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

San Antonio–New Braunfels: Home of the Alamo and Cradle of Texas Liberty

At a Glance

San Antonio-New Braunfels

Population (2014): 2.3 million
Population growth (2006–14): 19.4 percent
Median household income (2014): $52,689
National MSA rank (2014): No. 25*
Kauffman Startup Activity Index rank (2015): No. 10*
*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 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 city.
  • Both per capita and median income in San Antonio are lower than in the other four large Texas metros. They are also below state and U.S. figures.
  • Depressed energy prices have slowed exploration in the nearby Eagle Ford Shale formation while providing support to San Antonio’s transportation manufacturing and tourism sectors.
  • The area’s diversified economy—due to its three large military bases, numerous business and financial services firms, tourism industry and medical-research complex—will continue to provide economic stability.

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, which was built to defend the San Antonio mission, and the San Fernando de Béxar, which 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.

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.[1]

However, San Antonio’s population fell behind that of Houston and Dallas by 1930, and San Antonio has remained the third-largest urban area in Texas since then.

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

INDUSTRY CLUSTERS: Military, Health and Tourism 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 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 2006 and 2014 (Chart 8.1).[2]

San Antonio's Industrial Composition is Diverse

Clusters in the top half of the chart, such as recreation and food services, defense and security, and government 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 rapidly (“star”) or growing slowly (“mature”). Those in the bottom half, such as information technology and telecommunications, are less dominant locally than nationally and, hence, have LQs below 1. “Emerging” clusters, such as education, are fast growing; those growing slowly are “transitioning.”

The relatively larger LQs of recreation and food services, defense and security, and government reflect their outsized role in the San Antonio area. Government is the largest cluster on the strength of the region’s three large military installations, which together employ more than 80,000 residents.[3] The military bases support employment in the defense and security and health clusters.

The health and biomedical sectors also have a strong foothold in the area, with a combination of private and government operations. Employment in private health-related institutions accounts for about 10 percent of San Antonio’s workforce, higher than in other major Texas metros, including Houston, and its share grew in the 2006–14 period. Medical research facilities in San Antonio include the Brooke Army Medical Center’s San Antonio Military Medical Center—the nation’s largest military hospital—and Wilford Hall Ambulatory Surgical Center at Lackland Air Force Base, the University of Texas Health Science Center at San Antonio, the Texas Biomedical Research Institute and the 1,200-acre Texas Research Park.

Electrical equipment manufacturing—which includes household appliance, electrical lighting equipment and electrical component manufacturers—was the fastest-growing cluster from 2006 to 2014 as employment increased 99 percent (Chart 8.2). Transportation equipment manufacturing grew 47 percent during the period, thanks to a Toyota USA plant that began operations in 2006. It produces the Toyota Tundra, a full-size pickup, and added the Tacoma truck in 2010. Toyota employs 2,900 workers in its facility and relies on a host of area suppliers.

Electrical and Transportation Manufacturing Jobs Fastest Growing in San Antonio

Tourism is one of the area’s most important industries—local attractions draw millions of visitors annually—and, along with the travel industry, generated $13.4 billion in economic impact in 2013.[4] San Antonio is also a top U.S. convention city. Employment in recreation and food services, the second-largest cluster, expanded 26 percent (26,100 jobs) from 2006 to 2014. San Antonio is home to two of the region’s premier theme parks—SeaWorld, the largest of three such parks in the U.S., and Fiesta Texas, a 200-acre amusement park. Other notable attractions include the River Walk and the Alamo.

Business and financial services, the metro’s fifth-largest cluster, accounts for 9 percent of the local workforce—roughly equivalent to its national presence. San Antonio is headquarters of Cullen/Frost Bankers Inc. and USAA (United Services Automobile Association), a Fortune 500 financial services group. Employment in the business and financial services cluster expanded 22 percent from 2006 to 2014.

On average, clusters with a greater employment concentration in San Antonio than in the U.S. paid less, about $45,000 annually, than those with a relatively smaller presence, $58,100 (Table 8.1). The average wage is lower because San Antonio’s dominant clusters are in industries that typically command less pay. These include recreation and food services at $21,500 annually and retail at $31,000. Still, some locally concentrated clusters—biomedical and business and financial services—are among the highest paying at $70,300 and $73,700 annually, respectively.

Table 8.1: Pay in San Antonio’s Dominant Clusters Lags U.S.
Cluster San Antonio   U.S.
  2006 2008 2010 2012 2014   2014
Biomedical 65,526 71,371 70,047 65,948 70,291 91,463
Defense and security 52,859 43,852 45,621 56,526 57,278 59,588
Recreation and food services 22,266 21,193 21,609 21,002 21,501 23,870
Government 46,459 48,473 51,600 50,647 51,786 51,726
Construction 46,438 46,614 47,506 49,066 50,854 55,041
Health services 46,058 46,192 48,098 47,314 47,027 56,055
Transportation equipment manufacturing 59,817 51,767 56,579 56,573 60,535 71,570
Business and financial services 68,651 67,033 71,303 74,267 73,708 92,957
Retail 30,128 28,570 29,254 29,824 30,065 28,743
Clusters with location quotient >1 42,816 42,364 44,407 44,645 45,017
Clusters with location quotient <1 57,006 55,462 55,814 57,433 58,132
Average earnings (total) 43,172 42,850 44,176 44,288 44,868 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.

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, 24,000 people work in home health care services.[5] Many are unlicensed, nonmedical caregivers, and the average salary for these jobs—$19,600 in 2014—is significantly lower than for others in the sector. With home health workers removed, the rest of the health cluster averaged approximately $56,800 in 2014, on par with the U.S. at $56,100.

DEMOGRAPHICS: More Seniors, Low Incomes

San Antonio has the largest share of seniors among metros in this report at 12 percent (Chart 8.3). Still, the median age is 34.4 years, in line with the Texas median of 34.3. 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.

San Antonio's Senior Population Share is Highest Among Large Texas Cities

The population is predominantly Hispanic, 55 percent—the highest share among the five large Texas metros and well above the Texas share of 38.6 percent.[6] Despite the higher proportion of Hispanics, the metro area has the lowest foreign-born population among the metros in this report at 12 percent. This compares with the foreign-born share of 16.8 percent in Texas and 13.3 percent in the U.S.

San Antonio trails the state in educational outcomes. Twenty-six percent of the population age 25 and over holds a bachelor’s degree or higher, compared with the Texas average of 28 percent. The metro’s less-educated populace relative to other large Texas metros, combined with its high concentration of low-paying service jobs in sectors such as recreation and retail, has restrained per capita and median incomes. San Antonio trails other large Texas metros as well as state and national averages in both measures of income.

EMPLOYMENT: Steady As She Goes

Its large government presence (an LQ of 1.1), along with somewhat less-dominant business and financial services and manufacturing sectors, likely helped San Antonio weather the Great Recession better than other major Texas metros. San Antonio lost 2.6 percent of its jobs between the prerecession peak in August 2008 and the recession trough in September 2009, while Texas lost 4.1 percent of its jobs. The Alamo City regained prerecession levels of employment faster than any of the major metros except Austin.

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 11.7 percent above its 2008 high, just a tad higher than Texas’ overall increase of 10.4 percent from its 2008 peak.

Thanks in part to San Antonio’s relatively limited dependence on the slumping mining and energy sector—the cluster accounts for 5.6 percent of its workforce—the metro’s annualized job growth in the first 11 months of 2015 was vigorous at 3.6 percent, compared with the state rate of 1.3 percent. Unemployment at year-end 2014 fell below 4 percent, where it remained through 2015.[7]

OUTLOOK: Employment Stability Lifts Economy

San Antonio’s industry profile is as unique as its history, with a concentration in biomedical, defense and security, government, health, and recreation and food services. In the near term, those industries’ performance will set the course for the area’s economy.

San Antonio’s dependence on military and government jobs—government accounted for nearly 17 percent of the area’s 2014 output—provides stability, though federal budget constraints will likely limit growth.[8] San Antonio ranked ninth in 2012 among metro areas with the largest concentrations of government and military workers.[9]

Depressed oil prices have hurt drilling in the nearby Eagle Ford, where in November 2015 the total rig count was 68 percent below prior-year levels. However, relatively low fuel prices have been beneficial for oil refiners such as San Antonio-based Valero Energy Corp. and for the sale of large vehicles such as the trucks Toyota’s San Antonio plant builds. Low fuel prices have also given consumers greater disposable income, boosting tourism and supporting growth in the recreation and food services cluster and the 13.8 percent of the workforce it represents.

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.

San Antonio—New Braunfels Growth Outlook
Drivers Challenges
  • The government cluster continues to provide stability as the region’s population expands and the low unemployment rate attracts new residents.
  • Low energy prices will aid transportation equipment manufacturing and tourism growth.
  • Biomedical and health services should support job growth in the area.
  • Weakness in energy prices has dampened growth in the nearby Eagle Ford Shale formation, which may adversely impact the area’s economy.
  • A relatively short supply 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 to federal budget cuts in the future.


  1. The history of San Antonio is taken from the Texas State Historical Association’s Handbook of Texas,, and from the Brooke Army Medical Center website,
  2. 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.
  3. Data on the largest employers in San Antonio were obtained from the San Antonio Economic Development Foundation,
  4. See “The Economic Impact of San Antonio’s Hospitality Industry,”
  5. See definition of home health care workers in NAICS 6216.
  6. Texas’ major metros are Austin, Dallas, Fort Worth, Houston and San Antonio.
  7. Employment data are from the Texas Workforce Commission and are seasonally adjusted by the Federal Reserve Bank of Dallas.
  8. Output data are from the Bureau of Economic Analysis.
  9. See “Relying on a Federal Paycheck During the Shutdown,” Washington Post, March 7, 2013 (updated Oct. 1, 2013),
At the Heart of Texas