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At the Heart of Texas: Cities’ Industry Clusters Drive Growth

El Paso: Gateway to Mexico Relies on Government, Commerce

At a Glance

El Paso

Population (2014): 836,444
Population growth (2006–14): 13.6 percent
Median household income (2014): $40,133
National MSA rank (2014): No. 67*
*The El Paso metropolitan statistical area (MSA) encompasses El Paso and Hudspeth counties.

  • The government sector is the largest cluster in El Paso owing to Fort Bliss, but retail, recreation and food services, and transportation and logistics are also important, reflecting the border with Mexico and the region’s relationship with Ciudad Juárez across the Rio Grande.
  • El Paso wasn’t as negatively affected by the Great Recession as Texas overall. El Paso employment growth was slow following the recession, but the metro area outperformed the rest of the state in 2015.
  • Federal government workers and the military are dependent on government spending, posing downside risk. However, strong U.S. auto sales spur maquiladora manufacturing growth, aiding trade in El Paso. The strong U.S. dollar will continue to suppress retail sales in the near future.

HISTORY: From Agriculture to Trade Hub

In the days before the Rio Grande marked the border between the United States and Mexico in 1848, 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.

Fort Bliss has been the largest employer in El Paso for over a century. Underscoring the region’s commercial standing, El Paso is the second-largest port of entry between the U.S. and Mexico. Retail, consumer services and tourism have also remained important sectors of the local economy.

INDUSTRY CLUSTERS: Prime Site for Government, Retail

Clusters in Chart 3.1 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 2006 and 2014.[2]

El Paso Economy Dependent on Govt, Retail and Health Sectors

“Star” quadrant clusters, such as health services and retail, have a large share of employment relative to the nation (an LQ exceeding 1) and are fast growing; “emerging” industries, like business and financial services, are smaller relative to the nation (an LQ below 1) and fast growing. Industries in the “mature” quadrant, such as transportation and logistics, are more concentrated but slower growing, and “transitioning” industries, such as advanced materials, are smaller relative to the nation and slower growing.

Government is the largest sector, accounting for 23 percent of workers. Fort Bliss employed 40,000 people in late 2014 and indirectly supported the jobs of about 18,000 more in 2013, according to a University of Texas at El Paso study.[3] Public school districts and the Department of Homeland Security’s Bureau of Customs are also among the top employers.[4]

Retail and recreation and food services continue as star clusters of the El Paso economy, driven by a strong relationship with neighboring Ciudad Juárez and a thriving tourism industry. Mexican shoppers account for approximately 10 to 15 percent of El Paso’s retail sales.[5]

The health services cluster has grown significantly since 2006, accounting for more than 10 percent of employment. University Medical Center employs 2,400 people, and Texas Tech University Health Sciences Center has more than 1,500 workers. Large private health care providers such as Tenet Health, Del Sol Medical Center and the Las Palmas Medical Center also rank among El Paso’s top employers.

Border crossings, trade with Mexico and the Interstate 10 corridor through El Paso make transportation and logistics an important sector. El Paso is also a historically important railway stop between the Southwest and the rest of Texas.

About 19.1 million personal vehicle passengers, 6.6 million pedestrians and more than 390,000 commercial vehicles crossed the border in 2014.[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]

Education and business and financial services have gained importance since 2006 (Chart 3.2). While the education cluster’s share of employment in El Paso grew just 0.3 percentage points, sector jobs increased 69 percent between 2006 and 2014.

Education and Health Pace Employment Cluster Growth in El Paso

Similarly, employment in the business and financial services cluster experienced rapid expansion, up 19 percent. Large service employers in the metro include staffing firms such as T&T Staff Management, customer service providers like Alorica and GC Services, and other business service providers such as Automatic Data Processing Inc. and Datamark.

The star and mature segments are not as high paying as their less-concentrated counterparts, partly due to the nature of the industries that are heavily represented in El Paso (Table 3.1).

Table 3.1: Low-Paying Sectors Depress Annual Average Earnings in El Paso
Cluster El Paso   U.S.
  2006 2008 2010 2012 2014   2014
Primary metal manufacturing 50,798 51,803 54,707 55,409 57,985 64,454
Government 44,655 46,263 47,708 46,918 47,551 51,726
Transportation and logistics 41,789 40,421 42,396 41,512 41,207 51,043
Retail 24,739 23,454 24,720 24,462 24,567 28,743
Utilities 79,427 78,012 80,651 86,899 72,429 98,149
Health services 40,655 39,471 40,986 39,442 38,945 56,055
Construction 36,612 36,799 37,146 36,425 38,130 55,041
Recreation and food services 14,749 14,886 15,986 15,190 14,925 23,870
Clusters with location quotient >1 34,920 34,940 36,538 35,573 35,346
Clusters with location quotient <1 42,316 41,311 42,478 42,114 44,180
Average earnings (total) 35,116 35,057 36,266 35,905 35,834 51,361
NOTES: Clusters are listed in order of location quotient (LQ); clusters shown are those with LQs greater than 1. Earnings are in 2014 dollars.
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; authors’ calculations.

Recreation and food services and retail generally employ a large number of part-time workers, driving down the overall average, and even full-time employees in these industries are generally not highly paid. However, inflation-adjusted wages have increased much faster than overall wages in some high-concentration industries. While average wages have grown 2 percent since 2006, wages in primary metal manufacturing are up 14 percent, and government sector wages have increased 6.5 percent. Still, wages in El Paso remain below national averages for each cluster.

DEMOGRAPHICS: Population Reflects Border Proximity

El Paso’s population is predominantly Hispanic, with 81.2 percent of residents self-identifying as Hispanic, the second-highest percentage among the metros in this report behind McAllen (Chart 3.3). Over a quarter of El Paso’s population in 2014 was foreign born and migrated to the U.S., with 90 percent of these inhabitants born in Mexico.

El Paso's Population is Mostly Hispanic

El Paso residents trail those of other metros in measures of education. Seventy-five percent of El Paso adults age 25 and older had at least a high school diploma in 2014. That figure is more than 6 percentage points lower than the Texas average. Only 21 percent of adults had a bachelor’s degree or higher, compared with nearly 28 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 skilled or educated workers.

Labor force participation in El Paso is low. Sixty percent of the population age 16 and older is in the labor force. A sizable portion of the population, 16.5 percent, is 15 to 24 years old (a time when young people are generally still in school). The figure is 2 percentage points higher than the Texas average. A large share of the population, 11.3 percent, is also at retirement age (over 64 years old).

EMPLOYMENT: Smaller Job Losses, Slower Recovery

In terms of employment, El Paso wasn’t as affected by the Great Recession as the rest of Texas. Between the prerecession peak in February 2008 and the trough in May 2009, El Paso lost 2.7 percent of its jobs, while Texas lost 4.1 percent from peak to trough. However, job growth after the peak was slower in El Paso. The region required 40 months to regain prerecession levels of employment, and of the major metros, only Dallas and Fort Worth took longer to recover.

Moreover, while El Paso employment grew 7 percent between December 2009 and December 2014, Texas employment expanded 15 percent. Government spending cuts likely led to El Paso’s sluggish job gains, owing to the area’s greater dependence on government. (El Paso’s concentration of government and military workers ranked fifth nationally in 2012, immediately after the District of Columbia.)[9]

However, El Paso outperformed the rest of Texas in 2015, expanding at a 3.5 percent annual rate, compared with 1.3 percent for Texas overall. El Paso’s economy is heavily tied to Mexico due to the cross-border trade of goods and services. Thus, the slump in the energy sector that has suppressed employment growth in Texas has had little effect in El Paso so far, though slowing growth in Mexico may be felt in the future.

OUTLOOK: Ties to Mexico Bring Risks, Benefits

El Paso’s close economic ties to Mexico may be a downside risk in the near future. The strong dollar may negatively affect retail and recreation and food services, which benefit from cross-border tourism. As U.S. goods and services become relatively more expensive, tourists from Mexico may visit and spend less. Improving security in Juárez may shift spending from El Paso to Juárez.

Mexico’s economic outlook for 2016 reflects the possibility of falling government revenue—a result of lower oil prices and the potential negative effect of higher import prices (due to the falling peso) on economic activity.

While Fort Bliss has been an economic generator, a general decline in government spending such as that experienced in 2013 could significantly affect the military base, stifling growth in El Paso. Fort Bliss contributes an estimated $6 billion per year to the local economy.[10]

However, continued strong U.S. auto sales during the first half of 2016 could further boost Juárez maquiladoras, providing a tailwind to El Paso’s economy. The maquiladoras typically have positively affected overall employment in El Paso.

Though the strong dollar may discourage foreign tourists from crossing the border to shop in El Paso’s many retail areas, the decline in energy prices could provide a boost to retail spending from other regional tourists and El Paso residents. Similarly, falling fuel prices are a boon to a strong transportation industry. Mexican energy reform, allowing private investment (particularly for oil and gas exploration) and private participation in the sale, transport and distribution of energy products, could boost trade and investment ties in the medium to long term.

El Paso Growth Outlook
Drivers Challenges
  • Strong U.S. auto sales stimulate growth in manufacturing in the maquiladoras in adjacent Juárez and the rest of the state of Chihuahua.
  • Low fuel prices boost retail consumer spending and benefit the transportation industry.
  • A burgeoning health services industry will continue to expand to meet the needs of both an aging local population and Mexicans who visit to acquire health services.
  • Mexico energy reforms could boost cross-border trade and investment over the medium to long run.
  • Additional declines in government spending could negatively impact Fort Bliss, the largest employer in El Paso.
  • A strengthening U.S. dollar will negatively affect cross-border trade and retail sales.
  • Mexico confronts the possibility of lower oil revenues, which may depress Mexican government spending and economic growth and damp economic activity in El Paso.


  1. The history of El Paso has been adapted from the Texas State Historical Association’s Handbook of Texas,
  2. The percentage shares of each cluster do not add to 100 because some industries are counted in multiple clusters and some industries are not counted at all based on the cluster definitions. For instance, semiconductor manufacturing (NAICS 3344) is included in both the advanced materials and information technology and telecommunications clusters. (See the Appendix for more information.)
  3. See “The Economic Impact of Fort Bliss and William Beaumont Army Medical Center in El Paso County, Texas,” by David A. Schauer, Roberto Tinajero, David Ramirez and Dennis L. Soden, Technical Report no. 2013-01, Institute for Policy and Economic Development, University of Texas at El Paso, February 2013, Final.pdf.
  4. Detail on top employers in the El Paso metro area is from the Borderplex Alliance and Texas A&M Real Estate Center, and
  5. “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,
  6. Border crossings data are from the Bureau of Transportation Services,
  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. “Relying on a Federal Paycheck During the Shutdown,” Washington Post, March 7, 2013 (updated Oct. 1, 2013),
  10. See note 3.
At the Heart of Texas