42
41
39
38
38
38
35
32
30
29
27
25
24
20
18
17
11
9
8
6
0
0

Percent change in employment, 2010–17

NOTES: Percent change in employment is shown in whole numbers. Each cluster's share of jobs is shown in parentheses (rounded to one decimal place).
SOURCES: Texas Workforce Commission; authors' calculations.

Federal Reserve Bank of Dallas

100

Table 2.1: Annual Earnings in Austin Higher than U.S. Average in Several Dominant Clusters
Cluster

Austin
2010

2012

2014

U.S.
2016

2017

Computer manufacturing

134,849

134,613

127,210

137,120

141,034

120,226

Information technology and telecommunications

110,531

110,169

104,068

110,332

115,479

106,629

Business and financial services

90,174

90,887

91,559

97,649

99,067

100,785

Defense and security

86,112

88,731

93,620

105,400

107,064

91,226

Publishing and information

81,350

79,867

83,672

82,886

87,536

96,127
18,963

Food services

18,277

18,724

19,164

20,393

20,847

Construction

52,051

52,445

55,686

59,481

60,828

60,742

Government

57,686

57,398

60,279

62,491

62,749

60,568

Energy and mining

88,610

90,357

87,958

91,692

93,701

80,900

Education

45,912

42,576

44,937

46,272

46,589

49,322

Clusters with location quotient > 1

70,689

71,949

72,915

76,727

78,638

–

Clusters with location quotient < 1

53,813

51,373

51,900

54,111

53,946

–

Average earnings (total)

55,013

55,501

56,118

58,497

59,742

55,375

recent years. The second- and third-largest private
employers in the city are the Seton Healthcare Family,
with 10,270 employees, and St. David’s HealthCare, with
nearly 8,600 employees. The summer 2017 opening of
the Dell Seton Medical Center, a significant component
of the new Dell Medical School at UT, has also expanded opportunities for health care workers in the area.
Though the concentration of health industry employment remains below that of the U.S. (LQ is 0.73), cluster
employment has increased 32 percent since 2010.
Austin’s star and mature clusters pay considerably
higher wages than their less-concentrated counterparts
(Table 2.1). Computer manufacturing, information
technology and telecommunications, and business and
financial services boast some of the region’s best-paying jobs. In fact, the average earnings within computer
manufacturing were around $141,000 in Austin in 2017,
more than double the metro’s average of about $59,700
across all sectors. Overall, Austin residents employed in
the base clusters (those with LQs greater than 1) earn
46 percent more on average—$78,600 versus $53,900—
than those employed in less-concentrated clusters.
Moreover, wages in three of Austin’s top four
most-concentrated clusters—computer manufacturing
(LQ of 3.6), information technology (LQ of 2.5) and defense and security (LQ of 1.4)—were significantly higher
than the national average for those clusters in 2017.

DEMOGRAPHICS: Young,
Highly Skilled Talent Pool
The Austin metro area’s strength is its young and
well-educated workforce—its median age is 3.5 years
below the U.S. median. The area ranks No. 1 in college
education among the major Texas metros (Chart 2.3).
Austin placed eighth on the list of the most-educated U.S. metros, according to a study by WalletHub.6
Nearly 43 percent of adults (25 years and older) in the
metro area have at least an undergraduate degree,
compared with 28.9 percent in Texas and 31.2 percent
nationally in 2016. This is one reason the metro area has
attracted many high-tech companies and boasted a median household income of $73,800 in 2017, significantly
higher than that of the state and nation.
Hispanics make up 32.2 percent of the area’s inhabitants, less than the share in Texas overall. Foreign-born
residents constitute 14.4 percent of the metro population, lower than their share in Texas but slightly higher
than the national average.

EMPLOYMENT: Strong Rebound,
Unrelenting Growth
Employment declines in Austin during the Great
Recession were steep. However, the area was the first
major metro to bounce back, regaining all lost jobs 26

Section 2: Austin—Round Rock

Chart 2.3: Austin Has Most Educated Population Among Texas Major Metros
Percent
45

42.8
Bachelor’s degree or higher

No high school diploma

36.5
34.5

35
32.0
30

31.2

28.9

25
21.9

27.8

23.1
20.9 20.3

16.7

15.5

28.9

18.3
16.2

17.1

14.4
12.6

10.5

5
0
Austin

Dallas

El Paso

Fort Worth

Houston

McAllen

Midland–
Odessa

San Antonio

Texas

U.S.

NOTE: Share of population age 25 and over.
SOURCE: Census Bureau, 2016 American Community Survey 1-year estimates.

months after the beginning of the downturn. In December 2017, total nonfarm employment was 31 percent
over its previous peak in September 2008.
Austin’s rapid postrecession expansion has benefited
from its outsized concentration of high-tech jobs—both
in information technology and telecommunications
and in business and financial services. From December
2009 to December 2017, employment in professional,
scientific and technical services increased 81 percent,
and payrolls in information services grew 60 percent.7
Even as the Texas economy slowed through the 2015–
16 oil bust, Austin’s job growth remained vigorous. Austin
added to its payrolls at a 3.3 percent rate in 2016 and by
2.8 percent in 2017. Unemployment in Austin was more
than a percentage point below the Texas rate in 2017; it
dropped to a 17-year low of 2.7 percent in October 2017.
The unemployment rate, which subsequently ticked up
to 2.8 percent in October 2018, remains low, a testament
to both the strength of Austin’s economy and the challenges that lie ahead for businesses in finding workers to
fill positions. Austin is also a hotbed of entrepreneurial
activity, ranking second among U.S. metro areas, according to the Kauffman Startup Activity Index in 2017.8

Federal Reserve Bank of Dallas

OUTLOOK: No Slowing in Sight
Austin’s economy is dependent on the technology industry, with 6 percent of its 2016 gross domestic
product generated from the information services sector.
Global semiconductor sales, a barometer for the technology sector, are expected to grow strongly through
2018, according to World Semiconductor Trade Statistics.9 This bodes well for the Greater Austin economy.
Still, the region remains unable to attract significant
amounts of venture capital relative to other high-tech
hubs such as San Francisco and Boston. Venture capital
funding in 2017 declined 16 percent compared with
2016—from more than $900 million to just over $760
million. This compares with a 17 percent increase in
national venture capital and a 56 percent funding increase—or $300 million—across the rest of Texas. While
Austin remains attractive to startups and tech workers,
small businesses looking for capital to expand may
face challenges.
Some of the area’s technology jobs are tied to the
energy industry. Examples are those in the production
of high-tech instruments and computer equipment for
hydraulic fracturing of shale formations. Employment

in the area’s manufacturing industries declined in 2014
and 2015, in part due to depressed oil prices. However,
with strengthening in energy activity in 2017, manufacturing employment rose 4.7 percent.
UT’s presence provides stability and growth to the
education, biomedical and health sectors. The opening of
the Dell Medical School at UT should further expand the
capacity of medical research in the region.
The U.S. Army's recent announcement that its
Futures Command will be headquartered in Austin will
further boost the region's ties to the defense and security sector. Also, the area’s vibrant and educated work-

force will likely continue to attract employers, providing
new growth opportunities.
Both the commercial real estate and housing markets in the metro area are healthy, although there are
some signs of softening. Conversely, strong home prices
and rent appreciation over the past several years have
continued to weaken home affordability for lower-wage
workers. While this trend in prices is moderating, continued in-migration of high-wage earners will keep the
pressure on living costs.
—Laila Assanie and Christopher Slijk

Austin–Round Rock Growth Outlook
Drivers
•
•
•

Challenges

A pickup in global semiconductor demand will drive
employment gains in Austin’s large technology sector.
The presence of the state government and UT provide stability
to the area’s economy.
Austin’s vibrant and educated workforce will further attract
employers, fueling additional growth.

•
•

•

The area’s low unemployment rate will restrain job growth.
Rising rents and home prices will make living in Austin
unaffordable for many low- and mid-wage employees who are
part of Austin’s base clusters.
General difficulty in attracting significant venture capital may
leave small startups with limited avenues for growth relative to
other technology hubs.

Notes
The history of Austin has been adapted from the Texas State Historical
Association’s Handbook of Texas, tshaonline.org/handbook/online/articles/
hda03.
2
Detail about the largest Austin metro-area employers is provided by the
Austin Chamber of Commerce, www.austinchamber.com/economic-development/austin-profile/business-industry#Region's Largest Employers.
3
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
4
See note 2.
5
The information technology and telecommunications cluster includes firms
categorized in North American Industry Classification System code 334,
computer and electronic product manufacturers.
6
Data are from the “Most and Least Educated Cities in America” list published by WalletHub. The study ranked the 150 largest U.S. metros based
1

on 11 metrics, including the percentage of adult residents with a high
school diploma, associate degree, bachelor’s degree and graduate or professional degree; quality of public schools and universities; and students
per capita enrolled in the top universities in the U.S. See www.wallethub.
com/edu/most-and-least-educated-cities/6656.
7
Employment data are from the Texas Workforce Commission and are early
benchmarked and seasonally adjusted by the Federal Reserve Bank of
Dallas.
8
Data are from the 2017 Kauffman Startup Activity Index, which is based on
three indicators: the rate of new entrepreneurs starting businesses, opportunity share (a measure of the percentage of new entrepreneurs not coming
out of unemployment) and startup density.
9
The “World Semiconductor Trade Statistics” August 2018 release projects
that the worldwide semiconductor market will grow by 15.7 percent to $477
billion in 2018 following a 21.6 percent increase in 2017. See www.wsts.
org/76/Recent-News-Release.

Section 2: Austin—Round Rock

Amarillo

At a Glance
•
•
•
•

Dallas’ prominence arose from its importance as
a center for the oil and cotton industries and its
location along numerous railroad lines.

Plano
Irving

Lubbock

Today, Dallas serves as the business and financial
services center for the state and has evolved into a
major high-tech hub.

Fort Worth

El Paso

Midland
Odessa

Dallas has become a popular migrant destination,
attracting residents from abroad as well as from
other states.

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Houston
San Antonio

Sugar Land

Edinburg

Population (2017):

Median household income (2017):

4.9 million

$68,734 (Texas: $59,206)

Mission
McAllen

National MSA rank (2017):
No. 4* (Dallas and Fort Worth
combined)

Kauffman Startup Index rank (2017):
No. 11* (Dallas and Fort Worth combined)

Sherman
Gainesville

Denton

McKinney
Frisco

Lewisville

Plano

Sulphur
Springs

Greenville
Rockwall

Dallas
Irving

Beaumont
Port Arthur

Austin

The metro’s finance, insurance and transportation
sectors are expected to see continued expansion
following an earlier national consolidation that
increased the sectors’ local concentration.

Population growth (2010–17):
15.6 percent (Texas: 12.1 percent)

Dallas

Kaufman
Waxahachie

*The Dallas–Plano–Irving metropolitan division is part of the Dallas–Fort Worth metropolitan statistical area (MSA) and encompasses Collin, Dallas, Denton,
Ellis, Hunt, Kaufman and Rockwall counties. The population of the Dallas–Fort Worth MSA is 7.4 million. The Kauffman Startup Activity Index, a measure of
business creation in the 40 largest U.S. metropolitan areas, is further explained in the appendix.

Dallas–Plano–Irving:
Texas’ Business and Financial Services Hub
HISTORY: Business Center Rises
from Rail Crossroads

ters to Dallas and further increasing the area’s prominence as the state’s business and financial center.

Dallas quickly became a service center for the surrounding countryside after its founding in 1841. By the
1870s, Dallas had attracted two major rail lines, making
it one of the first rail crossroads in Texas and establishing the city as a strategic location for the transport of regional products to manufacturers to the north and east.1
Dallas became the world’s leading inland cotton
market at the beginning of the 20th century. It also rapidly evolved into a center of petroleum financing; Dallas
bankers were among the first in the nation to lend money to oil companies using oil reserves as collateral.
The growth of companies such as Texas Instruments
Inc. helped make Dallas the nation’s third-largest technology center during the 1950s and '60s. The opening of
Dallas/Fort Worth International Airport in 1974 provided a major selling point, bringing corporate headquar-

INDUSTRY CLUSTERS: Business
and Finance Loom Large
Industry cluster concentration is measured by
location quotient (LQ), which compares the metro-area economy with the national economy (Chart 3.1).
Growth within an industry cluster is measured by the
percentage-point change in its share of local employment between 2010 and 2017.2
Clusters in the top half of Chart 3.1, such as business
and financial services and computer manufacturing,
have a larger share of employment relative to the nation
and, thus, an LQ greater than 1. These clusters are generally vital to the area’s economy and can be expanding
relatively rapidly (“star”) or slowly (“mature”).

Chart 3.1: Business and Finance, IT and Telecom Dominate Dallas
3.0

Mature

Star

2.5

Location quotient in 2017

Computer
manufacturing

Business and
financial services

2.0
Information technology
and telecommunications

Defense and
security

1.5
Education

Energy and
mining

Retail

Transportation
and logistics

1.0
Food services
Advanced
materials

Government

0.5

Construction
Health
services

Transitioning

0.0
–1.5

–1.0

–0.5

0.0

Emerging
0.5

1.0

1.5

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 3: Dallas—Plano—Irving

Those in the bottom half, such as advanced materials
(semiconductors and fiber optics) and government, are
less dominant locally than nationally and, hence, have an
LQ below 1. “Emerging” clusters are fast growing, while
those expanding slowly or declining are “transitioning.”
Not surprisingly, Dallas’ most important star clusters
are business and financial services and defense and security. Business and financial services is the largest cluster,
employing around 14 percent of the workforce in 2017.
Some of Dallas’ largest employers are banking companies, such as JPMorgan Chase & Co. and Bank of America.
Liberty Mutual Insurance and State Farm Insurance
have consolidated operations into the Dallas area,
bringing thousands of jobs and making insurance one
of the metro’s fastest-growing industries. The relocations are contributing to growth in the already large
business and financial services cluster. The cluster has
grown rapidly since 2010, increasing its employment
share 0.8 percentage points from 2010 to 2017.
The Dallas area is also home to major technology
companies, including Texas Instruments and AT&T.
The information technology and telecommunications
cluster employed about 8 percent of the metro’s work-

force in 2017, growing 16 percent from 2010 to 2017
(Chart 3.2). During the peak of the high-tech boom, the
Telecom Corridor was an expansive part of the Dallas
area’s economy. The region was hard hit by the 2001
dot-com bust, but recovered and subsequently added
the operations of numerous companies in technology
and other fields.
Dallas has experienced a real estate boom since
the end of the Great Recession, fueling growth in its
construction sector. Employment expanded 37 percent
in 2010–17, in line with the increase in Fort Worth and
ahead of other metros in this report except Austin.
Defense and security, employing 5 percent of the
workforce, has gained standing in Dallas. Employment
in the energy and mining cluster grew 15 percent from
2010 to 2017, but its overall significance has declined as
many energy companies moved business operations to
Houston. Drilling for natural gas in North Texas’ Barnett
Shale has slowed because of low natural gas prices.
Dallas’ neighbor, the Fort Worth–Arlington metropolitan division, also has dominant defense and energy
clusters. Fort Worth–Arlington serves as a logistics and
distribution hub with activity spilling into Dallas, where

Chart 3.2: Dallas Posts Rapid Job Gains in Its Dominant Clusters
Transportation & logistics (4.1%)
Construction (5.2%)
Defense & security (4.9%)
Food svcs (8.2%)
Business & financial svcs (14.3%)
Health svcs (10.3%)
Recreation (2.9%)
Retail (10.3%)
Total
Glass & ceramics (0.4%)
Wood products (1.5%)
Information technology & telecom (7.8%)
Electrical equipment mfg (0.1%)
Primary metal mfg (0.2%)
Energy & mining (5.7%)
Chemicals (1.3%)
Agribusiness (0.9%)
Biomedical (0.6%)
Education (8.2%)
Publishing & information (1.9%)
Fabricated metal mfg (0.7%)
Machinery mfg (0.3%)
Textiles (0.5%)
Transportation equipment mfg (0.8%)
Computer mfg (1.6%)
Utilities (0.3%)
Government (4.0%)
Advanced materials (2.7%)
–10

–4
0

3
3
3
2

8
7

11
11

16
16
16
15
15

28
26
25
24
24

37
36
36

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 3.1: Annual Earnings in Dallas Generally Exceed National Average in Dominant Clusters
Cluster

Dallas

U.S.

2010

2012

2014

2016

2017

Computer manufacturing

111,193

120,283

129,462

137,677

149,548

120,226

Information technology and telecommunications

102,959

105,195

109,767

114,238

114,619

106,629

Business and financial services

92,226

93,405

97,068

100,179

100,602

100,785

Defense and security

83,346

82,943

86,025

90,224

91,077

91,226

Transportation and logistics

53,813

53,451

53,615

52,764

51,432

53,761

Glass and ceramics

56,201

57,573

63,951

66,544

68,153

55,398

Construction

57,297

58,438

60,270

64,724

66,296

60,742

Publishing and information

79,800

83,359

85,528

87,018

83,874

96,127

Food services

20,135

19,708

19,202

20,165

20,433

18,963

Clusters with location quotient > 1

76,616

78,328

77,901

80,914

81,207

–

Clusters with location quotient < 1

54,099

53,724

58,910

59,787

60,245

–

Average earnings (total)

59,859

60,559

61,132

63,032

63,315

55,375

transportation and logistics was the fastest-growing
cluster. Dallas and Fort Worth together are home to 22
Fortune 500 companies on the 2018 list.
Dallas’ star and mature clusters are relatively high
paying and boast annual average earnings ($81,200)
that are 28 percent higher than the annual average
earnings in Dallas ($63,300) (Table 3.1). While real (inflation-adjusted) wages in the star and mature clusters
grew an average 6.0 percent since 2010, wages in other
less-prominent industry clusters climbed 11.4 percent.

DEMOGRAPHICS: A Destination
for New Arrivals
The Dallas–Fort Worth metroplex (Greater Dallas and
Fort Worth components) has become a top domestic
destination, although it has attracted many new residents
from other countries as well. New arrivals from other
parts of the U.S. accounted for 40 percent of DFW’s population increase in 2017 (Chart 3.3). Among U.S. metro
areas, the metroplex experienced the highest population
gains through total net migration from 2010 to 2017.
Amid record migration, Dallas’ unemployment rate
has remained low, averaging 3.6 percent in 2017. Per
capita income and median household income are higher than national and Texas figures, and Dallas’ median
household income increased 10.2 percent from 2014 to
2017 in real terms.

Dallas’ population is 44.1 percent non-Hispanic
white. Hispanics make up a significant share of the area’s
inhabitants, 29.7 percent. Foreign-born residents constitute 20.2 percent of the metro population, higher than
their shares in Austin and San Antonio.
Dallas ranks second in educational attainment
among the Texas metros in this report, with 36.5 percent
of its adult residents holding a bachelor’s degree or higher. This is likely because the business and financial services, health care, education, information technology,
and defense and security sectors employ a large share of
the workforce and most require a college degree.

EMPLOYMENT: Brisk Growth amid Oil
Bust, Subsequent Moderation
The Dallas economy proved resilient during the oil
bust period. Area employment grew an annualized 3.7
percent from December 2014 to December 2016—second only to Austin among the major Texas metros.
Employment expansion was broad based, and nearly
every major sector outpaced the state and nation over
the two-year period. Trade, transportation and utilities; construction; professional and business services;
and leisure and hospitality each grew at a more than 4
percent annual rate during the period. The Dallas area’s
spurt has been fueled in part by business relocations
and consolidations.

Section 3: Dallas—Plano—Irving

Chart 3.3: Domestic Net Migration to Dallas–Fort Worth Solid Since 2005
Thousands
200
Domestic migration

180

International migration
Natural increase

160
140
120
100
80
60
40
20
0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

NOTE: Census Bureau population estimates approximate the population on July 1 of the year indicated and capture changes from the previous year.
SOURCE: Census Bureau.

Dallas employment growth reached an annualized
2.6 percent in 2017, above its long-run (1990–2017) average growth of 2.2 percent and ahead of the state’s 2.1
percent increase. Job growth was particularly strong in
the finance and insurance sector at 4.0 percent, primarily due to a 5.1 percent increase in insurance carriers
and related activities employment. These gains are
likely a result of the consolidation of employers such as
State Farm, Liberty Mutual and JPMorgan Chase in the
metro area. The Dallas unemployment rate dropped to
3.2 percent in October 2017—the lowest since 2000. It
subsequently rose slightly and has averaged 3.5 percent
in the first 10 months of 2018.
Amid the metro’s flourishing economy, the real
estate market has boomed. Strong housing demand
has boosted single-family homebuilding activity, with
construction permits issued approaching or reaching
double-digit growth every year from 2012 through 2015
and again in 2017. DFW placed first among the top markets for apartment deliveries in 2017.3

Federal Reserve Bank of Dallas

OUTLOOK: Faster Job Growth
than the State
Dallas’ employment growth will likely continue
to outperform the state and the nation in the medium term. The area still attracts business and financial
services companies, which have reached a critical
mass and can draw on a network of necessary support
services. Overall growth is buoyed by a well-educated
population, a competitive cost structure and the U.S.
economy’s strength.
Dallas’ central location and its established network
of highway, air and rail transportation will support expansion in its transportation and logistics sector, which
makes up 4.1 percent of the region’s employment and is
classified as a star among Dallas’ clusters. Denton and
Collin counties are projected to be among the nation's
fastest-growing economies from 2017 to 2021, according to an Oxford Economics forecast.4 DFW will also
benefit from ongoing expansion of firms such as Charles
Schwab, which is expected to hire more than 2,000

additional workers at its Westlake Campus currently
under construction in Tarrant County.5
Both the commercial real estate and housing markets in the metro area are expanding, but the pace of
activity has begun to moderate. The rapid increase in
home prices and rents over the past several years has

reduced housing affordability. While this trend in price
appreciation has eased, continued in-migration will
likely support the market.
–Laila Assanie and Stephanie Gullo

Dallas–Plano–Irving Growth Outlook
Drivers
•

•
•

Challenges

A diversified economy (less dependent on the energy sector)
and ongoing corporate relocations and expansions will
continue to boost job growth and buoy ongoing office and
industrial development.
A relatively well-educated workforce and rapid growth should
continue to attract businesses to the area.
Newcomers to the area will further drive demand for both
single-family and multifamily housing.

•

Tight labor markets may restrain the opportunities for
companies to grow.
A tight housing supply combined with rapid population growth
and continued job gains will support home prices, eroding the
area’s cost-of-living advantage.
Rapid population growth will increase strain on existing
infrastructure and public resources.

•

Notes
The history of Dallas is taken from the Texas State Historical Association’s
Handbook of Texas, tshaonline.org/handbook/online/articles/hdd01.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
See “Apartment Supply Volumes Peak at a 30-Year High in 2017,” by Kim
O’Brien, Jan. 22, 2018, www.realpage.com/analytics/apartment-supply-volumes-peak-30-year-high-2017/.
4
See “Dallas–Fort Worth Has Top Two Spots in U.S. Based on 5-Year Economic Forecast,” by Tracy M. Cook, Aug. 10, 2017, www.dallasnews.com/
business/economy/2017/08/10/two-dallas-fort-worth-counties-lead-nationeconomic-growth-potential-next-five-years.
1

See “Charles Schwab to House 2,600 Employees with Initial Phase of
Westlake Campus,” by Candice Carlisle, Sept. 20, 2017, www.bizjournals.
com/dallas/news/2017/09/20/charles-schwab-to-house-2-600-employeeswith.html, and “Schwab Now Expects to Bring 2,600 Jobs to New Campus
North of Fort Worth,” by Gordon Dickson, Sept. 21, 2017, www.star-telegram.com/news/local/community/northeast-tarrant/article174565261.html.

Section 3: Dallas—Plano—Irving

At a Glance
•

Retail is among the largest clusters in El Paso. Health services and food services as well
as transportation and logistics are also important, reflecting El Paso’s proximity to the
border of Mexico and its trading relationship with neighboring Ciudad Juárez.

•

Government is a major driver of the local economy, especially the federal government.
Fort Bliss, the largest employer, is an important generator of local economic activity and
is likely to continue to play that role in the foreseeable future.

•

El Paso’s job growth outpaced the state and nation in 2015 and 2016. Robust
manufacturing activity in Ciudad Juárez boosted El Paso’s service sector. However,
moderating U.S. auto demand combined with uncertainty surrounding cross-border trade
could slow manufacturing activity. In addition, a strengthening dollar will temper retail
sales north of the Rio Grande.

•

El Paso was the most-populous border metro in Texas until McAllen surpassed it in 2015.

El Paso

Population (2017):
844,818

Sierra
Blanca

Population growth (2010–17):
4.7 percent (Texas: 12.1 percent)

Median household income (2017):
$44,416 (Texas: $59,206)

National MSA rank (2017): No. 68*

Amarillo

Plano
Irving

Lubbock

El Paso

Dallas

Fort Worth
Midland
Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Beaumont
Port Arthur

Austin

Houston
San Antonio
Edinburg

Mission
McAllen

Sugar Land
*The El Paso metropolitan statistical area (MSA) encompasses El
Paso and Hudspeth counties.

El Paso:
Gateway to Mexico Relies on Commerce, Government
HISTORY: From Agriculture to Trade Hub

activity in retail, health and food services, is important
to the local economy. Government, led by Fort Bliss and
large Customs and Border Patrol operations, also plays a
major role in the metro area.

In 1848, before the Rio Grande marked the border
between the United States and Mexico, the flags of Mexico and Spain flew over what would become El Paso. U.S.
Army post Fort Bliss came into existence in 1854, five
years before the city was formally established in 1859.
El Paso was a small, quiet village for several decades
until the railroad arrived in 1881. It grew into a frontier
boomtown called the “Six-Shooter Capital” and “Sin City”
because of its saloons and gambling establishments.1
Over the years, more conventional industries
emerged. Augmenting cotton production, copper
smelting and oil refining entered the area and expanded
the economy in the late 19th and early 20th centuries.
Underscoring the region’s current commercial standing, El Paso is the second-largest port of entry between
the U.S. and Mexico after Laredo with $76.1 billion in
total trade in 2017. Cross-border tourism, which drives

INDUSTRY CLUSTERS: Prime Site
for Government, Retail
Clusters in Chart 4.1 are organized by location
quotient (LQ)—the share of local employment in each
industry cluster relative to the nation—and the change
in employment share between 2010 and 2017.2
“Star” quadrant clusters, such as transportation
and logistics, retail, food and health services, have a
large share of employment relative to the nation (an LQ
exceeding 1) and are relatively fast growing; “emerging” industries are smaller relative to the nation (an LQ
below 1) and fast growing. Industries in the “mature”

Chart 4.1: El Paso's Economy Dependent on Cross-Border Tourism, Government
2.0

Mature

Transportation
and logistics

1.6

Food services

Government
Utilities

1.4
Location quotient in 2017

Star

Primary metal manufacturing

Education

1.8

Construction
1.2

Textiles

1.0
Energy and
mining

0.8
0.6

Fabricated metal
manufacturing

Information technology
and telecommunications

0.4

Retail
Health
services

Business and
financial services

Advanced
materials

0.2

Transitioning
0.0
–2.0

–1.5

Emerging
–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

Percentage-point change in employment share, 2010–17
NOTES: Bubble size represents cluster share of metropolitan statistical area employment. Cross-border tourism refers to activity in retail, health services and
food services.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 4: El Paso

Education is the third-largest cluster with more
than 38,000 jobs. The sector is fueled by the 12 school
districts and private and charter schools, UTEP, El Paso
Community College and Texas Tech University Health
Sciences Center. Although the sector is one of the area’s
largest, employment has changed little since 2010.
Government (excluding public sector health care and
education employment) accounts for 8 percent of workers. Fort Bliss is the largest employer in the metro area
and, according to the Texas Comptroller of Public Accounts, contributed $23.1 billion to the Texas economy in
2017.4 The Department of Homeland Security’s Customs
and Border Protection agency, the city of El Paso and El
Paso County, which together employ over 10,700 workers, are also among top government employers.5
El Paso is a historically important gateway from both
Mexico and the Southwest to the rest of Texas. Border
crossings, trade with Mexico and the Interstate 10 corridor through El Paso make transportation and logistics
an important sector. About 22.1 million personalvehicle passengers, 7 million pedestrians and more

quadrant, such as education and government, are more
concentrated but slower growing or shrinking in size,
and “transitioning” industries are smaller relative to the
nation and slower growing or declining.
Retail and food services are star clusters of the El
Paso economy, driven by the growing binational population and regional income gains. A strong relationship
with neighboring Ciudad Juárez is important as Mexican shoppers account for 10 to 15 percent of El Paso’s
retail sales.3 Employment in retail, the second-largest
sector in El Paso, has grown 17 percent since 2010, to
nearly 40,000 workers (Chart 4.2).
Health services, the largest sector, expanded 28
percent from 2010 to 2017, to more than 40,000 workers. Large, private health care providers such as Tenet
Health and Las Palmas Del Sol Healthcare rank among
El Paso’s top employers. Growth is also driven by rapidly growing medical programs at the University of Texas
at El Paso (UTEP) and Texas Tech University Health
Sciences Center. The sector’s expansion bodes well for
the region as its wages are slightly higher than average.

Chart 4.2: Growth in Cross-Border Trade and Tourism Drives Job Gains
Utilities (0.5%)
Primary metal mfg (0.4%)
Health svcs (13.5%)
Transportation equipment mfg (0.4%)
Transportation & logistics (4.2%)
Food svcs (10.1%)
Machinery mfg (0.3%)
Retail (13.1%)
Total
Business & financial svcs (4.6%)
Recreation (1.8%)
Textiles (0.7%)
Energy & mining (3.8%)
Chemicals (1.0%)
Fabricated metal mfg (0.7%)
Agribusiness (1.2%)
Defense & security (1.8%)
Education (12.7%)
Construction (5.0%)
Government (8.3%)
Biomedical (0.3%)
Advanced materials (1.2%)
Information technology & telecom (2.4%)
Wood products (1.0%)
Publishing & information (0.5%)
Glass & ceramics (0.2%)
Electrical equipment mfg (0.2%)
Computer mfg (0.2%)

–42
–50

–37
–40

–6
–6

–28
–28

–30

–20

–10

–3
–3

3
3
3

–1
–1
–1

8
7

11
11
10

19
17

30
28
28
27
25

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 4.1: Low-Paying Sectors Depress Annual Average Earnings in El Paso
Cluster

El Paso

U.S.

2010

2012

2014

2016

2017

Primary metal manufacturing

56,644

57,371

60,038

55,076

56,285

67,868

Education

42,122

40,480

41,153

41,447

41,568

49,322

Transportation and logistics

44,005

43,011

42,661

42,946

43,490

53,761

Utilities

83,506

89,976

74,994

84,146

86,716

107,188

Food services

15,088

14,861

14,500

15,207

15,106

18,963

Government

57,457

57,264

57,786

59,094

58,626

60,568

Retail

25,595

25,328

25,435

26,139

26,435

31,216

Health services

43,860

42,782

42,109

44,012

43,957

56,001

Textiles

38,244

36,459

37,605

33,623

33,681

50,601

Construction

38,461

37,715

39,481

41,477

41,555

60,742

Clusters with location quotient > 1

36,613

36,885

36,743

37,688

37,769

–

Clusters with location quotient < 1

44,158

43,875

44,924

46,684

46,278

–

Average earnings (total)

37,550

37,176

37,111

37,833

37,924

55,375

than 530,000 loaded containers crossed the border
in 2017.6 Additionally, cross-border manufacturing
through the maquiladora industry stimulates employment in transportation.7 A 10 percent increase in maquiladora output has been shown to increase El Paso’s
transportation employment 5.3 percent.8
Business and financial services have gained importance since 2010. Sector jobs increased 11 percent between 2010 and 2017. Large service employers include
staffing firms such as T&T Staff Management, customer
service providers such as Alorica and GC Services, and
other services providers such as ADP and Datamark.
The dominant sectors do not pay as well as their
less-concentrated counterparts, partly because of the
type of industries most represented in El Paso (Table 4.1).
Retail and food services generally employ a large number
of part-time workers, driving down overall average earnings, and even full-time employees in these industries
are paid low wages. However, inflation-adjusted wages
have increased much faster than overall wages in some
high-concentration industries. While average wages have
grown about 1.0 percent since 2010, wages rose 8.0 percent in construction, 3.3 percent in retail and 2.0 percent

in government. Still, wages in El Paso remain below the
national average for each cluster, though cost-of-living
differences compensate for some of the disparity.

DEMOGRAPHICS: Population Reflects
Border Proximity
El Paso’s population is predominantly Hispanic, with
82.2 percent of residents self-identifying as Hispanic,
the second-highest percentage among the metros in this
report behind McAllen (Chart 4.3). A quarter of El Paso’s
population in 2016 was foreign born and migrated to the
U.S., with 90 percent of these immigrants born in Mexico.
El Paso residents trail those of other Texas metros in
measures of education. Seventy-seven percent of El Paso
adults age 25 and older had at least a high school diploma in 2016. That figure is more than 6 percentage points
lower than the Texas average. Only 22 percent of adults
had a bachelor’s degree or higher, compared with 29 percent for Texas. These education levels are in line with the
large immigrant population in El Paso and the composition of its industry clusters; some of the most concentrated clusters do not require highly educated workers.

Section 4: El Paso

Chart 4.3: El Paso's Population Is Largely Hispanic
Percent
100
91.8

Hispanic

White, not Hispanic

82.2
80
70

61.1

60
53.1

52.6

55.1

52.0

50
44.1
40

40.0

36.8 36.9
32.2

29.7

39.1

42.5

34.1

26.4
17.8

20
12.3
10

6.6

0
Austin

Dallas

El Paso

Fort Worth

Houston

McAllen

Midland–
Odessa

San Antonio

Texas

U.S.

SOURCE: Census Bureau, 2016 American Community Survey 1-year estimates.

Labor force participation in El Paso is relatively low.
About 61 percent of the population age 16 and older is
in the labor force, 3.2 percentage points lower than the
Texas average. This is likely due to demographic differences; for example, El Paso has a higher share of young
people 15 to 24 years old who are enrolled in school
and, hence, less likely to work.

EMPLOYMENT: Solid Growth Driven
by Maquiladora Activity
El Paso’s employment grew only 11.4 percent between December 2010 and December 2017, compared
with Texas’ 17.9 percent increase. However, El Paso
outperformed the rest of Texas more recently, in 2015
and 2016, suggesting that the slump in the energy sector
that suppressed employment growth in the state had
little effect on El Paso.
El Paso’s economy is heavily tied to Mexico due to
the cross-border trade of goods and services, exemplified by maquiladora activity. Manufacturing in Ciudad
Juárez grew robustly from 2014 to mid-2017, when it
reached record employment levels. The boom in Ciudad

Federal Reserve Bank of Dallas

Juárez manufacturing has in turn boosted El Paso service sector jobs. Increases in trade, transportation and
utilities and professional and business services payrolls
accounted for 37 percent of the 17,000 jobs El Paso added from December 2014 to December 2017.
Other drivers were education and health services,
which added 3,800 jobs from December 2014 to December 2017, representing 22 percent of total job growth.
Health services accounts for nearly 1-in-7 area jobs.
With these labor gains, the unemployment rate,
which averaged 6.4 percent in 2014, slid to 4.6 percent
in 2017, well below the long-term average of 8.5 percent.

OUTLOOK: Ties to Mexico Bring
Risks, Benefits
El Paso’s close economic ties to Mexico may be a
downside risk in the near future. A relatively strong
dollar (weak peso) may continue to negatively affect
retail, recreation and food services, which benefit from
cross-border tourism. Conversely, a weak peso could
boost trade from Mexico by making imported goods
cheaper. The exchange rate rose from about 13 pesos

to the dollar in mid-2014 to almost 22 at year-end 2016
before settling at 20 pesos to the dollar by the end of
2018. In addition, improving security in Juárez may shift
spending from El Paso to Juárez.
El Paso’s economy is heavily reliant on maquiladora
activity and international trade. As uncertainty about
U.S. trade policy lingers, border investment may slow.
Moreover, much of Juárez’s manufacturing is auto
related, making it vulnerable to tariffs and softening U.S.
demand for vehicles.9 On the upside, health services,
one of the fastest-growing clusters in El Paso, is expected

to continue expanding given the aging population and
expansion of local medical programs such as the Texas
Tech University Health Sciences Center dental school
expected to open in 2020. Fort Bliss is an economic
generator, and the recent increase in defense spending
should buoy local base operations.
—Kristin Davis and Marycruz De León

El Paso Growth Outlook
Drivers
•

•

•
•

Challenges

El Paso’s economy is heavily dependent on maquiladora
activity, and manufacturing across the border will continue to
boost jobs in El Paso.
A burgeoning health services industry will continue to expand
to meet the needs of both an aging local population and
Mexicans who cross the border to acquire health services.
El Paso’s education sector will expand with the growth of
health-care-related professional schools in the region.
Fort Bliss is a major contributor to the El Paso economy with
little indication that its role will change in the foreseeable future.

•

Uncertainty regarding U.S. trade policy, tariffs and relations with
Mexico may damp investment in the region.
Since roughly half of maquiladoras in Ciudad Juárez are
auto related, change in U.S. vehicle demand may affect
manufacturing activity south of the border with a ripple effect on
El Paso employment.
A weak peso relative to the dollar poses a risk for the local retail
sector and deters Mexican visitors but could boost trade by
making Mexican goods relatively cheaper.

•

Notes
The history of El Paso has been adapted from the Texas State Historical
Association’s Handbook of Texas, tshaonline.org/handbook/online/articles/
hde01.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
“Dollar-Sensitive Mexican Shoppers Boost Texas Border Retail Activity,” by
Roberto A. Coronado and Keith R. Phillips, Federal Reserve Bank of Dallas
Southwest Economy, Fourth Quarter, 2012, www.dallasfed.org/research/
swe.aspx.
4
See Texas Comptroller’s report on impact of Fort Bliss to the Texas economy
in 2017, accessed May 25, 2018, www.comptroller.texas.gov/economy/economic-data/military/fort-bliss.php. Fort Bliss employment was 48,000 in 2017.
1

Detail on top employers in the El Paso metro area is from the city of
El Paso, accessed May 25, 2018, www.elpasotexas.gov/~/media/files/coep/
economic%20development/top%20employers-2016.ashx?la=en.
6
Border crossings data are from the Bureau of Transportation Services,
www.bts.gov/transborder.
7
Maquiladoras are manufacturing operations in Mexico that assemble
imported components into exportable products that are free of import and
export duties.
8
“The Impact of Maquiladoras on U.S. Border Cities,” by Jesus Cañas,
Roberto Coronado, Robert W. Gilmer and Eduardo Saucedo, Growth and
Change, vol. 44, no. 3, September 2013, pp. 415–42.
9
“Economic Growth to Accelerate in 2018 and then Ease in 2019 as Auto
Sales Downshift,” by William A. Strauss and Thomas Haasl, Chicago Fed
Letter, No. 399, 2018.
5

Section 4: El Paso

At a Glance

Amarillo

•

Fort Worth began as an outpost marking Texas’
western frontier. Rail connections and a central
location for cattle drives helped establish the city’s
identity as “Cowtown,” a moniker that endures.

•

In the years surrounding World War II, Fort Worth
emerged as a hub for the aviation and defense
industries, key elements of the local economy today.

•

Fort Worth’s blue-collar workforce provides a ready
labor supply for the manufacturing sector, but a lesseducated pool of workers may be a factor shifting
some types of employment toward its regional
neighbor, Dallas.

•

Depressed natural gas prices have limited exploration
of the area's Barnett Shale, but high oil prices have
aided growth in the metro’s energy sector.

Plano
Irving

Lubbock

Dallas

Fort Worth

El Paso

Midland
Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

Beaumont

New Braunfels

Port Arthur

Austin

Houston
San Antonio

Sugar Land

Edinburg

Mission
McAllen

Population (2017):
2.5 million

Population growth (2010–17):

National MSA rank (2017): No. 4*
(Dallas and Fort Worth combined)

12.9 percent (Texas: 12.1 percent)

Median household
income (2017): $65,439

Kauffman Startup Index rank (2017):
No. 11* (Dallas and Fort Worth combined)

(Texas: $59,206)

Decatur

Fort Worth
Grapevine
Mineral
Wells

Weatherford

Benbrook

Granbury

Arlington

Cleburne

Glen Rose
Hillsboro

*The Fort Worth–Arlington metropolitan division is part of the Dallas–Fort Worth metropolitan statistical area (MSA) and encompasses Hood, Johnson, Parker,
Somervell, Tarrant and Wise counties. The population of the Dallas–Fort Worth MSA is 7.4 million. The Kauffman Startup Activity Index, a measure of business
creation in the 40 largest U.S. metropolitan areas, is further explained in the appendix.

Fort Worth–Arlington:
Transportation-Related Sectors Predominate
in Local Economy
HISTORY: Cowtown Takes Off
with Aviation
Fort Worth, established as an Army fort near the
Clear Fork of the Trinity River in 1849, is named after
Mexican–American War hero U.S. Army Gen. William
Jenkins Worth. He had proposed a series of 10 forts
from Eagle Pass to North Texas to mark the western Texas frontier. Shortly after Fort Worth’s inception, settlers
began moving in and, by 1860, had established the city
as a county seat. However, its initial growth spurt didn’t
occur until after the Civil War.1
Once a wayside for cowboys on cattle drives to Kansas, Fort Worth attracted the interest of cattle buyers and
meatpackers and acquired the nickname “Cowtown.”
The Texas Pacific Railway completed a route linking Fort
Worth with San Diego in 1876—the first in a series of
railroad ties—and the city caught the attention of Armour
and Co. and Swift and Co. Local citizens assembled a

$100,000 incentive to entice the companies. Both began
slaughterhouse operations in 1903, helping draw a burgeoning livestock trade to north Fort Worth.
Following the discovery of oil in Texas in 1901,
refinery and pipeline firms came to Fort Worth. Oil and
gas companies increased their foothold during the oil
boom of the 1980s and the more recent discovery of
large natural gas deposits in the nearby Barnett Shale.
With World War II, the aviation industry established
a major presence in the form of Consolidated Aircraft
Corp. (later acquired by General Dynamics Corp. and
now part of Lockheed Martin Aeronautics Co.). Carswell
Air Force Base (now the Naval Air Station Joint Reserve
Base), part of the Strategic Air Command, was located
next door. The siting of Dallas/Fort Worth International
Airport (DFW) in 1973 on the Tarrant–Dallas county line
and subsequent relocation of American Airlines nearby
have continued to link the city to the aviation industry.

Chart 5.1: Transportation, Manufacturing and Energy Drive Fort Worth's Economy
3.0

Mature

Star

Transportation
equipment
manufacturing

2.5

Glass & ceramics
Transportation
and logistics

Location quotient in 2017

2.0

Defense and
security

1.5

Energy and
mining

Retail

Construction
Food services

1.0
Health
services

Education
0.5

Wood products

Government
Advanced
materials

0.0

Transitioning

–0.5
–2.5

–2.0

–1.5

–1.0

Machinery
manufacturing
Business and
financial services

–0.5

Emerging
0.0

0.5

1.0

1.5

2.0

Section 5: Fort Worth—Arlington

INDUSTRY CLUSTERS: Transportation
Manufacturing, Defense Vital

security reflect their outsized role in the region. Along
with DFW Airport, Fort Worth Alliance Airport and the
Joint Reserve Base are major hubs. They have helped
spur additional activity, much of it tied to e-commerce.
United Parcel Service (UPS) has been constructing a
$200 million package operations facility in Arlington,
expected to employ 1,400 full-time-equivalent positions. FedEx already operates a growing regional sorting
hub at Alliance.
General Motors has operated an automobile assembly plant in Arlington since 1954 and continues to
invest in its growth. The plant specializes in larger sport
utility vehicles. A $1.4 billion upgrade and expansion
began at the facility in 2015, and in 2018, the company
was completing a nearby manufacturing and warehousing complex to augment existing production.3
Fort Worth’s largest industry clusters drive essential
activity and development—these include retail, health
services, food services and education. Retail, which experienced employment growth of 17 percent during the
2010–17 study period, is the largest cluster (Chart 5.2).
Jobs in food services, the third-largest cluster, expanded
31 percent during the period. The smaller recreation

Location quotients (LQs), which compare the relative concentration of various industry clusters locally
and nationally, are a convenient way of assessing key
drivers in an economy. An LQ exceeding 1 indicates
that a specific industry cluster carries more relative
weight locally than nationally. Industry cluster growth is
measured by the percentage-point change in its share of
local employment between 2010 and 2017 (Chart 5.1).2
Clusters in the top half of Chart 5.1, such as transportation equipment manufacturing, have a larger
share of employment relative to the nation and, thus,
an LQ greater than 1. These clusters are generally vital
to the area’s economy and can be expanding rapidly
(“star”) or growing slowly (“mature”). Those in the bottom half, such as advanced materials and government,
are less dominant locally than nationally and, hence,
have an LQ less than 1. “Emerging” clusters, such as
health services, are fast growing; those growing slowly
or contracting are “transitioning.”
The large LQs of transportation equipment manufacturing, transportation and logistics, and defense and

Chart 5.2: Job Gains Broad Based Across Dominant Goods and Services-Related Clusters
Construction (5.9%)
Food svcs (9.2%)
Health svcs (11.3%)
Energy & mining (7.0%)
Wood products (1.6%)
Fabricated metal mfg (1.1%)
Glass & ceramics (0.4%)
Retail (11.8%)
Total
Machinery mfg (0.9%)
Business & financial svcs (7.0%)
Chemicals (1.6%)
Recreation (3.0%)
Agribusiness (1.0%)
Information technology & telecom (3.0%)
Education (8.8%)
Transportation equipment mfg (3.1%)
Electrical equipment mfg (0.2%)
Government (4.7%)
Defense & security (3.8%)
Biomedical (0.7%)
Utilities (0.3%)
Publishing & information (1.1%)
Primary metal mfg (0.1%)
Advanced materials (1.9%)
Textiles (0.4%)
Transportation & logistics (4.8%)
Computer mfg (0.2%)

–13
–14

–34
–40

–30

–20

–10
–10

–5
–6

–10

1
1

0
–1

5
4
4

9
8
8

17
17
17

21
20

31
30

26
25

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 5.1: Transportation Manufacturing and Defense Sectors Pace Earnings
Cluster

Fort Worth
2010

2012

Transportation equipment manufacturing

94,220

Transportation and logistics

58,733

Energy and mining

83,368

Construction

50,460

U.S.

2014

2016

2017

96,044

92,359

99,533

95,231

73,569

58,450

49,894

45,509

46,467

53,761

75,853

78,625

71,766

72,643

80,900

51,753

54,579

57,863

60,418

60,742

Glass and ceramics

51,932

55,022

59,728

59,747

62,752

55,398

Fabricated metal manufacturing

52,526

53,323

55,472

54,188

55,033

55,830

Machinery manufacturing

66,040

69,553

67,927

66,944

68,726

70,059

Food services

17,533

17,437

17,565

18,164

18,254

18,963

Defense and security

87,777

87,885

88,876

91,022

89,034

91,226

Retail

32,001

31,397

31,680

32,110

31,700

31,216

Wood products

47,531

48,261

49,498

52,251

53,924

52,914

Chemicals

98,629

93,074

87,437

75,376

72,983

72,887

Education

43,232

42,308

43,278

44,695

44,066

49,322

Clusters with location quotient > 1

52,605

53,336

52,751

50,106

50,044

–

Clusters with location quotient < 1

64,161

59,931

60,142

64,908

64,544

–

Average earnings (total)

51,298

50,841

51,875

52,276

52,714

55,375

cluster, which grew 8 percent, includes Arlington’s Six
Flags Over Texas amusement park. The park’s parent
company, Six Flags Entertainment Corp., is based in
nearby Grand Prairie.
The energy and mining cluster holds a large overall
employment share and experienced the fourth-fastest
employment growth of all clusters, up 26 percent from
2010 to 2017. Fort Worth was a commercial center for the
oil industry early in the last century and enjoyed easy
access to the Permian Basin to the west. Today, it is the
center of the Barnett Shale formation, a prolific source
of natural gas. Persistent price weakness—natural gas
was selling for about one-third of its July 2008 high in
November 2018—has prompted some retrenchment.
The Fort Worth metropolitan division also supports
a sizable defense and security cluster that includes
Lockheed Martin Corp. and Bell Helicopter. Arlington is
the site of two premier sports facilities—AT&T Stadium,
where the Dallas Cowboys football team has played
since moving from Irving in 2009, and Globe Life Park
(formerly the Ballpark in Arlington), home field of the
Texas Rangers baseball team. A $1.1 billion, 41,000-seat

baseball stadium, Globe Life Field, is under construction and scheduled to open in 2020.
Fort Worth’s construction industry cluster was the
fastest-growing over the study period. In 2016, the value
of all construction activity in the greater Dallas–Fort
Worth metropolitan area ranked second among the
nation’s metros, according to Dodge Data and Analytics.4 Major projects recently undertaken in Fort Worth
include Facebook’s more than $1 billion data center
and a $450 million multipurpose arena near the Will
Rogers Memorial Center that will become home of the
annual Fort Worth Stock Show & Rodeo.5 Residential
construction activity in Fort Worth has picked up as
well, and growth in single-family permits exceeded the
Dallas metropolitan division in 2017 for the first time
since 2013.6
On average, clusters with a greater employment
concentration locally than nationally paid $50,000
annually, compared with those with a relatively smaller
presence, at $64,500 (Table 5.1). However, within more
concentrated clusters, average pay varies widely. Transportation equipment manufacturing—with nearly three

Section 5: Fort Worth—Arlington

Chart 5.3: Share of College Graduates Lower in Fort Worth Relative to Dallas
Percent
40
36.5
35

Dallas
Fort Worth

30.3

30
26.5

27.4

28.8

25
20.5

15.5

14.4

0
Less than high school

High school graduate or equivalent

Some college or associate degree

Bachelor's degree or higher

NOTE: Share of population age 25 and over.
SOURCE: Census Bureau, 2016 American Community Survey 1-year estimates.

times the national employment share (LQ of 2.7)—pays
well, at $95,200, as does defense and security (LQ of
1.1), at $89,000. By comparison, the larger food services
and retail clusters (both straddling the star and emerging categories) were among the lowest paying, at about
$18,300 and $31,700 a year, respectively.

DEMOGRAPHICS: In-Migration Key
to Growth
Fort Worth and its larger neighbor, Dallas, make up
the Dallas–Fort Worth metroplex—the fourth-largest
MSA in the country, with 7.4 million people in 2017.7
New residents from elsewhere in the U.S. accounted for
40 percent of the metroplex’s population growth in 2017,
and the region took the top spot nationally for total net
migration from 2010 to 2017. The largest share of people
moving from outside the state to Dallas–Fort Worth in
2016 came from California, followed by Oklahoma.
A total of 59.3 percent of the Fort Worth area’s foreign-born population came from Latin America, less
than the 68.6 percent share for Texas overall in 2016.
In 2017, Fort Worth’s median household income—
the midpoint at which half of incomes are above and

Federal Reserve Bank of Dallas

below—was $65,439, exceeding the U.S. median of
$63,336 but trailing Dallas.
Consistent with the area’s manufacturing emphasis,
28.8 percent of workers age 25 and older hold a bachelor’s or higher degree, less than Dallas at 36.5 percent
and the U.S. at 31.2 percent but on par with Texas at 28.9
percent (Chart 5.3). The share of adults with only a high
school diploma in Fort Worth exceeds the share in Dallas.

EMPLOYMENT: Energy Affects
Postrecession Recovery
While Fort Worth and Dallas together make up a
diversified economy that closely resembles the U.S. as a
whole, the influence of the mining and energy cluster—whose LQ of 1.2 makes it more prominent locally
than nationally—likely helped Fort Worth get a quicker
start than its sibling metro following the Great Recession. While it took Dallas 51 months to regain all the
jobs it lost during the recession, Fort Worth was able to
rebound in 43 months.
The situation was reversed in 2015, when the steep
decline of oil and gas prices restrained the Fort Worth
area’s expansion.

Through much of 2012 and 2013, the Fort Worth
area’s unemployment rate was lower than Dallas’. A wider spread—this time favoring Dallas—emerged during
2015 as the energy slump deepened. Employment
growth in Fort Worth slowed to 0.9 percent in 2015, and
in 2016, job gains occurred at a 1.5 percent rate. This
compares with 3.7 percent for Dallas over the same
period. Higher oil prices and a pickup in manufacturing
activity boosted Fort Worth employment growth to 2.3
percent in 2017, similar to Dallas’ 2.6 percent increase.
Fort Worth's unemployment rate was 0.7 percentage
points below the U.S. average during most of 2017 and
was little changed through much of 2018.

tration in energy, transportation and defense. In the near
term, those industries’ performances will help set the
course for Fort Worth. Logistics is an expanding sector
that should provide a net positive. A lower cost of housing
relative to Dallas will continue to attract residents to Fort
Worth, which in 2017 outpaced its eastern neighbor in
both single-family and multifamily construction.
Federal budget decisions will likely help set the
long-term outlook for the historically powerful defense
and security cluster and the almost 4 percent of the
workforce it represents. Stagnant prices for natural gas
will damp prospects and limit natural gas exploration
along the Barnett Shale. Record high oil production in
the state will continue to boost growth in the energy
and mining cluster, which makes up 7 percent of the
region’s employment and is classified as a star among
Fort Worth’s clusters.

OUTLOOK: Transportation
and Defense Lead
Although sometimes viewed as a single economic
unit with Dallas, the Fort Worth region has a unique and
complementary industry profile, with a greater concen-

—Michael Weiss and Alexander T. Abraham

Fort Worth—Arlington Growth Outlook
Drivers
•

•

Challenges

Manufacturing operations, defense industry installations
and transportation and logistics facilities provide a strong
foundation of well-paying jobs.
Expanding oil production will continue to benefit Fort Worth’s
energy and manufacturing sectors, fueling job growth in
the metro.
Greater housing affordability relative to Dallas will attract
residents and employers to Fort Worth.

•

Volatile fuel prices may affect expansion in Fort Worth’s large
transportation cluster.
A relatively less-well-educated workforce may limit the kinds of
businesses that select a Fort Worth location over one in Dallas.
The defense and security cluster and large military base are
vulnerable to federal budget cuts in the future.

•
•

Notes
The history of Fort Worth is taken from the Texas State Historical Association’s Handbook of Texas, tshaonline.org/handbook/online/articles/hdf01.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
“GM Adds 850 More Jobs in Arlington, Expands to Six Flags Mall Site,” by
Tracy M. Cook, Dallas Morning News, June 16, 2017, www.dallasnews.com/
business/jobs/2017/06/16/general-motors-bring-850-jobs-arlington.
4
“Dallas–Fort Worth Construction Is Slowing from Recent Highs,” by Steve
Brown, Dallas Morning News, Aug. 1, 2017, www.dallasnews.com/business/
real-estate/2017/08/01/dallas-fort-worth-construction-slowing-recent-highs.
1

“Facebook’s Fort Worth Data Center Opening This Week Is Getting Bigger,” by Steve Brown, Dallas Morning News, May 3, 2017, www.dallasnews.
com/business/real-estate/2017/05/03/facebooks-fort-worth-data-centeropening-week-getting-bigger; “New $450 Million Dickies Arena Moves Forward in Fort Worth,” by Larry Collins, KXAS-TV, April 18, 2017, www.nbcdfw.
com/news/local/New-450-million-Fort-Worth-Arena--419681933.html.
6
In 2017, single-family permits in the Dallas–Plano–Irving metropolitan division were up 13 percent from the previous year compared with a 29 percent
increase in Fort Worth–Arlington.
7
The 2017 population estimates are from the Census Bureau. The three
largest metropolitan statistical areas are New York–Newark–Jersey City, Los
Angeles–Long Beach–Anaheim and Chicago–Naperville–Elgin.
5

Section 5: Fort Worth—Arlington

Population (2017):
6.9 million

Population growth
(2010–17): 15.9 percent
(Texas: 12.1 percent)
Huntsville

Median household
income (2017): $63,802

Conroe

(Texas: $59,206)

The Woodlands
Hempstead
Bellville

Beaumont

Liberty
Katy

Anahuac

National MSA rank (2017):
No. 5*

Port Arthur

Houston

Richmond

Kauffman Startup Index rank (2017):

Sugar Land

No. 9*

Angleton
El Campo

Galveston
Amarillo

Freeport
Bay City

Plano
Irving

Lubbock

Fort Worth

El Paso

Midland

At a Glance
•

Houston is Texas’ second-largest metro, accounting for
one-quarter of the state's jobs and 30 percent of its
economic output.

•

Houston began as a port city, rising to prominence as one of
the top three busiest deepwater ports in the U.S.

•

Due to its proximity to Spindletop, site of the legendary
1901 oil strike, the Houston area quickly became the energy
capital of the U.S. and home to oil companies, refineries and
petrochemical plants. While the energy industry remains the
dominant cluster, the metro has diversified. Manufacturing,
chemicals and health industries have grown in importance.

•

Dallas

Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Austin
San Antonio
Edinburg

Mission
McAllen

A series of catastrophic flooding events has prompted
reevaluation of the area’s basic needs and plans. New
building regulations and infrastructure investments may
raise the region’s cost of housing and doing business.

*The Houston–The Woodlands–Sugar Land metropolitan statistical area (MSA) encompasses Austin, Brazoria, Chambers, Fort Bend,
Galveston, Harris, Liberty, Montgomery and Waller counties. The Kauffman Startup Activity Index, a measure of business creation in the
40 largest U.S. metropolitan areas, is further explained in the appendix.

Sugar Land

Beaumont
Port Arthur

Houston

Houston–The Woodlands–Sugar Land:
Texas' Gulf Coast Hub and Nation's Energy Capital
HISTORY: An Energy Complex Emerges
from a Port City

Houston in 1918, and many others followed, constructing facilities along the Houston Ship Channel.
Forty oil companies had Houston offices by 1929.
During World War II, demand for petrochemical products skyrocketed, and Houston quickly developed one
of the largest petrochemical plant concentrations in the
U.S. Houston was an international energy capital by the
1970s, expanding with the oil boom but also contracting
during the 1980s bust.

Houston was founded in 1836 along Buffalo Bayou, a
waterway leading to the Gulf of Mexico. At the time, the
city was dependent on agriculture and commerce, and
most business involved selling supplies to area farmers.1
Because Buffalo Bayou was difficult to navigate, trade
tended to pass through Galveston, 50 miles away on the
coast. Rail lines connected Houston to the countryside,
and by 1861, the city was the rail center of southeast
Texas. The U.S. government began widening and deepening Buffalo Bayou in 1881, and when the Houston
Ship Channel was finally completed in 1914, Houston
became a deepwater port, ranking among the top three
ports by volume in the U.S. just before World War II.2
Drillers struck oil in 1901 at Spindletop, 75 miles
to the east near Beaumont, catalyzing the oil boom in
Texas. Sinclair Oil Co. built the first major oil refinery in

INDUSTRY CLUSTERS: Energy and
Related Industries Dominate
Chart 6.1 shows the composition of industry clusters in Houston, organized by location quotient (LQ), a
measure of a cluster’s share of local employment relative to its share nationally. Each cluster is plotted based
on employment share change between 2010 and 2017.3

Chart 6.1: Energy and Related Manufacturing Among Houston's Dominant Clusters
3.0

Mature

2.5

Machinery
manufacturing
2.0
Location quotient in 2017

Star

Fabricated metal
manufacturing
Chemicals
Construction

Transportation
and logistics

1.5

Business and
financial services

Energy and mining

1.0

Education
Health
services

0.5
Advanced
materials

Government

0.0

Food services

Recreation
Agribusiness

Transitioning

–0.5
–1.5

Emerging
–1.0

–0.5

0.0

0.5

1.0

1.5

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents industry share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 6: Houston—The Woodlands—Sugar Land

Clusters in the “star” quadrant, such as construction,
have a large share of employment relative to the nation
(an LQ exceeding 1) and are relatively fast growing;
“emerging” industries, such as recreation, are smaller
relative to the nation (an LQ less than 1) but also fast
growing. “Mature” sectors, such as the energy and mining industry, are more concentrated but slower growing; “transitioning” segments, such as government, are
smaller relative to the nation and are slower growing.
Energy and related companies—which include oilfield
services and refining—by far make up the largest industry
group in Houston, employing 12 percent of the workforce,
after contracting during the 2015–16 energy bust. As of
2018, Houston had 21 Fortune 500 headquarters, 17 of
which are related to oil and gas extraction and processing.
Apart from Phillips 66 and ConocoPhillips—whose headquarters are in Houston—the city’s largest employers
include units of Exxon Mobil Corp., with 14,000 employees, and Shell Oil Co., with 12,000 employees.4
Oilfield manufacturing and services companies that
support the energy extraction firms include National
Oilwell Varco, Schlumberger and Halliburton. This concentration has spawned significant clusters of machinery and fabricated metal manufacturers.

The chemical industry is another major energy-related cluster, employing 2.4 percent of Houston’s
workforce. Leading employers include Dow Chemical
Co. and many of the large energy companies, including
Exxon Mobil, which also manufacture chemicals.
Houston is a major port city and regional commercial
hub. The United Airlines hub, the carrier’s second largest,
is located at George Bush Intercontinental Airport and
employs 14,200 people in Houston. Southwest Airlines
dominates Hobby Airport and has 3,600 local workers.
The health services cluster, accounting for 10.7 percent of Houston’s workforce, has also grown significantly in recent years. Two of the area’s largest employers,
with more than 20,000 workers each, are Memorial Hermann Health System and the University of Texas MD
Anderson Cancer Center. Though Houston’s concentration of health care workers remains below that of the
U.S. (with an LQ of 0.9), employment grew 21 percent
from 2010 to 2017 (Chart 6.2).
The major industry clusters in Houston pay significantly more than other industries (Table 6.1). Average
annual earnings for energy and mining, for example,
were $120,700 in 2017; overall average earnings in Houston were $65,000. Workers employed in the most-con-

Chart 6.2: Food Services and Recreation Lead Houston Job Growth
Food svcs (8.8%)
Recreation (2.5%)
Agribusiness (0.7%)
Business & financial svcs (9.4%)
Health svcs (10.7%)
Construction (7.1%)
Wood products (0.9%)
Retail (10.5%)
Total
Transportation & logistics (4.0%)
Chemicals (2.4%)
Biomedical (0.7%)
Glass & ceramics (0.4%)
Defense & security (2.6%)
Information technology & telecom (3.6%)
Education (9.8%)
Energy & mining (12.2%)
Fabricated metal mfg (1.7%)
Publishing & information (0.9%)
Electrical equipment mfg (0.2%)
Advanced materials (3.3%)
Utilities (0.6%)
Primary metal mfg (0.1%)
Government (3.9%)
Machinery mfg (1.4%)
Textiles (0.3%)
Computer mfg (0.5%)
Transportation equipment mfg (0.2%)
–40

21
21
21
21
18
17
17
15
15
14
11
11
10
10
7
5
3
2
1
1
1
–1
–3
–4
–21
–35
–30

–20

–10

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 6.1: Energy and Related Clusters Drive Houston Workers' Earnings
Cluster

Houston

U.S.

2010

2012

2014

2016

2017

119,894

125,444

124,557

123,673

120,706

80,900

Machinery manufacturing

97,114

101,846

102,492

103,066

103,421

70,059

Fabricated metal manufacturing

63,695

67,507

67,773

65,234

66,269

55,830

100,730

103,317

106,506

111,148

113,496

72,887

65,995

69,062

72,861

73,834

72,883

60,742

119,242

124,631

126,614

124,790

134,235

107,188

Transportation and logistics*

76,050

84,102

77,871

79,562

80,508

53,761

Glass and ceramics

53,149

56,688

57,244

56,232

57,804

55,398

Education

46,750

45,968

47,670

49,880

49,985

49,322

Food services

18,860

18,683

18,990

19,530

19,514

18,963

Energy and mining

Chemicals
Construction
Utilities

101,936

103,693

105,695

104,660

104,444

100,785

Advanced materials

Business and financial services

85,835

88,217

89,508

94,195

97,136

85,695

Clusters with location quotient > 1

78,245

81,979

82,404

81,110

80,337

–

Clusters with location quotient < 1

55,631

55,889

56,250

57,454

57,303

–

Average earnings (total)

63,031

65,474

66,707

65,399

64,953

55,375

*Large increase is due to average earnings in NAICS 486 (pipeline transportation) doubling in second quarter 2012 compared with second quarter 2010.
NOTES: Clusters are listed in order of location quotient (LQ); clusters shown are those with LQs greater than 1. Earnings are in 2017 dollars.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors' calculations.

centrated clusters—those with LQs greater than 1—earn
on average 40 percent more than workers in less-concentrated clusters ($80,300 versus $57,300). Average
real earnings (inflation-adjusted) in Houston grew 3.0
percent from 2010 to 2017. Earnings in the most-concentrated clusters grew more slowly at 2.7 percent.

DEMOGRAPHICS: Houston Population
More Diverse
Demographics in Houston—the state’s second-most
populous metro, with 6.9 million residents—are more
diverse than in the other major metros. Houston’s Hispanic population is as large as the white non-Hispanic
population—around 37 percent. The black (non-Hispanic) share, 16.9 percent, and Asian (non-Hispanic)
share, 7.6 percent, are higher than in most other Texas
metro areas in this report (Chart 6.3).
As an immigrant gateway city with rapid job growth,
Houston’s increasingly diverse industrial base and
top universities have made it a popular destination for
those relocating from other countries. Apart from the
Texas border metros, Houston has the state’s largest
foreign-born population share, 23.5 percent. Roughly

two-thirds of the foreign born are from Latin America
and a fourth are from Asia.
Houston trails Dallas and Austin in the share of the
population with a bachelor’s degree or higher. This reflects the abundance of energy industry and manufacturing jobs, many of which pay well but do not require
a college degree. However, Houston’s population is
more educated than Texas’ overall. Thirty-two percent
of Houston’s population holds a bachelor’s degree or
higher; the Texas average is 28.9 percent.

EMPLOYMENT: Impact of Energy
Booms and Busts, Storms
The shale oil boom fueled Houston’s rapid postrecession growth. With its high concentration of firms in
energy and related industries, Houston’s employment
prospects were driven by shale exploration, directly
and indirectly.
However, energy-fueled booms are sensitive to price
busts. In response to crashing oil prices in late 2014, the
Houston economy stalled in 2015 and 2016. Job losses
were concentrated not only in goods-producing sectors
such as energy and manufacturing, but also in some

Section 6: Houston—The Woodlands—Sugar Land

Chart 6.3: Population More Diverse in Houston than in Other Major Texas Metros
Percent of total population
100
90
80
70
60
50
40
30
20
10
0
Austin

Dallas
White; not Hispanic

El Paso

Fort Worth

Black; not Hispanic

Houston
Asian; not Hispanic

McAllen

Midland–Odessa

Hispanic or Latino

San Antonio
Other

SOURCE: Census Bureau, 2016 American Community Survey 1-Year Estimates.

service sectors such as professional and business services. Houston’s economy bounced back in 2017, with
payroll employment expanding 1.9 percent.
In August 2017, Hurricane Harvey wreaked havoc
on the middle and upper Texas Gulf Coast, bringing the
region to a standstill for a week. The region sustained at
least $70 billion in damage, and nearly 100,000 residential
structures were flooded. The region also lost an estimated
$8.5 billion in economic output—about 1.7 percent of the
metro area’s gross domestic product (GDP).5
While the economic effects of major storms are generally transitory in thriving economies such as Houston,
flooding has been a growing problem in the metro area
in recent years. The potential impacts of future weather
events have led to substantial public investment and
expanded regulation. Harris County voters approved a
$2.5 billion flood control program in 2018.
Houston has historically bounced back from adversity. It was hard hit by the Great Recession, losing 4.6
percent of its jobs between August 2008 and November
2009. Among the large Texas metros, only Dallas–Fort
Worth lost more. However, Houston rebounded strongly,
with employment expanding 18.1 percent from December 2009 to December 2014, or 3.4 percent per year.

Federal Reserve Bank of Dallas

Among the large metros, only Austin came back faster,
up 4.0 percent per year during the period.
Firms that directly participate in fossil fuel production, refining and petrochemicals expanded significantly, as did companies that provide support to energy
producers, such as machinery manufacturers, construction and real estate firms, and business and financial
services enterprises.

OUTLOOK: End of Energy Recession
Signals Renewed Growth
Energy made up 18.4 percent of Houston’s economy
(nominal GDP) going into the 2015–16 oil bust, after
which the industry hit a low of 9.6 percent of metro
GDP in 2016. The oil bust led to severe job losses in
the goods-producing sectors, steep declines in energy-related investment and falling demand for business
services and commercial real estate, especially office
space. That said, the effects of falling oil prices from
December 2014 through February 2016 were not nearly
as drastic for Houston as those during the 1980s oil
bust, reflecting the region’s greater resilience through
economic diversification.

Other headwinds for the Houston economy during
the last oil bust were low oil prices, the strong dollar
and weak global demand, which suppressed export
growth. Because Houston is a port city, trade is vital
to the economy and supports hundreds of thousands
of area jobs, by some estimates.6 The World Bank
estimates that global trade growth strengthened to a
six-year high in 2017 after two years of pronounced
weakness, and it forecasts annual trade expansion to
ease through 2020 due to deceleration in global investment and heightened uncertainty surrounding U.S.
trade policy.7
Parts of the energy industry are poised to expand.
A cycle of petrochemical-plant and liquefied natural
gas-terminal openings peaked in 2017. After the comparatively labor-intensive construction phase—expect-

ed to taper off by 2020—the plants will require fewer
employees as they become operational. The lifting of
oil export restrictions has also contributed to a large
upswing in related trade activity.
Meanwhile, Houston’s health care industry is expected to grow to support a burgeoning aging population.
More than 1-in-10 Houston residents is over age 65,
and this cohort is expected to grow significantly in the
coming decades as baby boomers age. The world-recognized medical research, highlighted by the MD Anderson Cancer Center, attracts patients from far outside the
area. The University of Texas Medical Branch in Galveston is another hub of medical exploration.
—Kristin Davis and Jesse Thompson

Houston—The Woodlands—Sugar Land Growth Outlook
Drivers
•

•
•
•

Challenges

Refinery operators and petrochemical producers are benefiting
from expanding domestic oil and natural gas production and
growing global demand.
Firm oil prices helped solidify the energy sector recovery from
the oil bust of 2015–16.
Global economic expansion and removal of the crude oil export
ban may boost export-related employment and investment.
A strong health care industry will continue to expand with the
retirement of the baby boomers and innovations in medical
technology and pharmaceuticals.

•

The winding down of construction on several large
petrochemical plants and liquefied natural gas terminals in
coming years may lessen demand for some construction
workers and related services.
The allocation of public dollars to flood-mitigation projects may
limit investment in other public projects and services. New
building regulations may raise housing costs and office rents.
Uncertainty around federal policy on immigration, international
trade and tariffs could adversely affect Houston’s economy,
which depends on the economic contributions of both.

•

Notes
The history of Houston is taken from the Texas State Historical Association's (TSHA) Handbook of Texas, tshaonline.org/handbook/online/articles/
hdh03.
2
“Houston Ship Channel,” by Marilyn M. Sibley, Handbook of Texas, TSHA,
tshaonline.org/handbook/online/articles/rhh11.
3
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
4
Data on major Houston employers are taken from the Houston Business
Journal Book of Lists and the Greater Houston Partnership’s 2017 Houston
Facts, www.houston.org/assets/pdf/economy/Houston_Facts_2017.pdf.
Nonenergy Fortune 500 companies headquartered in Houston were Sysco,
Waste Management, Group 1 Automotive and Quanta Services, www.houston.org/newgen/14_Company_Information/14A%20W001%20Fortune%20
500%20Companies.pdf.
1

“U.S. Disaster Costs Come Into Clearer Focus,” by Adam Kamins,
Moody’s Analytics, 2017, accessed Jan. 20, 2018, www.economy.com/
dismal/analysis/todays-economy/298539/US-Disaster-Costs-Come-IntoClearer-Focus/.
6
See the Greater Houston Partnership’s 2018 Houston Employment
Forecast, Dec. 8, 2017, www.houston.org/assets/pdf/economy/Employment-Forecast-2018-web.pdf. The total employment impact involves
450,000 jobs.
7
Global Economic Prospects, World Bank, January 2018, www.worldbank.
org/en/publication/global-economic-prospects.
5

Section 6: Houston—The Woodlands—Sugar Land

Population
(2017): 860,661

Population growth
(2010–17): 10.5 percent
(Texas: 12.1 percent)

Median household
income (2017): $37,106
(Texas: $59,206)

National MSA rank (2017): No. 65*

Raymondville
Rio Grande City

Edinburg

Mission

Harlingen

McAllen

Amarillo

South Padre
Island

Brownsville

At a Glance

Plano
Irving

Lubbock

Dallas

Fort Worth

El Paso

Midland
Odessa

•

Health services, education and retail trade are the
largest clusters in McAllen, though transportation and
logistics is also an important sector, attributable to
the border crossings with Mexico.

•

McAllen wasn’t notably affected by slowing elsewhere
in the state during the 2015–16 oil bust, though growth
was below the long-term average.

•

The dollar–peso exchange rate affects cross-border
retail spending and, hence, growth in key retail and
food services sectors.

•

A population that is relatively poorer and lesseducated than the Texas average may limit the area’s
ability to attract high-paying industries.

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Beaumont
Port Arthur

Austin

Houston
San Antonio
Edinburg

Sugar Land

Mission

McAllen

*The McAllen–Edinburg–Mission metropolitan statistical area (MSA) encompasses only Hidalgo County.

McAllen–Edinburg–Mission:
Retail, Medical Hub Draws on Cross-Border Trade
HISTORY: From a Private Ranch
to a Bridge to Mexico
McAllen began as a private ranch in the late 19th century. The city was not officially incorporated until 1911,
several years after the St. Louis, Brownsville and Mexico
Railway established a depot on ranch-donated land.1
At the request of President Woodrow Wilson, 20,000
soldiers from New York were deployed to McAllen in
1916 to help quell border disturbances. The area subsequently boomed, with the population growing from
1,200 to 6,000 by 1920.
McAllen’s economy was primarily agriculture based,
with some oil exploration, in the early 20th century. In
1941, the city built a suspension bridge across the Rio
Grande to Reynosa, Mexico. The McAllen–Hidalgo–
Reynosa International Bridge increased tourism and
trade, helping establish McAllen as an important port
of entry.

The discovery of oil in the Reynosa area in 1947
prompted a large in-migration from the Mexican interior, boosting tourism and providing McAllen with an
inexpensive labor supply. The McAllen Foreign Trade
Zone—the first inland foreign trade zone in the United
States—was established in 1973. International trade
and tourism remain important to the region’s economy.

INDUSTRY CLUSTERS: Retail, Health
Drive Economy
McAllen’s cluster composition is shown in Chart 7.1.
Clusters are organized by location quotient (LQ), which
represents the share of local employment in each cluster
relative to the nation, and the change in employment
share between 2010 and 2017.2 “Star” quadrant clusters,
such as food services, have a larger share of employment relative to the nation (an LQ exceeding 1) and are

Chart 7.1: Health Care, Education and Retail Dominate McAllen Clusters
2.5

Mature

Star

Health
services

2.0

Location quotient in 2017

Retail
1.5

Food services

Education

Government

1.0

Transportation
and logistics

Energy and mining
Agribusiness

0.5

Construction
Business and
financial services

Recreation
0.0

Transitioning
–0.5
–1.5

Emerging
–1.0

–0.5

0.0

0.5

1.0

1.5

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents the cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 7: McAllen—Edinburg—Mission

southwest of McAllen. Mexican shoppers account for
an estimated 30 to 40 percent of retail sales.4
Overall, retail trade made up nearly 13 percent of
McAllen’s total output in 2017.5 In terms of gross sales,
retail trade accounted for 52 percent in McAllen in
2017, compared with about 26 percent statewide.6
Government employees figure prominently in border economies, and McAllen is no exception. Excluding
public education and health services employees, government employees make up 7.7 percent of all workers
in McAllen, and the sector’s workforce has grown 16
percent since 2010 (Chart 7.2). This is in stark contrast
to a national decline of 2.5 percent in government employment over the same period.
The city of McAllen has more than 2,000 municipal
workers, while border crossings and international trade
represent a major federal employment commitment
involving U.S. Customs and Border Protection and other
federal agencies.
Education (both public and private) makes up one
of the largest industry clusters in McAllen, accounting
for 16.5 percent of all jobs, likely a result of the high
share of youths in the metro area. After state and local
budget cuts depressed growth from 2010 to 2012, the

comparatively fast growing. “Emerging” industries, such
as transportation and logistics and business and financial
services, are smaller relative to the nation (LQ less than
1) and fast growing. Industries in the “mature” quadrant
are more concentrated but slower growing, and “transitioning” industries are smaller relative to the nation and
slower growing or declining.
Health care is a key sector in the McAllen economy.
While the cluster has grown in importance in most
metro areas, it is more concentrated in McAllen (and
has the highest LQ) relative to other metros in this
report. About 20 percent of McAllen’s workers are in the
health cluster. Hospitals and medical centers, including
McAllen Medical Center and Edinburg Regional Medical Center, are among the metro’s top employers.3 The
opening of the University of Texas Rio Grande Valley
School of Medicine, which welcomed its first class in
2016, points to further sector growth.
Retail is typically big in the larger border communities, and this mature cluster employs 14.3 percent of
McAllen’s workers. The metro area serves as the retail
trade center of South Texas and northern Mexico. Retail
tourism draws customers from as far as Monterrey,
Mexico’s third-largest metro area, located 150 miles

Chart 7.2: Food Services, Manufacturing and Transportation Employment Growing Strongly
Textiles (0.2%)
Advanced materials (0.3%)
Primary metal mfg (0.1%)
Wood products (0.7%)
Food svcs (8.4%)
Fabricated metal mfg (0.4%)
Information technology & telecom (1.0%)
Transportation & logistics (2.6%)
Business & financial svcs (3.2%)
Total
Government (7.7%)
Defense & security (0.9%)
Retail (14.3%)
Health svcs (20.0%)
Recreation (1.7%)
Utilities (0.3%)
Computer mfg (0.0%)
Education (16.5%)
Energy & mining (3.3%)
Chemicals (0.4%)
Construction (2.7%)
Publishing & information (0.3%)
Biomedical (0.1%)
Glass & ceramics (0.2%)
Agribusiness (1.9%)
–40

91
80
76
51
32
32
30
19
18
16
16
16
14
13
12
11

–19

–5

9
9
8
7

–24
–26
–20

100

Percent change in employment, 2010–17

NOTES: Percent change in employment is shown in whole numbers. Each cluster's share of total jobs is shown in parentheses (rounded to one decimal place).
Data for a few manufacturing sectors excluded due to insufficient information.
SOURCES: Texas Workforce Commission; authors' calculations.

Federal Reserve Bank of Dallas

Table 7.1: Earnings Across Dominant McAllen Clusters Trail U.S. Performance
Cluster

McAllen
2010

2012

Education

41,795

Health services

34,913

U.S.

2014

2016

2017

40,003

40,923

42,667

43,015

49,322

31,243

32,210

32,974

31,814

56,001

Retail

25,189

25,898

26,424

26,763

27,037

31,216

Government

47,784

48,307

48,460

50,122

49,455

60,568

Food services

15,287

15,050

14,928

15,245

15,102

18,963

Clusters with location quotient > 1

31,903

30,227

35,223

33,753

33,501

–

Clusters with location quotient < 1

39,776

41,287

32,845

38,875

39,803

–

Average earnings (total)

33,445

32,704

33,128

33,698

33,628

55,375

cluster’s rate of expansion increased but at a slower
pace than overall employment.
With three international border crossings in the
metropolitan statistical area, McAllen is the third-busiest border crossing in Texas (behind Laredo and El
Paso) in terms of commercial truck traffic and pedestrians.7 Consequently, transportation and logistics is an
important emerging industry. While its concentration
(LQ of 0.8) isn’t as significant locally as nationally, the
sector has grown 19 percent since 2010, adding workers
and increasing its share of total McAllen employment.
The highly concentrated sectors—those with LQs
greater than 1—are slightly lower-paying in McAllen
than their less-concentrated counterparts (Table 7.1).
This is due to the prevalence of retail and food services
industries, which tend to pay low wages, and the relative scarcity of high-paying manufacturing and skilled
services jobs. The utilities, computer manufacturing
and biomedical clusters—the highest-paying industries
in the region by a significant margin—constitute just 0.5
percent of jobs in the region, compared with 2.2 percent
in the U.S.
Real (inflation-adjusted) wages overall remain
significantly lower than U.S. industry averages. Wages
in the star and mature clusters (LQs greater than 1) rose
5.0 percent from 2010 to 2017, and pay was flat in the
area’s less-concentrated sectors. Reduced government
spending in recent years may have slowed public sector
wage growth, while pay remains low in retail and has
declined in the health services sector. It bears noting
that wages in McAllen partly reflect the area's low cost
of living.

A low-pay environment in the burgeoning health industry is unusual; doctors, nurses and other health workers are generally well-educated and command high wages. However, nearly 40 percent of workers in McAllen’s
health cluster and nearly 12 percent of the area’s total
workforce are employed in home health care services.8
This segment of the industry grew 16.6 percent from 2010
to 2017, slightly more than the overall health services
cluster. Many home health workers are unlicensed, nonmedical caregivers, and the average salary for these jobs
is significantly lower than for the entire sector.

DEMOGRAPHICS: Poorer and Younger
than the State
McAllen’s population is much younger than that of
the other metros (Chart 7.3). The median age of 29.2 is
five years younger than the statewide figure. The city
has the largest share of under-15-year-olds of all metros
in this report at 28 percent. Families in McAllen also
tend to have more children—the metro averages nearly
2 children per family, compared with 1.4 for Texas.
The population is predominantly Hispanic at 91.8
percent, and 88.7 percent of the population self-identifies
as being of Mexican descent. McAllen has the largest foreign-born population of any metro in the report at nearly
27 percent, illustrating the city’s deep ties with Mexico.
McAllen is also home to a large group of seasonal residents who, at an average age of 72.3, contrast
starkly with the younger inhabitants of the metro and
the Rio Grande Valley. These “Winter Texans” come
primarily from midwestern U.S. states and Canada to

Section 7: McAllen—Edinburg—Mission

Chart 7.3: McAllen Has Youngest Population of Major Metros
Percent

Age (years)
60

100
90

80
70
60

34.4

34.6

32.1

35.1

37.9
34.6

34.2
31.0

29.2

34.5
30

40
20

30
20

10
0

0
Austin

Dallas
Under 15 years

El Paso

Fort Worth

15–24 years

Houston
25–54 years

McAllen

Midland–
Odessa

55–64 years

San Antonio
Over 64 years

Texas

U.S.

Median age

SOURCE: Census Bureau, 2016 American Community Survey 1-year estimates.

find a more temperate climate and low cost of living.
The approximately 106,000 migrants spent $528 million
locally in 2017–18.9
McAllen trails the state in terms of educational outcomes. Nearly 35 percent of the population age 25 and
over has no high school diploma—twice the Texas average. Only 18 percent of the population holds a bachelor’s
degree or higher, compared with 29 percent in Texas.
Due to low education levels and the prevalence of
low-paying industries, it’s not surprising that McAllen has
a high poverty rate—31 percent of the population lived
below the poverty line in 2016, compared with 16 percent
in Texas. The 2017 median household income of $37,106
was less than two-thirds of the Texas figure, $59,206.

EMPLOYMENT: Sluggish Growth
After Recovery from Recession
McAllen weathered the Great Recession far better
than most metros. While Texas lost 4.1 percent of its
jobs from peak to trough, McAllen employment fell only
1.8 percent from its peak in October 2008 to the trough
in March 2009.

Federal Reserve Bank of Dallas

Job growth in the postrecession period (December
2009 to December 2017) was 19.8 percent, or an average
of 2.3 percent per year—matching the Texas annual
average of 2.3 percent.
During the oil bust in 2015 and 2016, McAllen performed better than the rest of the state—growing at an
annualized rate of 1.9 percent over the two years, compared with 1.2 percent for Texas overall. Private education and health services grew 4.5 percent (per year) over
the period, significantly above the state’s 3.3 percent.
Government and leisure and hospitality jobs also grew
strongly over the two-year timeframe.
Led by a sharply lower Mexican peso in the wake of
the 2016 U.S. election, area-wide expansion remained
modest during 2017, resulting in employment declines
in the trade, transportation and utilities sector. Leisure
and hospitality employment grew just 1.8 percent.

OUTLOOK: Mixed, Dependent on Ties
to Mexico
Many highly educated McAllen residents seek employment elsewhere because of the higher pay offered

in bigger cities. This situation may change in the future;
McAllen has greatly improved the quality and availability of education. The merger of the University of Texas—
Pan American in Edinburg and the University of Texas at
Brownsville created the University of Texas Rio Grande
Valley, based in Edinburg and Brownsville, the largest
public university by enrollment in the Texas border region. Nevertheless, the emerging industries that employ
highly educated workers are not yet dominant enough
to retain much of the young, educated workforce.10
Over the past several years, more retail outlets south
of the border as well as a strong dollar have hurt border
retail sales. Total retail sales fell slightly (1 percent) in
2017, following declines in 2015 and 2016 that were
partly due to the energy bust and weaker cross-border
retailing. A stable outlook for Mexico in 2018 should
help such activity. However, uncertainty about bilateral

trade relations is a potential headwind to growth. Conversely, privatization of Mexico's oil industry should aid
the area.
Investments in several sectors in McAllen could lend
support to the economy. The La Plaza Mall, one of the
largest retail hubs in the area, opened a 245,000-squarefoot expansion in late 2017 that has drawn several
high-end retailers.11 The UT Rio Grande Valley School
of Medicine’s opening carries promise of future growth.
A partnership established in 2017 between the city of
McAllen and the McAllen Economic Development
Corp. seeks to recruit and secure funding for medical
research, suggesting the potential for expansion of highskill, high-wage health services positions in the area.
—Kristin Davis and Christopher Slijk

McAllen–Edinburg–Mission Growth Outlook
Drivers
•
•

•

Challenges

A young, growing population in the area will continue to provide
a deep labor pool for strong job growth in the region.
The creation of the UT Rio Grande Valley School of Medicine
will provide an avenue for growth in higher-skilled health
care positions.
A stable outlook for Mexico and greater maquiladora activity
should spur further growth in business services sectors tied to
these industries.
Continued progress on Mexico's recent energy reform will spur
more growth and investment in the area.

•

Skill shortages remain an issue. It is hard to attract skilled
workers to the region—and young, educated people tend to
leave to find higher-paying jobs elsewhere.
A strong dollar relative to the peso will negatively affect retail
sales in the short to medium term.
Trade policy uncertainty and tariffs on Mexico–U.S. trade may
damp cross-border activity.
A population that is relatively poorer and less-educated than
the Texas average may limit the area’s ability to attract highpaying industries.

•
•
•

Notes
The history of McAllen is taken from the Texas State Historical Association’s Handbook of Texas, tshaonline.org/handbook/online/articles/hdm01.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
Information about McAllen’s top employers is from the McAllen Economic
Development Corp., www.mcallenedc.org.
4
See “Dollar-Sensitive Mexican Shoppers Boost Texas Border Retail Activity,” by Roberto Coronado and Keith R. Phillips, Southwest Economy, Fourth
Quarter, 2012, www.dallasfed.org/assets/documents/research/swe/2012/
swe1204g.pdf.
5
Metropolitan statistical area (MSA) 2016 gross domestic product data by
industry are from the Bureau of Economic Analysis.
6
See Texas Comptroller gross sales and tax data, mycpa.cpa.state.tx.us/
allocation/HistSales.jsp.
1

Border crossing information is from the Bureau of Transportation Statistics.
Data for McAllen are listed under Hidalgo, Texas, which is part of the McAllen–Edinburg–Mission MSA. See transborder.bts.gov/programs/international/transborder/TBDR_BC/TBDR_BCQ.html.
8
See definition of home health care workers in NAICS 6216.
9
See “Winter Texan 2017–2018 Survey,” Business and Tourism Research
Center, University of Texas Rio Grande Valley, www.utrgv.edu/tourism/_files/
documents/reports/winter%20texan%20survey%20report%202017-18.pdf.
10
See McAllen Economic Scan, 2013, mcallen.org/wp-content/uploads/2014/10/market_profile.pdf.
11
See “La Plaza Mall’s $50 Million Expansion Opens Featuring H&M, Yard
House, Much More,” by Mitchell Ferman, The Monitor, Oct. 31, 2017,
www.themonitor.com/news/business/article_2f8461ca-bea5-11e7-92e123a59f2d5189.html.
7

Section 7: McAllen—Edinburg—Mission

At a Glance
•

Midland and Odessa began as railroad towns and together evolved into
a cattle shipping center and regional financial hub. The Permian Basin
oil boom in the mid-1920s shifted the economic focus to energy.

•

The shale boom of the last decade boosted household income and
spurred economic growth. The dominant energy industry has been
supported by manufacturing and transportation. Per capita personal
income in Midland is the highest in the state.

•

The Permian Basin has bounced back after energy activity and
household income decreased sharply with the onset of the oil bust
in 2015. The subsequent reemergence of oil production, during what
became a period of technological advances, has required fewer bluecollar workers.

Amarillo

Plano
Irving

Lubbock

Dallas

Fort Worth

El Paso

Longview

Midland
Odessa

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Beaumont
Port Arthur

Austin

Houston
San Antonio

Lamesa

Sugar Land

Edinburg
Andrews
Big Spring

Mission
McAllen

Stanton

Odessa
Kermit

Midland

Monahans

Population
(2017): 327,762

Population growth
(2010–17): 17.5 percent
(Texas: 12.1 percent)

Median household
income (2017): $64,210
(Texas: $59,206)

National MSA rank
(2017): Midland, No. 243*;
Odessa, No. 262*

*The Midland–Odessa combined statistical area is composed of the Midland and Odessa
metropolitan statistical areas (MSAs). The MSAs encompass Ector, Martin and Midland counties.

Midland–Odessa:
Riding the Oil Booms, Seeking Fewer Busts
HISTORY: Heart of the Permian Basin
Midland and Odessa are sibling cities about 20 miles
apart and jointly promoted as “Two Cities, No Limits.”1
Like many other Texas communities, Midland and Odessa began as stations along a railroad—halfway points
between Dallas and El Paso along the Texas and Pacific
Railway. Early on, the area relied primarily on ranching.
Midland became a prominent cattle shipping center for
Texas as well as a regional financial hub by 1890.
The beginnings of the oil boom in the Permian Basin—which encompasses two counties in New Mexico
and 55 counties in West Texas—arrived in the 1920s.
Scores of investors and oilfield workers moved to the
area, and by 1929, a total of 36 oil companies had established offices in Midland. Demand for oil and petrochemicals rose during World War II, helping transform Odessa
into the world’s largest inland petrochemical complex.

From that point forward, the area’s economy was
closely tied to the energy industry, rising with the oil
booms and contracting with the busts. After years of
decline that began with the 1980s oil bust, the Permian
Basin and its economic center, Midland–Odessa, were regenerated by the shale oil boom of the late 2000s. Investment grew in the prolific formation even during periods
of soft oil and gas prices, as its infrastructure, industry
know-how and technological advancement helped make
retrieving energy deposits relatively inexpensive.

INDUSTRY CLUSTERS: Energy-Driven
Economy
The composition of industry clusters in Midland–
Odessa is shown in Chart 8.1. The chart is organized by
location quotient (LQ)—a measure of a cluster’s share of

Chart 8.1: It's All About Energy in Midland–Odessa
7.0

Mature

Star

6.0

Location quotient in 2017

5.0

4.0

Energy and mining
Fabricated metal
manufacturing

3.0

Machinery
manufacturing

2.0
Government

Construction
Chemicals

Retail

Transportation and logistics

1.0

Food services
0.0

Recreation

Education
Business and
Transitioning financial services

–1.0
–3.0

–2.0

–1.0

Health services

0.0

1.0

Emerging
2.0

3.0

4.0

5.0

6.0

7.0

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 8: Midland—Odessa

and production companies employ more than 5,800
people, accounting for about 7 percent of the city’s total
employment in 2017.
Odessa’s second- and third-largest private employers are Halliburton and Keane Group, which together
employed about 4,300 workers, or over 5 percent of the
total employed.3
The region’s other important industries support the
outsized energy sector and have recently grown as well.
Odessa’s largest private employer, Saulsbury Industries
(a heavy industrial construction firm with nearly 4,000
employees nationwide and large midstream oil and gas
operations), helped build the growing infrastructure in
the Permian Basin. Oil and gas pipeline construction
companies employed 2,800 people in Midland–Odessa
in 2017, up from just 1,600 in 2014.4
The transportation and logistics cluster employs
only 3.4 percent of the workforce but is the third-fastest-growing cluster in Midland–Odessa (Chart 8.2).
Manufacturing—notably, fabricated metal manufacturing and machinery manufacturing—while mature and
relatively stable, helps support the energy industry.
Job growth has been focused in truck transportation
supporting expanding oil and gas production. Chemicals, long associated with the area’s energy sector, also

local employment relative to its share nationally—and the
change in employment share between 2010 and 2017.2
Clusters in the “star” quadrant, such as energy and
mining, have a large share of employment relative to
the nation (an LQ far exceeding 1, in this case) and are
relatively fast growing. “Emerging” industries, such as
recreation, are relatively smaller compared with the
nation (an LQ less than 1) but are fast growing. “Mature” sectors, such as machinery manufacturing, are
more concentrated relative to the U.S. (an LQ exceeding
1) but are slower growing; “transitioning” clusters, such
as business and government, are smaller relative to the
nation and are slower growing or declining.
Midland–Odessa lies in the heart of the Permian
Basin—which accounts for 30 percent of U.S. oil
production, up from 16.9 percent in 2010—and its
economy is overwhelmingly energy driven. About 30
percent of the workforce is employed by companies in
energy and mining, a cluster that has experienced rapid
growth. Energy firms dominate the listing of the top
private-sector employers in both cities.
Pioneer Natural Resources, with 3,600 employees
in Midland, has been the city’s largest employer since
2016, surpassing the Midland Independent School District. Pioneer and the city’s two next-largest exploration

Chart 8.2: Midland–Odessa's Largest Clusters Continue to Grow
Glass & ceramics (0.4%)
Chemicals (2.3%)
Transportation & logistics (3.4%)
Energy & mining (29.8%)
Recreation (2.4%)
Food svcs (8.7%)
Construction (7.0%)
Health svcs (8.6%)
Total

Retail (10.5%)
Agribusiness (0.5%)
Fabricated metal mfg (1.5%)
Defense & security (0.9%)
Business & financial svcs (4.5%)
Education (7.2%)
Textiles (0.1%)
Transportation equipment mfg (0.1%)
Computer mfg (0.0%)
Machinery mfg (1.5%)
Information technology & telecom (1.5%)
Government (4.5%)
Publishing & information (0.3%)
Wood products (0.2%)
Advanced materials (1.3%)
Utilities (0.4%)
Biomedical (0.1%)
Electrical equipment mfg (0.0%)
–150

–2
–7
–8
–10
–12
–19
–20
–25
–31

–100
–100

4
1

–50

8
7

33
29
27
27
21
18
17
15

78
72

100

150

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 8.1: Oil Boom and Bust Impacts Earnings in Midland–Odessa
Cluster

Midland–Odessa
2010

2012

Energy and mining

87,747

Machinery manufacturing

70,645

Fabricated metal manufacturing

64,216

Chemicals

73,394

Construction

55,772

Glass and ceramics

56,168

Food services

17,289

Transportation and logistics

60,442

U.S.

2014

2016

2017

90,293

96,750

91,316

98,001

80,900

73,032

82,595

77,851

78,239

70,059

69,453

78,192

68,784

73,787

55,830

82,854

79,460

79,094

83,471

72,887

64,178

68,203

65,926

68,388

60,742

54,738

60,246

66,710

69,608

55,398

18,471

19,554

19,279

19,642

18,963

66,268

70,466

57,252

65,204

53,761

109,430

120,053

93,523

102,454

104,871

107,188

Clusters with location quotient > 1

67,991

73,436

78,616

65,139

77,844

–

Clusters with location quotient < 1

46,200

48,484

52,406

54,252

49,458

–

Average earnings (total)

54,050

60,407

65,781

59,863

63,664

55,375

Utilities

2017

grew rapidly in the 2010–17 period. Additionally, the
region remains an important midway point between El
Paso and Dallas, serving as a transportation crossroad.
Wages in Midland–Odessa are relatively high for a
small metropolitan area, but they boom and bust along
with the energy industry. Inflation-adjusted annual
average wages grew by about 22 percent between 2010
and 2014—more than quadruple the statewide rate of
4.4 percent (Table 8.1). Midland–Odessa’s increase was
driven by energy and mining’s higher wages and growing share of employment. The energy slump depressed
overall wages between 2014 and 2016 by 9 percent, led
by an 18.8 percent decline among transportation and
logistics workers’ pay.

DEMOGRAPHICS: High Incomes,
Low Poverty
Real median household income, though quite high
in Midland–Odessa, fell 12.6 percent from 2014 to 2016
because of the oil bust (Chart 8.3). Midland–Odessa’s
income at $64,210 in 2017 remained above the Texas
median of $59,206 as the energy sector rebounded.
The area’s 10.4 percent poverty rate is the lowest
among all the metros in this report and 5 percentage
points less than the state average in 2016.

Midland–Odessa continues to trail the state in
educational attainment. About 80 percent of residents
age 25 or older have at least a high school diploma—3
percentage points below the state average in 2016.
Midland–Odessa also has the third-lowest share of population with a bachelor’s degree or higher (21 percent)
among the Texas metros in this report, ahead of only
McAllen and Beaumont–Port Arthur, and trailing the
statewide average of 28.9 percent.
Traditionally, many well-paying oilfield jobs do not
require a college education, hence the education gap
vis-à-vis the rest of the state. More than half (52 percent) of Midland–Odessa’s population is Hispanic—the
migration flow reflecting the area’s importance as the
heart of the Permian Basin and the employment opportunities it affords.

EMPLOYMENT: A Tale of Boom
and Bust
During the 2015–16 energy slump, the Permian Basin
rig count tumbled from 548 in December 2014 to a low of
137 in May 2016. Net migration in 2016 was negative—the
area lost 4,855 residents—even as migration increased in
Texas’ largest metros or remained stable in most others.
The outmigration likely helped limit increases in the

Section 8: Midland—Odessa

Chart 8.3: Midland–Odessa Household Income Booms and Busts with the Energy Sector
Percent growth
30
2010–14

2014–16

15
$71,000
10

$65,647
$42,116

$56,105

$61,132
$61,708

$56,565

$57,617

$36,176
$60,423

–5

–10

–15
Austin

Dallas

El Paso

Fort Worth

Houston

McAllen

Midland–
Odessa

San Antonio

Texas

U.S.

NOTES: Bars show real median household income growth during the selected periods. Nominal median 2016 incomes are displayed above bars.
SOURCE: Census Bureau, 2010, 2014 and 2016 American Community Survey 1-year estimates.

unemployment rate, which peaked at 5.7 percent in April
2016 from a low of 2.8 percent in December 2014.
Technological improvements to oil exploration and
extraction accelerated with firming oil prices since
the slump ended. Because the Permian Basin’s shale
deposits are stacked—some areas have as many as 12
shale layers—it has a considerable cost advantage over
other regions that typically contain a single layer. Thus,
the Permian has generated new investment and hiring
with a drilling breakeven oil price of around $50. The
new technology has limited the overall number of workers needed for oilfield work, with new positions typically requiring a higher skill set.
The latest rebound, which has been less labor
intensive than prior rebounds, differs from the upturn
following the Great Recession. As shale exploration
spread in the late 2000s, the Permian Basin’s rig count
increased, and total employment returned to prerecession levels by March 2011, growing 41 percent between
December 2009 and December 2014, or almost three
times the state rate.5

Federal Reserve Bank of Dallas

A shortage of pipeline capacity from the area to terminals along the Gulf of Mexico has recently restrained
the oil industry expansion. Industry officials have suggested that the bottleneck could ease in late 2019.

OUTLOOK: ‘New’ Old Industry
Holds Promise
Midland–Odessa’s economy and labor market
reflect the Permian Basin’s prominence as a leader in
the U.S. and global oil markets. Oil companies operating in the region enjoy a cost advantage that comes
from technological advances, a shale-rich geography
and established workforce and infrastructure. New
technology-enabled production will likely continue
growing, though employment gains will likely occur
at a slower pace than has historically been the case
during upturns.
The Permian Basin’s thriving energy sector is helping drive employment among supporting industries,
such as construction, manufacturing, transportation

and logistics. As production of oil and natural gas
increases, infrastructure is expected to grow to meet demand. Several pipeline projects are planned to accommodate the Permian’s growth.
Midland–Odessa’s economy is still exposed to the
commodity boom-and-bust cycle. However, recent
attempts to diversify the local economy may help the
region better weather inevitable busts.
The Permian Basin has the potential to produce alternative energy resources, such as wind power.6 Midland–

Odessa has also shown signs of moving beyond energy.
The University of Texas of the Permian Basin established
its College of Engineering in August 2017, and the area
received a site license to operate a commercial spaceport in September 2014. Midland–Odessa already has
a high concentration of manufacturing jobs, and the
spaceport and engineering school may help draw more
research and development to the region.
—Kristin Davis and Dylan Szeto

Midland—Odessa Growth Outlook
Drivers
•
•

•

Challenges

The Permian Basin’s shale-oil resources and new, more efficient
technologies should help production grow over the near term.
Transportation and distribution industries will continue to
grow as Midland–Odessa remains an important midway point
between Dallas and El Paso and as the needs of the energy
industry grow.
A commercial spaceport and new University of Texas Systemsupported College of Engineering may draw more research
and development.

•

Advances in oilfield technology are changing the kinds and
numbers of energy workers needed and the required skills.
Midland–Odessa’s highly energy-oriented economy still
leaves it exposed to the commodity boom-and-bust cycles.
Environmental concerns also pose a risk, as do recent pipeline
capacity limitations.
New capital investment outside energy and related industries
has been slow to come to the area, limiting options at least in
the near term.

•

Notes
The histories of Midland and Odessa are adapted from the Texas State
Historical Association's Handbook of Texas, tshaonline.org/handbook/online/articles/hdm03 and tshaonline.org/handbook/online/articles/hdo01.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
Detail regarding Midland’s and Odessa’s top employers was compiled
from several local websites: www.midlandtexas.gov/ArchiveCenter/ViewFile/
Item/208, odessatex.com/major-employers and www.midlandtxedc.com.
1

Data are from the Texas Workforce Commission’s Quarterly Census of
Employment and Wages.
5
Data are from the Texas Workforce Commission and have been seasonally
adjusted by the Federal Reserve Bank of Dallas.
6
The city of Midland partnered with Texas Tech University to invest in the
National Institute for Renewable Energy, which will research issues for the
wind-power industry.
4

Section 8: Midland—Odessa

Fredericksburg

Kerrville

New Braunfels

Boerne
Bandera

Population (2017):

San Antonio

2.5 million

Population growth (2010–17):
14.9 percent (Texas: 12.1 percent)

Uvalde

Schertz

Hondo

Seguin

Floresville

Median household income: (2017):
$56,774 (Texas: $59,206)

Jourdanton

National MSA rank (2017): No. 24*
Kauffman Startup Index rank
(2017): No. 6*

At a Glance
•

San Antonio has a rich heritage and history. It was
the largest city in Texas from 1860 to 1930, when it
fell behind Houston and Dallas. It has remained Texas’
third-largest metro area.

•

While housing costs are lower in San Antonio relative to
other large Texas metros, its median household income is
only slightly lower than the state figure.

•

The area’s diversified economy—particularly its business
and financial services firms, tourism industry and medical
research complex—will continue to provide economic stability.

•

Tight labor markets and difficulties attracting skilled workers
will make growth in high-wage industries more challenging.
Amarillo

Plano
Irving

Lubbock

Dallas

Fort Worth

El Paso

Midland
Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Port Arthur

Austin

San Antonio
Edinburg

Mission
McAllen

Beaumont

Houston
Sugar Land
*The San Antonio–New Braunfels metropolitan statistical area (MSA) encompasses
Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina and Wilson counties.
The Kauffman Startup Activity Index, a measure of business creation in the 40 largest
U.S. metropolitan areas, is further explained in the appendix.

San Antonio–New Braunfels:
Home of the Alamo and Cradle of Texas Liberty
HISTORY: A Military Service and Health
Research Center Emerges
Spanish expeditions explored the area of present-day
San Antonio in 1691 and 1709. A town grew out of the
San Antonio de Béxar Presidio and San Fernando de
Béxar. The presidio was built to defend the San Antonio mission, and San Fernando was the first chartered
civil settlement in Texas. In 1773, San Antonio de Béxar
became the capital of Tejas, Spanish Texas. It was the
site of several battles during the Texas Revolution from
October 1835 to April 1836, most notably the 13-day
siege of the Alamo. Bexar County was established by the
Republic of Texas following the departure of Mexican
troops, and San Antonio became its seat in 1837.1
In 1860, San Antonio surpassed Galveston to become
the largest city in Texas and, following the Civil War,
it thrived as a center for the cattle industry. The 1877
arrival of San Antonio’s first railroad—the Galveston,

Harrisburg and San Antonio Railway—fueled the city’s
economic growth and spurred additional railroad connections to other parts of the country by 1900. However,
San Antonio’s population fell behind that of Houston
and Dallas by 1930, and San Antonio has since remained
the third-largest urban area in Texas.
The First United States Volunteer Cavalry—later
known as the Rough Riders—was organized in San Antonio during the Spanish–American War. In World Wars
I and II, San Antonio served as an important military
center for the Army and Air Force. Today, three large
military installations—Fort Sam Houston and Lackland
and Randolph Air Force bases—provide employment
for many of the area’s residents.
A 418-bed military hospital began operations in
1938 and expanded during World War II. In 1946, with
Fort Sam Houston chosen as site of the U.S. Army
Medical Field Service School, the hospital was renamed

Chart 9.1: San Antonio's Industrial Composition Is Diverse
1.6

Mature
1.4

Transportation
equipment
manufacturing

Education

Recreation

Location quotient in 2017

1.2

Star

Food services

Health
services

Retail

Construction
1.0

Business and
financial services

0.8

Biomedical

Government

Energy and
mining

Publishing and information

0.6

Defense and
security

Agribusiness
0.4

Transportation
and logistics

Advanced
materials

0.2

Transitioning
0.0
–2.0

–1.5

Emerging
–1.0

–0.5

0.0

0.5

1.0

1.5

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 9: San Antonio—New Braunfels

The higher LQs of food services, recreation, education, health services (the largest cluster) and retail
reflect their outsized role in the San Antonio area. The
metro’s largest private employer is the supermarket
chain HEB, with 20,000 employees. The second- and
third-largest industry clusters, retail and food services,
are tied to the region’s strong tourism industry. San
Antonio is a top U.S. convention city. Local attractions
draw millions of visitors annually, and tourism and the
travel industry together generate billions of dollars in
economic impact each year.3
Employment expanded 32 percent in food services and 18 percent in recreation during the 2010–17
period—the two clusters make up nearly 14 percent
of all metro jobs (Chart 9.2). San Antonio is home to
two of the region’s premier theme parks—SeaWorld,
the largest of three such theme parks in the U.S., and
Fiesta Texas, a 200-acre amusement park. Other notable
attractions include the River Walk and the Alamo.
The government cluster reflects the presence of
three military installations, which together employ
more than 80,000 people.4 The military bases support

Brooke Army Medical Center. It marked the beginning
of the area’s ties to medical research.

INDUSTRY CLUSTERS: Tourism
and Health Dominate
Location quotients (LQs), which compare the relative concentration of various industry clusters locally
and nationally, can be used to assess key drivers in an
area’s economy. An LQ exceeding 1 indicates that a
specific industry cluster is more dominant locally than
nationally. Industry cluster growth is measured by the
percentage-point change in its share of local employment between 2010 and 2017 (Chart 9.1).2
Clusters in the top half of the chart have a larger
share of employment relative to the nation and, thus, an
LQ exceeding 1. These clusters are generally vital to the
area’s economy and can be expanding relatively rapidly
(“star”) or slowly (“mature”). Those in the bottom half
are less dominant locally than nationally and, hence,
have LQs below 1. “Emerging” clusters are fast growing;
those growing slowly or declining are “transitioning.”

Chart 9.2: Transportation, Food Services and Energy Lead Growth Among Large Clusters
Machinery mfg (0.4%)
Transportation & logistics (2.7%)
Glass & ceramics (0.3%)
Food svcs (10.1%)
Energy & mining (5.4%)
Business & financial svcs (9.3%)
Information technology & telecom (3.8%)
Transportation equipment mfg (1.2%)
Health svcs (13.7%)
Chemicals (0.7%)
Total
Retail (11.4%)
Defense & security (2.6%)
Recreation (3.8%)
Utilities (0.1%)
Construction (5.1%)
Computer mfg (0.2%)
Wood products (0.9%)
Education (9.5%)
Electrical equipment mfg (0.0%)
Government (6.6%)
Fabricated metal mfg (0.4%)
Agribusiness (1.2%)
Primary metal mfg (0.1%)
Advanced materials (1.2%)
Publishing & information (1.0%)
Biomedical (0.9%)
Textiles (0.2%)
–40

22
22
21
20
19
18
18
16
16
15

–21

–16
–20

–9

0
–1
–3
–5
–6

25
25

32
30
29

100

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 9.1: Pay in San Antonio's Dominant Clusters Lags U.S.
Cluster

San Antonio

U.S.

2010

2012

2014

2016

2017

Food services

17,780

17,627

17,770

18,496

18,606

18,963

Health services

49,084

48,431

48,407

51,534

51,479

56,001

Education

45,739

43,601

44,070

44,933

45,491

49,322
73,569

Transportation equipment manufacturing

58,582

58,576

62,677

69,627

75,418

Construction

49,188

50,803

52,645

56,073

56,524

60,742

Recreation

33,154

32,242

33,189

33,625

34,189

41,467

Retail

30,289

30,880

31,129

31,982

31,803

31,216

Business and financial services

73,828

76,897

76,366

78,046

78,614

100,785

Clusters with location quotient > 1

43,766

43,232

43,549

45,334

45,662

–

Clusters with location quotient < 1

59,739

61,313

62,135

63,466

63,354

–

Average earnings (total)

45,740

45,856

46,417

47,905

48,185

55,375

employment in the defense and security and health
clusters. San Antonio has ranked in the top 10 among
U.S. metro areas in terms of the largest concentrations
of federal government and military workers.5
The health services and biomedical sectors also
have a strong foothold in the area, with a combination
of private and government operations. Employment in
health-related institutions (private and government)
accounts for almost 14 percent of San Antonio’s workforce, a larger proportion than in other major Texas
metros (including Houston). Large private health care
service providers are Methodist Healthcare System and
Baptist Health System. Medical research facilities in San
Antonio include the Brooke Army Medical Center’s San
Antonio Military Medical Center (the nation’s largest
military hospital), Wilford Hall Ambulatory Surgical
Center at Lackland Air Force Base, the University of
Texas Health Science Center at San Antonio and the
Texas Biomedical Research Institute.
Education is also a significant regional contributor,
with more than 30 higher-education facilities and many
ties to health care and biosciences through the South
Texas Medical Center. Along with public and private
K-12 education jobs, education accounts for almost 10
percent of employment in San Antonio.
Machinery manufacturing—which includes mining
machinery used in the oil and gas industry—was the
fastest-growing cluster from 2010 to 2017 as employment increased 88 percent. Glass and ceramics expand-

ed 54 percent, while transportation equipment manufacturing grew 25 percent during the period, thanks in
part to continued growth in area suppliers for a Toyota
USA plant that began operations in 2006. The plant
produces the Toyota Tundra, a full-size pickup, and
added the Tacoma truck in 2010. Toyota employs 2,800
workers at its facility.
Business and financial services, the metro’s
fifth-largest cluster, accounts for 9.3 percent of the local
workforce—roughly equivalent to its national presence.
San Antonio is the headquarters of USAA (United Services Automobile Association), a Fortune 500 financial
services group, and Cullen/Frost Bankers Inc. Employment in the business and financial services cluster
expanded 29 percent from 2010 to 2017.
On average in 2017, clusters with a greater employment concentration in San Antonio than in the U.S.
paid workers about $45,700, less than those industries
with a relatively smaller presence, which paid $63,400
(Table 9.1). The average wage is lower because San
Antonio’s dominant clusters are in industries that typically command less pay. These include food services
at $18,600 annually and retail at $31,800. Still, some
locally concentrated clusters are among the highest
paying—business and financial services, at $78,600 annually, and transportation equipment manufacturing,
at $75,400. A relatively low cost of living in San Antonio
boosts the purchasing power of local wages, a difference not accounted for in the table.

Section 9: San Antonio—New Braunfels

Chart 9.3: San Antonio's Share of Veterans Highest Among Texas Metros
Percent
12

11.3

7.6

7.2

7.4

5.6

7.1

5.4

7.4

5.3

4
3.0
2

0
Austin

Dallas

El Paso

Fort Worth

Houston

McAllen

Midland–
Odessa

San Antonio

Texas

U.S.

NOTE: The share of veterans in Amarillo, Beaumont–Port Arthur, Lubbock and Tyler–Longview were 7.9, 7.3, 6.7 and 7.2 percent, respectively.
SOURCE: Census Bureau, 2016 American Community Survey 1-year estimates.

A low-pay environment in the health industry is
unusual; doctors, nurses and other health care workers
are mostly well-educated and command high wages.
However, in San Antonio’s health cluster, nearly 25,000
people work in home health-care services.6 Many are
unlicensed, nonmedical caregivers, and the average salary for these jobs—$21,100 in 2017—is significantly lower
than the average pay in the health care sector ($51,500).

DEMOGRAPHICS: Mostly Hispanic;
Strong Military Background
The population is predominantly Hispanic, 55.1
percent—the highest share among the five major Texas
metros and well above the Texas share of 39.1 percent.7
Despite the higher proportion of Hispanics, the metro
area has the lowest foreign-born population among the
major Texas metros in this report at 12.2 percent. This
compares with the foreign-born share of 17.0 percent in
Texas overall and 13.5 percent in the U.S.
Twenty-eight percent of the population age 25 and
over holds a bachelor’s degree or higher, similar to the
Texas average of 28.9 percent but markedly lower than
neighbor Austin at 42.8 percent.
56

Federal Reserve Bank of Dallas

San Antonio’s median age is 34.6 years, in line with
the Texas median of 34.5 years. Nevertheless, the area has
a relatively large older population compared with other
major Texas metros; the share of seniors is 12.7 percent.
The area’s age distribution reflects the significant military
presence and a tendency for many armed forces personnel to retire in the area after completing their service. As a
result, more than 1-in-10 San Antonio adults are current
or former military personnel, the highest share of all the
metros in this report (Chart 9.3). This compares with 7.1
percent in Texas and 7.4 percent in the U.S.

EMPLOYMENT: Steady as She Goes
San Antonio’s diversified industrial base and considerable government presence likely helped the metro
weather the Great Recession better than other major
Texas metros.
Despite its proximity to the Eagle Ford Shale formation—a prolific source of energy deposits—San Antonio
did not experience much of a boost in job growth from
the shale boom. Employment at year-end 2014 was 12.2
percent above its 2008 high, just a tad higher than Texas’ overall increase of 10.4 percent from the 2008 peak.

Thanks in part to San Antonio’s relatively limited
dependence on the cyclical energy and mining sector—
the cluster accounts for 5.4 percent of its workforce—
metro jobs grew at an annualized 2.9 percent rate in the
oil bust years, 2015–16, compared with the state rate of
1.2 percent.8
Growth in 2017 was 2.0 percent, and it slowed to
1.0 percent during the first 10 months of 2018. Labor
markets have continued to tighten, and the San Antonio
unemployment rate fell to an 18-year low of 3.1 percent
in October 2017. It has risen slightly since, to 3.3 percent in September 2018.

stability, although government employment levels have
been relatively flat outside of growth in public health.9
Federal budget constraints may also limit growth.
Firming oil prices have spurred little additional
activity in the nearby Eagle Ford, in contrast to the
Permian Basin region of Texas. The total rig count in the
Eagle Ford peaked at 98 in May 2017 and was at 90 in
September 2018. The Permian Basin rig count rose from
356 in May 2017 to 485 in September 2018. While San
Antonio has very few oil and gas jobs, related industries
such as transportation and machinery manufacturing
benefit from energy upturns.
The metro’s proximity to several state-of-the art military medical facilities, as well as large private research
and health institutes, should continue to propel health
sector growth and enable San Antonio to meet the needs
of South Texas, including the Rio Grande Valley. Additionally, the Texas Research and Technology Foundation plans to develop a 110,000-square-foot innovation
center in the downtown area, with the goal of incubating
and developing bioscience, cybersecurity and emerging-technologies companies in San Antonio.10

OUTLOOK: Industry Diversity
Lifts Economy
San Antonio’s industry profile is as unique as its
history, with a concentration in health care, retail, food
services, education, business and financial services,
and recreation. In the near term, those industries’ performance will set the course for the area’s economy.
San Antonio’s dependence on government and military jobs—government accounted for more than 15 percent of the area’s 2017 nominal output—provides some

—Laila Assanie and Christopher Slijk

San Antonio—New Braunfels Growth Outlook
Drivers
•
•
•

Challenges

The government, education and health clusters continue to
provide stability as the region’s population expands.
Biomedical and health services should continue to support job
growth in the area.
The rebound in the state’s energy sector should provide
some boost to ancillary transportation firms and oil refiners in
San Antonio.

•

San Antonio’s high school dropout rate is above the state
average, weakening the pipeline of high-skilled talent in the
local labor force.
A continued shortage of skilled workers may constrain growth
in high-paying sectors and limit the area’s ability to attract firms
and investment.
The three large military installations and the defense and
security cluster are vulnerable should federal budget cuts occur.

•

Notes
The history of San Antonio is adapted from the Texas State Historical
Association’s Handbook of Texas, tshaonline.org/handbook/online/articles/
hds02, and from the Brooke Army Medical Center website, www.bamc.
amedd.army.mil/history.asp.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
See “The Economic Impact of San Antonio’s Hospitality Industry,” by Richard V. Butler and Mary E. Stefl, Trinity University, for the San Antonio Area
Tourism Council and San Antonio Hotel and Lodging Association, www.
sanantoniotourism.com/research-and-useful-links.
4
Data on the largest employers in San Antonio were obtained from the San
Antonio Economic Development Foundation, www.sanantonioedf.com/
why-san-antonio/data.
1

See “Relying on a Federal Paycheck During the Shutdown,” Washington
Post, March 7, 2013 (updated Oct. 1, 2013), www.washingtonpost.com/
wp-srv/special/business/diversify-economy.
6
The definition of home health care workers is from the North American
Industry Classification System, NAICS 6216.
7
Texas’ major metros are Austin, Dallas, Fort Worth, Houston and San
Antonio.
8
Employment data are from the Texas Workforce Commission and are
seasonally adjusted by the Federal Reserve Bank of Dallas.
9
Output data are from the Bureau of Economic Analysis.
10
“Texas Research and Technology Foundation Plans Innovation Center,”
by Iris Gonzalez, Rivard Report, Sept. 14, 2017, http://therivardreport.com/
texas-research-and-technology-foundation-plans-innovation-center.
5

Section 9: San Antonio—New Braunfels

Amarillo

At a Glance
•

•

Amarillo initially flourished as a cattle-market hub,
connecting ranches in the Panhandle to major urban
markets by railroad. Large industrial plants, built after
World War I to produce helium and weapons for the
military, transformed the area, as did the discovery of
oil and gas.
Services have become the cornerstone of the
economy while many manufacturing plants still
thrive, contributing to comparatively low poverty and
unemployment rates.

Plano
Irving

Lubbock

Dallas

Fort Worth

El Paso

Midland
Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Port Arthur

Austin

The median household income trails the Texas average
slightly but is higher than other metros of comparable
size. The population is less diverse than that of the
state. Domestic outmigration and tight labor markets
may become a drag on future growth.

Houston
San Antonio

Sugar Land

Edinburg

Mission
McAllen

Population
(2017): 264,925

Population growth

Dumas

(2010–17): 4.8 percent (Texas: 12.1 percent)

Amarillo

Borger

Vega

Panhandle

Median household
income (2017): $53,922 (Texas: $59,206)
National MSA rank (2017): No. 184*

Claude
Hereford

Canyon

Beaumont

*The Amarillo metropolitan statistical area (MSA) encompasses
Armstrong, Carson, Oldham, Potter and Randall counties.

Amarillo:
Services Take Root in Panhandle’s Ranching,
Transportation Center
HISTORY: From Ranching and Trade
Hub to Industrial Complex

significantly, the Cliffside gas field discovery in 1928
included helium-rich deposits, leading to the federal government’s establishment of the U.S. Bureau of
Mines’ Amarillo Helium Plant. In 1942, the Pantex Ordinance Plant was opened for the production of bombs
and ammunition. It subsequently became the nation’s
premier nuclear weapons facility, today housing most
of the national plutonium repository and encompassing
18,000 acres and 650 buildings.2

Amarillo has its origins in 1887 with the arrival of rail
freight service, helping create a cattle-market center in
the Texas Panhandle, serving area ranches and those in
the South Plains and eastern New Mexico. Additional
rail service after the turn of the century strengthened
Amarillo’s standing in cattle shipping, and the city’s
standing as a transportation hub rose during the 1930s
with the convergence of four U.S. highways, including
the famous Route 66.1
The community was originally named Oneida and
later renamed Amarillo after the nearby lake and creek,
which likely derived their name from the yellow soil
along their banks or the yellow wildflowers plentiful
during the spring and summer.
The area gained an industrial base with the discovery of natural gas in 1918 and oil three years later.
Oil refineries and shipping facilities followed. Most

INDUSTRY CLUSTERS: Retail,
Food Services Drive Local Economy
Location quotients (LQs), which compare the relative concentration of various industry clusters locally
and nationally, are a convenient way of assessing key
drivers in a regional economy. An LQ exceeding 1
indicates that a specific industry cluster carries more
relative weight locally than nationally. Industry cluster

Chart 10.1: Diverse Cluster Mix Drives Activity
2.0

Mature

Star

1.8
Utilities
1.6

Location quotient in 2017

Education
1.4

Health
services

Retail

Food services

Construction

Government

1.2
1.0

Energy and mining

0.8
0.6

Transportation
and logistics

Business and
financial services

0.4

Agribusiness

0.2

Defense and
security

Transitioning

0.0
–1.5

–1.0

–0.5

0.0

0.5

Emerging
1.0

1.5

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 10: Amarillo

utility company with more than 800 employees (as of
March 2018), is a subsidiary of Xcel Energy Inc. of Minneapolis. The energy and mining cluster, employing 5.8
percent of area workers, was among the fastest-growing
sectors between 2010 and 2017, with total employment
increasing 24 percent during the period (Chart 10.2).
One factor in the growth of these two clusters is the
Panhandle region’s importance as a producer of wind
energy.5 The metro increased its wind energy production capacity nearly 500 percent between 2010 and
2016, driving its share of the state’s electricity-generating capacity from 3 percent to 10 percent.
While Amarillo has much lower shares of employment in manufacturing-related industries than the
nation, production plants are among the largest private-sector employers. The defense and security cluster
also grew rapidly from 2010 to 2017. The area is home
to CNS Pantex, the nation’s primary facility for the final
assembly, dismantlement and maintenance of nuclear
weapons, which is managed and operated privately but
overseen by the Department of Energy/National Nuclear Security Administration. It employed 3,200 people as
of March 2018, 2.7 percent of metro workers. Additionally, Bell Helicopter’s production plant employs 1,000
workers. A Tyson Foods beef plant tied to Amarillo’s
large cattle industry employs 2,280 people.

growth is measured by the percentage-point change in
the cluster’s share of local employment between 2010
and 2017 (Chart 10.1).3
Clusters in the top half of Chart 10.1 are generally
vital to the area’s economy and can be expanding rapidly relative to other clusters (“star”) or losing ground to
other clusters (“mature”). Those in the bottom half are
less dominant locally than nationally and have an LQ
less than 1.
Most Amarillo workers are in service occupations,
with 46 percent in the retail, health services, education
and food services industry clusters. All of these clusters
have LQs exceeding 1, indicating their outsized local
contribution. Retail and food services are in the “star”
category, with growing shares of the metro's employment. The largest employers include the Amarillo Independent School District, BSA Health System (formed
from the 1996 combination of High Plains Baptist
Hospital and St. Anthony’s Hospital), the Northwest
Texas Healthcare System, the city of Amarillo and several higher-education institutions, including Texas A&M
University in Canyon.4
Although the utilities cluster employs less than 1
percent of the workforce, its high LQ and above-average growth indicate its significance. Amarillo-based
Southwestern Public Service, a large regional electric

Chart 10.2: Energy-, Construction- and Transportation-Related Clusters Post Above-Average Growth
Transportation & logistics (2.6%)
Energy & mining (5.8%)
Construction (5.7%)
Utilities (0.6%)
Defense & security (1.4%)
Food svcs (9.5%)
Glass & ceramics (0.2%)
Agribusiness (1.2%)
Retail (12.8%)
Health svcs (13.5%)
Total
Information technology & telecom (1.7%)
Recreation (2.5%)
Machinery mfg (0.3%)
Education (10.1%)
Business & financial svcs (5.8%)
Chemicals (1.0%)
Government (6.7%)
Advanced materials (0.3%)
Biomedical (0.1%)
Wood products (0.6%)
Textiles (0.2%)
Publishing & information (0.5%)
Electrical equipment mfg (0.1%)
Computer mfg (0.0%)

26
24
21
20
18
18
17
17
7
7
6
6
4
2
2
–2
–6
–7
–9
–16
–19
–33
–41
–48
–64

–70

–60

–50

–40

–30

–20

–10

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 10.1: Earnings in Amarillo Trail U.S.
Cluster

Amarillo

U.S.

2010

2012

2014

2016

2017

Utilities

86,768

88,877

92,126

98,899

103,833

107,188

Construction

46,959

48,845

48,714

52,114

50,999

60,742

Food services

14,984

15,562

15,950

16,148

16,257

18,963

Retail

27,823

27,522

27,559

28,514

28,077

31,216

Education

40,771

38,535

39,712

40,634

40,478

49,322

Health services

50,480

49,070

47,992

50,479

50,434

56,001

Energy and mining

62,848

54,275

60,319

58,012

60,167

80,900

Clusters with location quotient > 1

36,871

36,207

38,632

39,668

39,806

–

Clusters with location quotient < 1

51,044

50,002

49,392

50,955

51,211

–

Average earnings (total)

43,813

43,270

43,510

44,619

44,891

55,375

Average annual real (inflation-adjusted) earnings in
Amarillo grew only 2.5 percent in 2010–17 (Table 10.1);
this is below the state’s 5.7 percent wage growth rate.
The metro’s wages are below the U.S. average in most
industry clusters, and overall wages are 18.9 percent
lower in Amarillo than in the U.S. Lower average wages
in Amarillo partly reflect the low cost of living; adjusting wages for lower housing costs in particular would
significantly reduce the wage gap vis-à-vis state and
national wages.

losses via domestic outmigration. The overall population grew 4.8 percent from 2010 to 2017.
Amarillo’s postsecondary education attainment
among those ages 25 and older lags the state, with 23.7
percent possessing a bachelor’s degree or higher, compared with 28.9 percent statewide.
Expansion of wind-energy production will likely
continue to lead future growth. Defense and security
manufacturing and cattle production will remain mainstays of Amarillo’s economy, with an expected increase in
export demand for beef aiding growth in the near term.6

DEMOGRAPHICS: Incomes Stagnate
Even as Labor Market Remains Tight

—Stephanie Gullo

Amarillo’s real median household income grew 1.6
percent from 2014 to 2017 compared with 7.8 percent
statewide. At $53,922, Amarillo’s median income was
below the state median of $59,206 in 2017—a relatively high income for a small city. Poverty rates are
slightly lower than in the state; 15 percent of the local
population and 18 percent of children live in poverty,
compared with an overall statewide poverty rate of 16
percent and 22 percent among children.
Amarillo averaged the lowest unemployment rate
among Texas metros in 2015 and 2016.
More than 60 percent of the population is non-Hispanic white; 28.4 percent of the population is Hispanic.
The population rose in 2017 as net international migration and natural increase (births minus deaths) offset

Notes
The history of Amarillo has been adapted from the Texas State Historical
Association’s Handbook of Texas, tshaonline.org/handbook/online/articles/
hda02.
2
Detail about Pantex’s current operations has been obtained from https://
pantex.energy.gov/about.
3
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
4
Data about major employers in Amarillo have been obtained from the
Amarillo Chamber of Commerce, www.amarillo-chamber.org/major-employers.html.
5
See “Wind Power a Growing Force in Oil Country,” by Justin J. Lee and
Kelvinder Virdi, Federal Reserve Bank of Dallas Southwest Economy, Second Quarter, 2017, www.dallasfed.org/research/swe.aspx.
6
See “CattleFax Outlook: Cattle Profitability Remains for 2018,” by Wes Ishmael, Beef Magazine, Feb. 2, 2018, accessed May 7, 2018, www.beefmagazine.com/marketing/cattlefax-outlook-cattle-profitability-remains-2018.
1

Section 10: Amarillo

At a Glance
•

The Spindletop oil discovery near Beaumont in 1901
transformed the small lumber and port town into
a thriving oil and gas hub, with one of the nation’s
largest concentrations of refineries, petrochemical
plants and related businesses.

•

The area, which includes the city of Orange, became
known as the Golden Triangle, a reference to the
wealth that came as a result of Spindletop’s oil riches.

•

Median household income grew faster in Beaumont–
Port Arthur than in all major Texas metros from 2014
to 2016, likely due to the boom in downstream energy
and the resulting highly paid jobs. However, median
household income remains far below the comparable
state and U.S. figures.

Population
(2017): 412,437

Population growth
(2010–17): 2.2 percent (Texas: 12.1 percent)

Median household
income (2017): $49,875 (Texas: $59,206)
Jasper
Livingston

Newton

National MSA rank (2017): No. 130*

Woodville

Amarillo

Beaumont

Kountze
Plano

Orange
Irving

Lubbock

Liberty

Fort Worth

El Paso

Midland

Anahuac

Port Arthur

Dallas

Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

New Braunfels

Beaumont
Port Arthur

Austin

Houston
San Antonio
Edinburg
*The Beaumont–Port Arthur metropolitan statistical area (MSA) encompasses Hardin,
Jefferson, Newton and Orange counties.

Mission
McAllen

Sugar Land

Beaumont—Port Arthur:
The Golden Triangle Shines as Petrochemicals Boom
HISTORY: Discovery of Oil Transforms
the Area

Neches River to Beaumont and Orange in 1908. Refineries tied to Spindletop followed and, by 1909, Port Arthur
was already the nation’s 12th-largest port based on the
value of exports. By 1914, it became the second-largest
oil-refining center in the country.

While Beaumont, like many Texas communities,
traces its initial growth to the post-Civil War arrival of
the railroad, it owes its longer-term viability to the Spindletop oil gusher in 1901. The oil field south of town
spawned three oil companies—the Texas Co. (later Texaco), Gulf Oil Corp. and Humble (later Exxon Mobil)—
and established the region as an oil distribution and
refining hub. Beaumont, part of Texas’ Golden Triangle
along with Port Arthur and Orange, saw its population
double during Spindletop’s first decade. Discovery of
another oil field at Spindletop in 1925 again brought a
burst of growth to the area.1
Nearby Port Arthur, which founder Arthur E. Stilwell
initially envisioned as a tourist destination (naming
the town after himself ), became a seaport following
creation of a canal linking Sabine Lake to Sabine Pass
in 1899. The canal was deepened and extended up the

INDUSTRY CLUSTERS: A Global
Petrochemical and Industrial Complex
Location quotients (LQs), which compare the
relative concentration of industry clusters locally and
nationally, are a convenient way of assessing key drivers
in an economy. Industry cluster growth is measured by
the percentage-point change in its share of local employment between 2010 and 2017 (Chart 11.1).2
Clusters in the top half of Chart 11.1, such as chemicals, construction, and energy and mining, have a larger
share of employment relative to the nation and, thus,
an LQ greater than 1. These clusters are generally vital

Chart 11.1: Petrochemicals and Refineries Central to Beaumont–Port Arthur's Economy
4.0

Mature

3.5

Energy and mining

3.0
Location quotient in 2017

Star

Chemicals

Construction
Utilities

Fabricated metal
manufacturing

2.5

Advanced
materials

2.0

Primary metal
manufacturing
Machinery
manufacturing

Education
1.5

Retail
Food services

1.0
Health
services
0.5

Transportation
and logistics
Business and
financial services

Government

Transitioning
0.0
–2.0

–1.5

–1.0

–0.5

0.0

0.5

1.0

1.5

Emerging
2.0

2.5

Section 11: Beaumont—Port Arthur

which is feedstock for propylene and other petrochemicals. Record low natural gas prices gave the companies
a competitive edge vis-à-vis foreign producers that rely
on oil as an input and propelled the construction or
expansion of plants along the Gulf Coast. The projects
include BASF’s $270 million expansion of its dicamba
herbicide production facility in Beaumont.4
With the decline of oil prices in mid-2014, many
refinery-related expansions were put on hold. As prices
stabilized and then increased, some companies renewed plans. Total Petrochemicals has confirmed plans
to build a $1.7 billion ethane cracker in Port Arthur,
scheduled to begin operations in 2020.
Beaumont–Port Arthur’s other important industries
have grown in support of its outsized manufacturing
and energy base. Payrolls in electrical equipment and
machinery manufacturing each grew at around 50
percent in 2010–17 (Chart 11.2). The transportation and
logistics cluster, employing 3 percent of the workforce,
is also among the fastest growing in Beaumont–Port
Arthur, expanding 20 percent in 2010–17. The region
remains an important seaport, with both the ports of
Beaumont and Port Arthur placing among the top 25
U.S. water ports for total tonnage in 2017.5 The majority of the tonnage moving through both ports is crude
petroleum and its refined products (gasoline, diesel

to the area’s economy and can be expanding relatively
rapidly (“star”) or growing relatively slowly (“mature”).
Those in the bottom half are less-dominant locally than
nationally and, hence, have an LQ less than 1. “Emerging” clusters are fast growing; those growing slowly or
declining are “transitioning.”
Energy and mining-related companies, including
both upstream and downstream firms, make up the
largest cluster in Beaumont–Port Arthur, employing
14.7 percent of the workforce. Major employers include
Exxon Mobil in Beaumont (2,000 workers) and Motiva
Enterprises and Valero in Port Arthur (1,500 and 850,
respectively).3 The Motiva facility processes more than
600,000 barrels of oil per day, making it the largest refinery in North America.
Similarly, the chemical industry is a major cluster,
its relative size increasing since 2010. Chemical manufacturing boasts 3.3 times the concentration in Beaumont–Port Arthur than in the U.S. due to the significant
presence of employers such as BASF Corp. and Total
Petrochemicals and Refining USA, which together operate the world’s largest steam cracker in Port Arthur, and
Exxon Mobil’s chemical and polyethylene plants.
Texas-based chemical companies have benefited
from the last decade’s shale-led boom that has produced cheap and plentiful supplies of natural gas,

Chart 11.2: Energy and Manufacturing Payrolls See Strong Growth
Machinery mfg (1.2%)
Electrical equipment mfg (0.1%)
Textiles (0.1%)
Chemicals (5.0%)
Transportation & logistics (2.9%)
Energy & mining (14.7%)
Defense & security (1.5%)
Food svcs (8.7%)
Business & financial svcs (4.9%)
Utilities (0.7%)
Total
Transportation equipment mfg (0.5%)
Advanced materials (5.8%)
Information technology & telecom (1.9%)
Retail (12.4%)
Construction (11.0%)
Primary metal mfg (0.4%)
Health svcs (11.8%)
Education (9.0%)
Government (6.6%)
Recreation (1.6%)
Fabricated metal mfg (1.9%)
Publishing & information (0.4%)
Wood products (0.8%)
Agribusiness (0.9%)
Computer mfg (0.3%)
Glass & ceramics (0.3%)
Biomedical (0.2%)

–32

–42
–43

–60

–40

–18
–20
–23
–25

–20

–6
–7
–9
–10
–10

1
1
1
1
0

–3

11
11

Percent change in employment, 2010–17

Federal Reserve Bank of Dallas

Table 11.1: Earnings in Energy-Related Clusters Outperform U.S. Averages
Cluster

Chemicals

Beaumont—Port Arthur

U.S.

2010

2012

2014

2016

2017

104,749

110,483

118,628

120,187

127,863

72,887

Energy and mining

88,747

89,992

90,947

100,690

98,938

80,900

Construction

61,393

64,965

65,214

72,117

72,728

60,742

Fabricated metal manufacturing

63,403

69,540

66,602

61,919

61,656

55,830

Advanced materials

90,693

97,395

105,335

107,557

114,780

85,695

124,886

111,957

116,700

119,614

122,068

107,188

Machinery manufacturing

60,754

61,640

62,879

69,385

69,905

70,059

Primary metal manufacturing

69,779

74,267

72,041

72,756

70,851

67,868

Retail

29,366

28,766

29,764

30,814

31,376

31,216

Food services

17,500

17,280

16,153

17,101

16,832

18,963

Education

39,895

37,815

38,322

39,391

39,380

49,322

Clusters with location quotient > 1

55,939

61,225

66,369

63,073

67,299

–

Clusters with location quotient < 1

56,207

53,399

51,437

58,991

53,934

–

Average earnings (total)

49,481

51,145

52,279

54,139

54,572

55,375

Utilities

and fuel oil). In November 2017, voters passed an $85
million bond measure to upgrade facilities at the Port of
Beaumont and improve its rail and highway access.
Driven by high-paying energy and manufacturing
jobs, inflation-adjusted annual wages have grown
rapidly since 2010 (Table 11.1). On average, a worker in
Beaumont–Port Arthur made 10.3 percent more in 2017
than in 2010 in real (inflation-adjusted) terms.
Wages in industries with an LQ greater than 1 have
driven the area’s wages up, and in 2017, workers in
these clusters (star and mature) made $67,300 annually
on average, compared with $54,600 on average across
all sectors.

this report and 12 percentage points lower than the Texas
average of 28.9 percent. Many petrochemical and manufacturing-related jobs do not require a college degree.
Beaumont–Port Arthur’s significance as a key player
in the petrochemical industry will continue to dominate its fortunes. Energy companies have several billion-dollar projects planned, which will boost growth in
the medium term, particularly in terms of construction
employment and both retail and leisure and hospitality
spending in the area.
—Laila Assanie

Notes
The history of Beaumont and Port Arthur has been adapted from the Texas
State Historical Association’s Handbook of Texas, tshaonline.org/handbook/
online/articles/hdb02 and tshaonline.org/handbook/online/articles/hdp05.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for detail.)
3
Employment data are from the individual companies websites: Exxon
Mobil’s Beaumont facilities, www.corporate.exxonmobil.com/en/company/
worldwide-operations/locations/united-states/beaumont-operations/aboutus; Motiva Enterprises’ refinery, https://motiva.com/About/What-We-Do/
Our-Production; and Valero’s Port Arthur refinery, www.valero.com/en-us/
Pages/PortArthur.aspx.
4
See “BASF Expands Production Capacity for Herbicide Dicamba in
Beaumont, Texas,” BASF news release, March 21, 2017, www.basf.com/en/
company/news-and-media/news-releases/2017/03/p-17-154.html.
5
Port data are from the Bureau of Transportation Statistics, www.bts.dot.
gov/port-performance-freight-statistics.
1

DEMOGRAPHICS: Household Income
Increasing, Underscoring Industrial Base
Primarily a petrochemical manufacturing-driven
economy benefiting from the shale oil boom, Beaumont–
Port Arthur saw median household income expand at a
faster pace than in most Texas metros from 2014 to 2017,
rising 13 percent.
Still, the metro’s median household income of $49,875
trails the state median, likely due to a less-educated
workforce than in the state as a whole. About 17 percent
of residents age 25 and older have at least a bachelor’s
degree, the lowest share among Texas metros covered in

Section 11: Beaumont—Port Arthur

Amarillo

Plano

Lubbock

Irving

Dallas

Fort Worth

El Paso

Midland
Odessa

Longview

Arlington
Tyler
Round Rock
The Woodlands

Beaumont

New Braunfels

Port Arthur

Austin

Houston
San Antonio

Sugar Land

Edinburg

Mission

Population

McAllen

(2017): 316,983

Population growth
(2010–17): 8.5 percent (Texas: 12.1 percent)

Median household
income (2017): $47,276 (Texas: $59,206)

Plainview

Lubbock

National MSA rank (2017): No. 158*
Crosbyton

At a Glance
•

Texas Tech University and agriculture have shaped
Lubbock’s development since the early 20th century.

•

Education, health, retail and food sectors are major
contributors to economic activity.

•

A large student population helps explain the area’s
relatively low median household income and
disproportionate population shares of 15–24-year-olds
and college degree holders relative to the overall state.

Levelland

Tahoka

*The Lubbock metropolitan statistical area (MSA) encompasses
Crosby, Lubbock and Lynn counties.

Lamesa

Lubbock:
Texas Tech, Agriculture Work Together in Plains Economy
HISTORY: Rooted in Agriculture
and Education

INDUSTRY CLUSTERS: Location
Quotients Assess Economic Drivers

Lubbock’s settlers came in search of land to cultivate
in the late 1800s. Other settlements dotted the West
Texas plains, though Lubbock’s growth stood out, driven by the railroad. The city was formally established in
1909, and later that year, the Santa Fe Railway arrived.
Lubbock’s 1910 population doubled over the following
decade, to 4,051 residents in 1920.
In 1923, the Legislature designated Lubbock as the
home of Texas Technological College, known as Texas
Tech University since 1969. Agriculture remained a
vital component of economic activity, particularly
cotton and sorghum farming. By the mid-20th century,
Lubbock accounted for a major portion of the global
cottonseed-processing industry.1

Chart 12.1: Education, Health, Food and Retail Services Dominate
1.8

Mature

Star

Education

1.6

Health
services

Food services

Location quotient in 2017

1.4
1.2

Retail

Construction

Utilities

Agribusiness
1.0
0.8
Information technology
and telecommunications

0.6

Transportation
and logistics

Government

0.4
Defense and
security

0.2

Transitioning

0.0
–1.5

Business and
financial services

–1.0

–0.5

0.0

Emerging
0.5

1.0

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 12: Lubbock

and, hence, have an LQ less than 1. “Emerging” clusters
are fast growing; those growing slowly are “transitioning.”
Health services, Lubbock’s largest industry cluster,
encompasses nearly 17 percent of total employment
and is 1.4 times more concentrated in Lubbock than in
the U.S. on average. Major health services employers
include University Medical Center, Covenant Health
System and Lubbock Heart Hospital. University Medical
Center is a public hospital, employing more than 4,600
people. The institution serves as the primary teaching
hospital for the Texas Tech University Health Sciences
Center, training 400 students annually for careers in
nursing and medicine.
Education, Lubbock’s second-largest industry cluster, employs 13 percent of the workforce. The education
cluster’s major employers include Lubbock's independent school districts, Texas Tech, Lubbock Christian
University and Wayland Baptist University.3
Texas Tech and its nearly 6,000-person payroll account for a significant portion of the education cluster
employment. The university’s Health Sciences Center
employed 3,400 people as of September 2016. Student
enrollment at Texas Tech alone totaled 37,000 (11.7

percent of the metro population) in fall 2017.4 At least
$2.1 billion of annual economic output in 2015 (latest
estimate available) was attributed to Texas Tech—including research expenditures, university operations
and visitors throughout the Lubbock metropolitan
statistical area and nearby counties.5
Lubbock’s retail cluster accounts for 13 percent of
the workforce, amounting to 1.2 times the cluster’s
concentration in the U.S. The food services cluster is
similarly large, encompassing nearly 11 percent of the
workforce. In 2017, food services employment was 1.4
times more concentrated in Lubbock relative to the U.S.
Jobs in crop production and food manufacturing
make up much of the agribusiness cluster, which is
slightly more concentrated in Lubbock than in the U.S.
overall. Texas’ broader High Plains region, which includes Lubbock, harvests 25 percent of the annual U.S.
cotton crop.6 Agribusiness giant Monsanto, a Fortune
500 firm, scheduled the opening of a nationwide cottonseed processing center in Lubbock in 2018.
Lubbock’s fastest-growing industry clusters from
2010 to 2017 reveal a diverse mix (Chart 12.2). Recent
employment growth may be partially due to increased

Chart 12.2: Employment Growth Broad Based Across Clusters
Defense & security (1.2%)
Glass & ceramics (0.2%)
Transportation & logistics (2.4%)
Business & financial svcs (5.1%)
Construction (5.0%)
Wood products (0.9%)
Recreation (3.0%)
Energy & mining (4.6%)
Textiles (0.3%)
Utilities (0.4%)
Food svcs (10.9%)
Retail (12.8%)
Total
Chemicals (0.7%)
Education (13.1%)
Health svcs (16.7%)
Fabricated metal mfg (0.5%)
Government (5.5%)
Machinery mfg (0.6%)
Publishing & information (1.1%)
Agribusiness (2.6%)
Biomedical (0.2%)
Information technology & telecom (2.2%)
Advanced materials (0.3%)
Primary metal mfg (0.0%)
Transportation equipment mfg (0.0%)

59
53
49
31
30
30
25
23
22
16
15
15
13
13
13
11
9
6
0
–1
–4
–14
–21
–21
–55
–89

–100

–80

–60

–40

–20

Percent change in employment, 2010–17
NOTES: Percent change in employment is shown in whole numbers. Each cluster's share of total jobs is shown in parentheses (rounded to one decimal place).
SOURCES: Texas Workforce Commission; authors' calculations.

Federal Reserve Bank of Dallas

Table 12.1: Earnings in Education and Health Services, Two Largest Clusters, Boost Metro Average
Cluster

Lubbock
2010

2012

Education

50,322

Health services

47,913

U.S.

2014

2016

2017

49,112

49,869

51,365

50,976

49,322

45,366

48,227

50,237

50,845

56,001

Food services

15,864

16,267

16,587

16,681

16,700

18,963

Retail

27,698

28,239

29,374

29,432

29,570

31,216

Utilities

79,168

79,021

79,770

81,125

83,849

107,188

Agribusiness

44,626

43,382

44,243

43,997

46,548

44,576

Construction

40,502

44,337

44,448

47,552

48,250

60,742

Clusters with location quotient > 1

38,168

37,081

38,786

39,245

40,212

–

Clusters with location quotient < 1

46,591

46,566

47,898

48,237

48,620

–

Average earnings (total)

39,745

39,845

40,878

41,920

42,242

55,375

residential construction activity.7 Glass and ceramics
job growth mainly reflects expansion in cement and
concrete product manufacturing.
Annual earnings for workers in clusters with an LQ
above 1 averaged $40,200 in 2017, lower than the metro
average of $42,200 (Table 12.1). This subset includes the
food services and retail clusters, which depress the area’s
average wages. Education and health services have the
converse effect, raising the average earnings. Overall, in
real (inflation-adjusted) terms, average annual earnings
inched up 6.3 percent by 2017 from levels in 2010.
Annual earnings for workers in clusters with an LQ
less than 1 averaged $48,600 in 2017, slightly more than
the metro average.

DEMOGRAPHICS: Future Professionals
in Training
Lubbock’s college student population partially
explains wage, age and education trends. Real median
household income was little changed in Lubbock from
2014 to 2017. Lubbock’s median household income,
$47,276, also trails the state figure of $59,206.
Lubbock’s 15–24-year-olds make up 20.3 percent
of the local population compared with the statewide
figure of 14.3 percent in 2016. A sizable, highly educated
population also resides in Lubbock, with 30.2 percent
of the population age 25 and older holding a bachelor’s
degree or higher, compared with 28.9 percent for the

state. The college-student population likely explains
Lubbock’s relatively young median age: 30.8 years compared with 34.5 years for the state.
Higher education should continue leading Lubbock
in the future, especially as Texas Tech’s footprint continues to expand and support services grow. Agribusiness
provides an important link between regional interests
and growing global markets.
—Alexander T. Abraham

Notes
The history of Lubbock has been adapted from the Texas State Historical Association’s Handbook of Texas, tshaonline.org/handbook/online/articles/hdl04.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
The Lubbock Economic Development Alliance publishes a list of major
employers and number of employees in Lubbock, lubbockeda.org/data-map-center/major-lists/local-major-employers/.
4
Texas Tech University provides a brief institution profile, www.ttu.edu/about/.
5
See the “Economic Impact Report,” by Bradley Ewing, January 2013,
www.ttu.edu/administration/president/pdf/TTU_EconomicImpactReport.pdf.
Additionally impacted areas include Garza, Dickens, King, Motley, Floyd,
Hale, Lamb, Bailey, Cochran, Hockley, Yoakum and Terry counties.
6
For Texas A&M Forest Service’s definition of Texas’ High Plains region,
see http://texastreeid.tamu.edu/content/texasEcoRegions/. For the Lubbock
Chamber of Commerce’s facts about regional agriculture, see www.lubbockchamber.com/ag-facts.
7
The annual value of all permits for new private-housing units doubled in
2017 from 2010 levels. Calculations were made using nominal housing
permits data from the Census Bureau.
1

Section 12: Lubbock

Amarillo

Plano

Population

Irving

Lubbock

(2017): 445,208 (metros combined)

Dallas

Fort Worth

El Paso

Longview

Midland

Population growth
(2010–17): 4.7 percent (Texas: 12.1 percent)

Odessa

Arlington
Tyler
Round Rock
The Woodlands
New Braunfels

Median household
income (2017): Tyler, $54,339; Longview, $48,259

Port Arthur

Austin

(Texas: $59,206)

Beaumont

Houston
San Antonio

National MSA rank (2017): Tyler, No. 199*; Longview, No. 204*

Sugar Land

Edinburg

Mission
McAllen

At a Glance

Tyler

•

The discovery of oil in East Texas helped move
the region from a reliance on agriculture to a
manufacturing hub with an energy underpinning.

•

Health care leads the list of largest employers in
Tyler and Longview, the county seats of adjacent
Smith and Gregg counties.

•

Proximity to Interstate 20 has supported logistics
and retailing in the area. Brookshire Grocery Co.
is based in Tyler, which is also home to a Target
distribution center. Dollar General is building a
regional distribution facility in Longview.

Gilmer

Canton

Marshall

Athens

Longview
Henderson

Rusk
Nacogdoches

*The Tyler and Longview metropolitan statistical
areas (MSAs) encompass Smith, Gregg, Rusk
and Upshur counties.

Tyler–Longview:
Health Care Growth Builds on Manufacturing,
Energy Legacy
HISTORY: East Texas Oilfield Changes
Agricultural Economies

and by the mid-1960s, Tyler’s 125 manufacturing plants
employed 8,000 workers.
Longview, a cotton and timber town before the
oil boom, attracted newcomers from throughout the
South for its industrial plants. The Texas Eastman Co.,
an offshoot of the Eastman Kodak Co. (best known
for predigital photography supplies and equipment),
located in Longview and was the state’s largest inland
chemical complex in the 1950s. The Jos. Schlitz Brewing Co. opened what became the state’s largest brewery
and associated factory in 1966, producing 4 million
barrels of beer annually. The plant closed after its subsequent owner, the Stroh Brewery Co., exited the beer
business in 1999.1
Although Tyler and Longview are separate metropolitan statistical areas, the neighboring communities’ commercial activities overlap and complement one another.

The East Texas communities of Tyler and Longview,
though 40 miles apart, are viewed as sharing an economic
base and history. Tyler’s early economy relied on agriculture and immigration from the Old South before the Civil
War. Longview's growth took off with westward expansion
of the Southern Pacific Railroad in the early 1870s.
The discovery of the East Texas oilfield in the 1930s
provided an economic respite for both cities from the
Great Depression and shaped their subsequent commercial development.
Tyler is widely known for its rose industry and
annual Texas Rose Festival. Local growers turned roses
into a major business after peach blight wiped out more
than 1 million fruit trees in 1900. The arrival of oil led
first to the growth of metal and fabricating industries,

Chart 13.1: Health Care, Manufacturing and Energy Dominate
2.0

Mature

Star

1.8

Construction

Energy and mining

1.6

Fabricated metal
manufacturing

Machinery
manufacturing

1.4
Location quotient in 2017

Health
services

Retail

Utilities

1.2

Education

1.0

Transportation
and logistics

0.8

Food services
Agribusiness

Chemicals
Government

0.6

Business and
financial services

Recreation

0.4

Advanced
materials

Information technology
and telecommunications

0.2

Transitioning

0.0
–2.0

–1.5

Emerging
–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

Percentage-point change in employment share, 2010–17

NOTE: Bubble size represents cluster share of metropolitan statistical area employment.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics.

Section 13: Tyler—Longview

INDUSTRY CLUSTERS: Health Care
Emerges amid Manufacturing

authority in 2005 and is a regional teaching institution as
well as a health care provider.
Tyler-based Brookshire Grocery Co., with 2,460
employees, is part of the retail sector, the second-largest
in the region, with an LQ of 1.1. Walmart employs 1,060
in Longview. Interstate 20, linking Tyler and Longview,
helps support the retail sector and related activities.
The transportation and logistics sector, with an LQ
of 1.1, includes 400 Union Pacific personnel in Longview.
A Target distribution center in Tyler, with 600 workers,
is among the largest employers, while Dollar General
is constructing a regional distribution center that will
employ 400 workers in Longview. It will join a Neiman
Marcus national service center, with almost 300 workers.
The mature machinery manufacturing sector, which
is tied to the area’s large energy and mining cluster, has
the region’s highest LQ, 1.7. Among the largest companies are Trane Co. with 1,750 employees and Komatsu
Ltd. with 400 employees.
Transportation and logistics, manufacturing and
construction helped drive economic growth from 2010
to 2017 (Chart 13.2). Agribusiness has seen the fastest
growth during this period and includes Tyler’s famous
rose industry.

Location quotients (LQs), which compare the relative concentration of various industry clusters locally
and nationally, are a convenient way of assessing key
drivers in an economy. An LQ exceeding 1 indicates
that a specific industry cluster carries more relative
weight locally than nationally. Industry cluster growth is
measured by the percentage-point change in its share of
local employment between 2010 and 2017 (Chart 13.1).2
Clusters in the top half of Chart 13.1 are generally
vital to the area’s economy and can be expanding rapidly
(“star”) or growing slowly (“mature”) relative to other
industries. Those in the bottom half are less dominant
locally than nationally. “Emerging” clusters are fast growing; those growing slowly or declining are “transitioning.”
The region’s largest cluster is health services, with an
LQ of 1.5 and over 34,000 employees. The two largest employers in Tyler, East Texas Medical Center and CHRISTUS Trinity Mother Frances Health System, together employ more than 6,700 people. CHRISTUS Good Shepherd
Medical Center Longview is Longview’s largest employer,
with a payroll exceeding 2,500.3 The University of Texas
Health Science Center in Tyler received degree-granting

Chart 13.2: Manufacturing, Transportation Support Tyler–Longview Growth
Agribusiness (1.8%)
Primary metal mfg (0.3%)
Transportation equipment mfg (0.5%)
Transportation & logistics (3.5%)
Food svcs (8.7%)
Advanced materials (1.0%)
Construction (7.0%)
Business & financial svcs (5.3%)
Fabricated metal mfg (1.5%)
Wood products (1.1%)
Textiles (0.1%)
Defense & security (0.9%)
Health svcs (17.6%)
Glass & ceramics (0.2%)
Retail (12.3%)
Total
Education (9.1%)
Chemicals (1.3%)
Publishing & information (0.7%)
Energy & mining (8.2%)
Biomedical (0.1%)
Government (4.3%)
Recreation (1.8%)
Utilities (0.5%)
Information technology & telecom (1.4%)
Computer mfg (0.2%)
Machinery mfg (1.3%)
Electrical equipment mfg (0.0%)
–80

80
45
23
21
20
16
14
14
12
12
11
10
10
10
7
6
4
4

–4
–4
–5
–5
–6
–10
–21
–45
–50
–66
–60

–40

–20

100

Federal Reserve Bank of Dallas

Table 13.1: Manufacturing, Energy Propel Wage Growth
Cluster

Tyler–Longview
2010

2012

2014

U.S.
2016

2017

Machinery manufacturing

72,482

76,313

80,825

77,205

75,603

70,059

Fabricated metal manufacturing

56,522

58,523

59,808

59,363

62,161

55,830

Health services

51,350

50,858

48,471

51,036

52,093

56,001

Construction

47,234

48,449

49,471

50,177

49,319

60,742

Energy and mining

69,041

76,254

76,629

70,970

70,490

80,900

Utilities

84,274

84,227

87,420

94,030

92,473

107,188

Transportation and logistics

52,299

56,168

56,731

56,100

53,444

53,761

Retail

30,904

30,172

30,432

29,290

29,798

31,216

Food services

15,066

14,698

15,042

15,514

15,809

18,963

Primary metal manufacturing

43,880

40,915

42,499

40,324

56,922

67,868

Education

37,147

35,506

35,154

36,250

35,995

49,322

Clusters with location quotient > 1

46,251

47,835

47,751

44,543

44,481

–

Clusters with location quotient < 1

46,632

46,344

47,502

51,565

52,503

–

Average earnings (total)

44,792

45,631

45,564

44,105

44,467

55,375

The energy and mining sector remains active,
reflecting the legacy of the massive East Texas oilfield
and the recently tapped Haynesville shale formation,
which mostly holds natural gas. It has been a source of
jobs that paid an average of $70,500 in 2017, nearly 60
percent above the average pay of $44,500 for all jobs in
the area (Table 13.1). Reflecting relatively weak natural
gas and oil prices as well as soft demand in the 2015–16
period, energy wages stagnated. Meanwhile, pay in the
primary metal manufacturing sector averaged $56,900
in 2017, jumping nearly 30 percent since 2010.

DEMOGRAPHICS: Lower Labor Force
Participation, Less Education
The Tyler–Longview labor force participation rate of
58.9 percent in 2016 trailed both the state (64.5 percent)
and the nation (63.1 percent).
A larger share (15.5 percent) of the local population is
age 65 or older, relative to the state at 12.0 percent. Notably, the prime-age portion of the population (ages 25 to
54) in Tyler–Longview, 37.4 percent, is three percentage
points lower than the statewide figure. This age distribution reflects a population that is growing older, partly
because younger workers are moving to larger cities.
The local population is less educated than the Texas
average. The share of the population over age 25 with

a bachelor’s degree or more is 22.4 percent compared
with 28.9 percent statewide. Meanwhile, 27.4 percent
of the local population has a high school diploma or
equivalent, more than two percentage points higher
than for the state.
The data reflect the significant regional presence of
traditional blue collar industries, including manufacturing, construction and energy and mining sectors.
They typically have not required workers with advanced
levels of education.
Tyler–Longview’s expanding distribution sector
should benefit from the state’s increasing population
and demand for goods and services. The health care sector can expect further growth as the UT Health Science
Center in Tyler expands.
—Michael Weiss

Notes
The history of Tyler and Longview has been adapted from the Texas State
Historical Association’s Handbook of Texas, tshaonline.org/handbook/
online/articles/hdt04, and tshaonline.org/handbook/online/articles/hdl03.
2
The percentage shares of individual clusters do not add to 100 because
some industries are counted in multiple clusters, and some industries are
not counted at all based on cluster definitions. (See the appendix for more
information.)
3
“Tyler Texas Community Profile, Smith County’s Largest Employers,” Tyler
Economic Development Council Inc., 2017, and “Real East Texas Longview
Major Employers,” Longview Economic Development Corp., 2018.
1

Section 13: Tyler—Longview

Appendix
A.1. Methodology
This report uses industry cluster definitions developed
by the StatsAmerica Innovation Project, funded by the
U.S. Commerce Department’s Economic Development
Administration and assembled by the Purdue Center for
Regional Development and the Indiana Business Research Center.1 The original 17 clusters and six manufacturing subclusters provide a comprehensive view of the
interconnected upstream and downstream industries.2
While clusters based on this definition are defined
by their North American Industrial Classification System identifier (or NAICS code), they do not necessarily
correspond to a specific broad NAICS sector. Rather, the
clusters are made up of interrelated subsectors or industries (from the three-digit level down to the six-digit
level) that are part of different NAICS supersectors
(two-digit level). In some instances, individual NAICS
industries may be found in multiple clusters, and not all
existing industries are included in a cluster.
The StatsAmerica analysis focuses only on “traded”
clusters, or industries that are export oriented; thus,
some large and important industries were omitted.
We altered some of the cluster definitions to create a
more complete view of the industry mix in Texas and its
metro areas. We included the Retail, Construction and
Utilities NAICS supersectors, the Food Services sector
(NAICS 722) and the Government sector that includes
federal, state and local government workers, with the
exception of those employed in education or health
services. We took ambulatory health care services and
health and personal care stores out of the Biomedical
StatsAmerica cluster and created a separate Health Services cluster that includes public and private employment at hospitals, ambulatory health care services, and
nursing and residential care facilities.
We combined the StatsAmerica Energy and Mining
clusters and aggregated all of the mining and support
activities subsectors up to the three-digit NAICS level.
We modified StatsAmerica’s Education and Knowledge
Creation cluster to include only public and private
educational services. Additionally, to look at the manufacturing sector in more detail, we broke up the manufacturing grouping into its six subcluster components as
defined by StatsAmerica.

Federal Reserve Bank of Dallas

For purposes of our cities analysis, we used Census
Bureau definitions of metropolitan statistical areas
(MSAs) for Amarillo, Austin, Beaumont–Port Arthur,
El Paso, Houston, Lubbock, McAllen and San Antonio.
For Dallas and Fort Worth, we used the Census Bureau’s
definitions of metropolitan divisions. For Midland–
Odessa and Tyler–Longview, in each area, we combined
the two MSAs into one.
The analysis uses data from the Quarterly Census of
Employment and Wages, which contains employment,
wage and firm information by industry down to the
six-digit NAICS level. Data for Texas metros were retrieved from the Texas Workforce Commission (TWC),
while data for Texas and the U.S. came from the Bureau
of Labor Statistics (BLS).
TWC and BLS data may be suppressed at some levels of detail when the number of firms does not reach
a certain threshold and the confidentiality of individual firms may be at risk. TWC data are only available
quarterly, so annual employment data were calculated
by taking average quarterly employment; annual total
wages were calculated by summing quarterly wages.
Thus, some discrepancies may exist in the wage data
because some industries may be unsuppressed in one
quarter and suppressed in another, leaving annual
wage data incomplete. In instances when wage data for
a particular NAICS code were available in some quarters and missing in others within the same calendar
year, observed quarterly wage data were applied to/
substituted for missing quarters. Additionally, because
of suppression issues, employment in some industries
with fewer firms is potentially understated.
The detailed employment and wage data were aggregated into clusters based on the StatsAmerica cluster
definitions using NAICS codes to match the raw data
with the cluster definitions. For each cluster, the component industry annual employment and wage data
were summed and excluded industries were subtracted.
Average wage data for each cluster were calculated by
taking total wages for the aggregated cluster and dividing by total employment in the cluster.
Location quotients (LQs) were calculated by taking
cluster employment in each metro divided by total
metro employment, over cluster employment in the
U.S. divided by total U.S. employment.3 An LQ greater
than 1, therefore, means that the cluster’s share of total

employment in the metro is greater than its share of total U.S. employment, indicating that the cluster is more
concentrated in the metro than in the U.S. overall.
Demographic data are from the Census Bureau’s
American Community Survey. For 2017, population
and median household income are used; other detail is
from 2016. We compared those with data from the 2010
survey. In all three years, only one-year estimates were
used for analysis.
The Kauffman Startup Activity Index measures business creation in the 40 largest metropolitan areas in the
U.S. The index is based on three indicators: the rate of
new entrepreneurs starting businesses, the percentage
of new entrepreneurs not unemployed before starting a
business and the number of newly established employer businesses per 1,000 employer firms.4

A.2. Changes to StatsAmerica Cluster
Definitions
• Split Manufacturing grouping into individual subcluster components.
• Changed the Education and Knowledge Creation
cluster as follows:
■ Removed NAICS 51111 (Newspaper Publishers),
NAICS 51112 (Periodical Publishers), NAICS
51113 (Book Publishers), NAICS 516 (Internet
Publishing and Broadcasting), which are already
counted in Printing and Publishing, and NAICS
519 (Other Information Services).
■ Included both public and private employment in
Educational Services (NAICS 61). In the 2016 edition, Education Services consisted only of private
employment in NAICS 61.
• Added NAICS 519 to the Printing and Publishing
cluster but removed NAICS 51911 and NAICS 51919
to avoid double counting.
• Combined the Energy and Mining clusters and aggregated all subsectors in NAICS 212 and 213.
• Removed NAICS 621 and NAICS 446 from the Biomedical cluster and created a Health Services cluster
that includes both government and private employment in NAICS 621, NAICS 622 and NAICS 623. In
the 2016 edition, Health Service cluster was made
up of only private employment in NAICS 621, NAICS

•
•

•

622 and NAICS 446.
Added Retail (NAICS 44–45), Construction (NAICS
23) and Utilities (NAICS 22) supersectors.
Added a Government sector, which includes total federal, state and local government workers, excluding
those employed in public education and health care.
This edition follows StatsAmerica’s original definition
of the Arts, Entertainment, Recreation and Visitor
Industries cluster, which we refer to as the Recreation cluster. The first edition augmented the original
definition by including all of NAICS 72.
Added a Food Services cluster, composed of
NAICS 722.

A.3. Location Quotient and Average
Wage Equations
1. Cluster location quotient =

where 𝑒� = metro’s cluster employment, 𝑒 = metro’s
total employment, �� = U.S. cluster employment and
� = U.S. total employment.

2. Cluster average wage =

where 𝑥� = total wages paid in each cluster and
𝑒� = employees in each cluster.

A.4. Additional Data
Detailed cluster location quotient, employment,
wage and demographic data are available at
www.dallasfed.org/research/heart.

Notes
As used by Diane F. Primont and Bruce Domazlicky in “Industry Cluster
Analysis for the Southeast Missouri Region,” Center for Economic and
Business Research, September 2008.
2
Detailed cluster definitions can be found on the StatsAmerica website,
www.statsamerica.org/innovation/about.html.
3
See A.3. for the full equations.
4
See www.kauffman.org/kauffman-index/reporting/startup-activity.
1

Appendix

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