San Antonio Economic Forecast 2022

The San Antonio economy has bounced back from the pandemic-induced recession quite nicely, and I believe the economy will likely continue to show growth at or slightly above its long-term trend in 2022. I project employment growth this year to be in the range of 2.2-2.7%, and the unemployment rate will continue to decline to about 3.5-4.0%. The data, trends, and potential factors that I am seeing in my crystal ball that form the basis for this forecast are discussed in the rest of this post.

After a quick rebound from the pandemic-induced recession, the San Antonio economy has moved toward its more long-term average growth rate in employment. This is somewhat against the pattern seen in the other major metropolitan economies across Texas, as they have continued to maintain historically strong growth. This is especially the case for the Austin economy. These patterns are evident in the following chart showing the year-over-year employment growth. Even though many of these areas have continued to experience such strong growth, it is clear that there is a sizable gap between them and the Austin economy.

As shown in Chart 2, the Austin economy grew 8.11% percent in December, which was still substantially larger than the second-fastest growing region – Dallas – at 5.82% and Fort Worth, the third fastest growing region at 5.02%. The San Antonio economy grew 2.87% in December – the slowest among the major metropolitan regions and below the growth rate across the state of 5.08% and the U.S. at 4.52%.

The large disparities in the growth of the Austin economy relative to San Antonio, and the other major metropolitan economies in Texas for that matter, is worth exploring, and I will have a post on that soon. For now, I want to focus on San Antonio.

Chart 3 shows the year-over-year employment growth by month across broadly-defined industries from January 2019 through December 2021 for San Antonio. As expected, the hospitality industry took the largest dive during the lock down followed by the professional services industry. These two industries have also had the largest immediate recoveries, along with the other services industry.

Chart 4 and Table 1 show the employment growth by industry from the depth of the pandemic-induced recession in April 2020 to a year later in April 2021, i.e., from trough to peak, and then for the remainder of 2021. It needs to be kept in mind that these are similar lengths of time, but it is clear from these numbers that the growth rates across almost all of the industries in San Antonio have slowed considerably. The manufacturing, construction and mining, and education and health industries have seen their growth basically stall or even turn slightly negative in the last three quarters of 2021. The one exception is the hospitality industry that not surprisingly continues to experience growth far above average.

Table 2 compares employment growth in San Antonio over its history leading up to the pandemic (Jan. 1991-Dec. 2019) to the growth rates across industries over the past year. Overall employment growth in 2021 was 2.87%, a bit above the historical average of 2.37% growth. Five of the ten industries – manufacturing; trade transportation, and utilities (TTU); professional services; hospitality; and other services – continued to grow at above average rates in 2021. Not too surprisingly, the hospitality industry continues to lead the growth with a rate of 10.87% in 2021 – far above the industry’s historical average. Only two industries experienced declining growth in 2021 – construction and mining and information. As shown in Chart 3, the declining growth in the information industry is a regression back to the mean based on recent history. Not to give away too much of the punch line for my next post, but this explains, in part, the difference in growth rates between Austin and San Antonio.

I expect these overall slowing trends in employment growth to continue through 2022 in San Antonio. Some of this is just going to be a regression back to the mean from the large growth rates as the economy recovered from the pandemic-induced recession. The structure of the San Antonio economy is an additional reason, and the potential effects of growth in the global and national economies will also play a role, as discussed below.

Similar to the pattern in the other major metropolitan Texas economies and across the state and U.S, the unemployment rate in San Antonio has steadily declined after the precipitous fall following the re-opening of the economy ending 2021 at a rate of 4.2% (see Chart 5). As shown in Chart 6, San Antonio had one of the lowest unemployment rates among the major metropolitan economies in Texas before the pandemic at 3.0%. However, San Antonio experienced one of the largest surges in its unemployment as it climbed to 14.1% in April 2020 at the depth of the recession, but as noted, unemployment has been consistently declining and is similar to the rate in Dallas (4.1%) and Fort Worth (4.2%). The unemployment rate in San Antonio is also lower than the statewide rate at 5.0%, but it is a bit higher than the U.S. unemployment rate at 3.9%. Compared to San Antonio, the unemployment rate in Austin was 0.9 percentage point lower at the end of 2021 at 3.3%. The strong economic growth since April 2020 has surely been the main driver pushing unemployment rates down, but it should be kept in mind that at least part of this decline may be due to the decline in the labor force participation rate due to the Great Resignation phenomenon. In fact, while the labor force participation has been increasing, it is still below the pre-pandemic rate of 63.4% in February 2020 for the U.S.

These structural changes in the labor market are one of the risk factors to this forecast. I can see these changes potentially having both positive and negative effects on economic growth. If the labor market adjusts to these changes fairly quickly and workers fill the jobs at higher pay and with enhanced benefits, this could serve as a boost to overall economic growth. However, if the current trend continues for an extended period of time, this could continue to exacerbate the shortages in many markets and serve to dampen economic growth. These adjustments in the labor market may be forestalled in industries where there is a relative paucity of benefits, such as paid sick leave. If the shortages causing the rapid increase in the inflation rate do not diminish in the near future, the persistent inflation at relatively high rates will also likely be a deterrent to growth in and of itself. In response to this, the Federal Reserve has sent strong signals that it will most likely be raising interest rates several times this year, which will also serve to slow the economy some. There could also be bubbles in many asset markets, such as the stock and housing markets, and if one or more of those bubbles burst, they might also cause the economy to pause a bit, even if it does not push it into a recession. The strong economic growth was, at least in part, driven by the federal government stimulus, and with that coming to an end, consumer spending is likely to move back into a more typical pattern over time causing a moderation in U.S. economic growth. It is also likely that growth in the global economy will also slow this year because of similar trends, and the economic effects of the war in Ukraine may also slow global economic growth a bit. Overall, it seems these various factors combined with the structure of the San Antonio will mean the local economy will continue to grow fairly strongly in 2022 but at a slower rate than in 2021.

Economic Impacts of the Culinary Industry in San Antonio in 2019 and 2020

I recently completed an economic impact analysis of the culinary industry in San Antonio in 2019 and 2020 for the San Antonio City of Gastronomy program. A summary of the results is shown in the following table. For the detailed results, please see the full report.

The culinary industry in San Antonio directly employed 125,770 workers and paid wages and benefits of $4,4 billion in 2019. The industry had a direct economic impact as measured by output of about $16.6 billion. The direct contributions to gross regional product (GRP) of the industry totaled $7.1 billion. However, with the impact of the COVID-19 pandemic, these impacts declined in 2020 with direct employment in the industry falling to 110,121 and wages and benefits declining to $4.0 billion. Direct economic impact shrank to about $15.8 billion, while the industry’s contribution to gross regional product fell to $6.5 billion.

When multiplier effects are included, the total employment supported by the culinary industry in San Antonio in 2019 was 227,764 workers who earned wages and benefits of almost $8.0 billion. The total economic impact on the local economy as measured by output amounted to $29.3 billion, and the industry’s contribution to GRP in 2019 was $13.4 billion. Like with the direct impacts, the total impacts declined in 2020. Total employment supported by the culinary industry declined to 208,642 jobs with incomes of $7.3 billion. The total output (i.e., economic impact) fell almost $1.5 billion to about $28.0 billion, and the total contribution to GRP declined 6.9% to $12.5 billion.

Demand for Dining in Restaurants in San Antonio and Texas

The Federal Reserve Bank of Dallas publishes a monthly report on San Antonio economic indicators, and in its most recent report, they published the following chart showing the fluctuations in restaurant reservations compared to 2019 in San Antonio and Texas. As they note, the demand for dining in restaurants fluctuates directly with the number of COVID cases, which accounts for the softening trend since June with the exception of the spike over Labor Day weekend. Another interesting trend the graph shows is the separation between dining demand in San Antonio and Texas over this past summer. Throughout the time period covered by the graph, the changes in San Antonio and Texas tracked very closely, but it seems the large amount of tourist activity in San Antonio over the summer generated a surge in demand for dining at restaurants in San Antonio over this past summer that was considerably larger than the activity across the state. It looks like the trend lines are back to moving more closely together following the Labor Day weekend and the return to school.

Unemployment Continues to Improve…With a Caveat

The unemployment rate continued its decline in August across the major metropolitan economies in Texas and across the State and U.S. as the recovery from the economic effects of the pandemic continue (see Chart 1). In San Antonio, the unemployment rate declined to 4.8%, This is 1.8 percentage points above the pre-pandemic level, so while the economy is certainly recovering, there is still a ways to go. San Antonio has the third lowest unemployment rate compared to the other major metropolitan economies in Texas with Austin having the lowest at 3.8%. The unemployment rate in Texas stood at 5.9%, a bit higher than the unemployment rate for the U.S. at 5.2%.

However, the total level of employment in San Antonio declined in July and August, as shown in Chart 2. This indicates to me that at least part of the decline in the unemployment rate in San Antonio may be due to people dropping out of the labor force and therefore, no longer being counted in the unemployment rate. This is also occurring in some of the other major metropolitan economies across the state.

While there have been monthly declines in total employment the past couple of months, the year-over-year growth rates in employment continued to be strong in August with growth in San Antonio coming in at 3.94% (see Chart 3), a good bit above the average historical growth rate in the region of about 2.3%. However, these growth rates continue to decline across most regions in the state, as well as across the entire state of Texas and the U.S. This is likely due to a regression to the mean as the recovery continues and some pull back in consumer spending due to the Delta variant. Another possible factor is the lag in business travel due to the pandemic. This especially affects those local economies with large leisure and hospitality industries like San Antonio because the convention activity is not filling in for the decline in leisure travel as the new school year began.

If we can keep making strides against the pandemic, growth should continue into the near future. This does not mean the year-over-year growth rates will increase, as they will likely tend to move more toward their long-term average rates in the respective areas as the economy gets closer to full employment. The sustained growth will also continue to push the unemployment rates down, especially as the structural unemployment is reduced.

Many Factors at Play in the Labor Market in San Antonio

Employment in the San Antonio economy actually declined in July compared to June, as shown in the following table. Compared to the employment level in Feb. 2020, the month before the pandemic hit, employment in San Antonio was still down 25,500 jobs as of June and then in July decreased another 900 jobs to now being off by 26,400 jobs. The employment situation worsened in August as total employment was down 29,200 jobs compared to February 2020. These trends are probably reflecting many novel factors at play in the labor market, not only in San Antonio but across the U.S. and the world.

The unemployment rate in San Antonio has declined from 5.5% in June to 5.1% in July, and now it is sits at 4.8% in August. If the unemployment rate is going down while employment levels are also going down, this seems to me to indicate that the decline in the unemployment rate is due to people dropping out of the labor force instead of finding jobs. This may be due, in part, to the reduction/expiration of unemployment benefits, but it does not seem to indicate that the removal of those benefits had the large impacts on employment that some believed would be the case. Other factors seem to be driving workers’ decisions. Dr. David Autor puts forth an interesting explanation of what may be happening in his New York Times opinion piece (Autor, 2021). Regarding the effects of unemployment benefits, he refers to research showing that states which dropped the federal unemployment benefits this summer have seen very small declines in their unemployment rates. The Financial Times also recently published research on this same phenomenon (Smith and Zhang, 2021). Furthermore, Autor points out that Europe and Britain did not expand their unemployment benefits in a substantial way, and yet, they are also experiencing a labor shortage, too (Autor, 2021).

Having to put your son or daughter in child care has also been put forth as a possible explanation for the labor shortage, but as Autor notes, “women with children have since returned to work at almost the same rate as women without children, meaning access to child care isn’t the main culprit” (Autor, 2021).

He argues that the main reason for the labor shortage is “people’s valuation of their own time has changed.” In other words, many potential workers have decided that it is no longer worth working in a low wage job where they are also likely to be without benefits. As shown in the table above, those industries where wages are lowest are also those where there is high person-to-person interaction and thus, where workers are at increased risk of exposure to COVID. Instead, some are choosing to spend more time with their family and pursue other leisure activities that enhance their standard of living even if it reduces their incomes and consumption (Autor, 2021).

In addition to the explanation put forth by Autor, other factors may also explain what is happening in the labor market in San Antonio. It is clear in the table above that the leisure and hospitality industry and the education and health industry account for most of these job losses. As of June, leisure and hospitality accounted for 17,900 of the decline in jobs, and 8,600 of the jobs lost were in education and health. The employment situation improved in the leisure and hospitality industry in July where the reduction in employment compared to Feb. 2020 declined to 15,800, but the employment level worsened in August to 18,000 jobs. I think this may be due to the rather robust summer vacation season coming to an end followed by convention activity that is still depressed due to the pandemic. The situation got a bit worse in the education and health industry with employment being down 12,100 in July over this same time period but improved in August as the decline reduced to 10,200 jobs. The leisure and hospitality industry and education and health comprise a large part of the San Antonio economy. Besides the shift from leisure visitors to conventions as summer has ended that is possibly affecting employment in the leisure and hospitality industry, there is also much anecdotal evidence of workers in the leisure and hospitality and education and health industries leaving their jobs to seek employment in other industries for many of the reasons already stated. I suspect other metropolitan areas where these industries are a big component of the local economy are seeing similar effects.

It is also worth noting that in the industry that has shown the largest growth since Feb. 2020 by a wide margin, professional and business services, the growth declined from being up 9,900 jobs in June to only being up 6,300 jobs in July. Looking at the data on this industry in more detail, most of the decline occurred in the administration and waste services industry, for which I do not have an explanation. Employment levels did improve a bit in August with total employment in this industry being 7,100 jobs above the February 2020 level.

It is also important to keep in mind the wage levels of the workers most impacted by the economic effects of the pandemic. The average wage is presented in the table above and is calculated using data from the Quarterly Census of Employment and Wages for Bexar County. The average wage across all industries is $56,126 as of 2019, and of the four industries with below average wages, three of those industries are also the three most impacted by the pandemic in terms of declines in employment. This is no surprise as we have known that the economic effects of the pandemic have disproportionately fallen on those at the lower end of the income scale. As mentioned earlier, these are also likely to be the people most impacted by the loss of unemployment benefits, and given the other aforementioned factors at play in this labor market, it may also be deleterious to the overall economic recovery as their spending and engagement in the economy possibly declines.

Even more so, the adjustments happening on the supply-side of the labor market as discussed above indicate that the persistent labor shortage is due to structural changes, as workers reassess the value of their time and/or seek to transition to employment in different industries or different jobs in the same industry. The upshot is that the recovery back to pre-pandemic employment levels will take longer than if these effects were not occurring. This means that facilitating these adjustments is of utmost importance to helping those seeking to transition to new careers, but it is also vital to reducing the time it takes the economy to fully recover.

Autor, David. Sep. 4, 2021. “Good News: There’s a Labor Shortage.” The New York Times.

Smith, Colby, and Zhang, Christine. Sep. 21, 2021. “End to U.S.’s Extra Unemployment Benefits Gives Little Boost to Labour Market.” Financial Times.

The Unemployment Rate in San Antonio in April: A Projection Based on Comparison to the US Rate

Recently, the unemployment rate in the U.S. in April was reported at 14.7%, which may actually be about 5% higher as discussed in my post from yesterday. In my projection of the effects of the pandemic on the San Antonio economy, I forecast that the unemployment rate in San Antonio might reach between 14-21%. The unemployment rate for Texas and the metropolitan areas will not be reported until May 22, so the question is: what will the unemployment rate in San Antonio be in April? Going back to January 1990 (as far back as data on the unemployment rate in San Antonio are reported), the monthly average unemployment rate in San Antonio was 4.9% compared to the average U.S. unemployment rate of 5.8%. So, the unemployment rate in San Antonio is 0.9 percentage point lower than the U.S. rate on average.  If this relationship holds, this means the unemployment rate in San Antonio in April will be 13.8%. “If this relationship holds” might be a big assumption, since the industries that have taken the brunt of the impacts of the pandemic – accommodations and food services, retail, and health care – are such a large part of the San Antonio economy. This could mean that the unemployment rate in San Antonio in April will be about the same or possibly even higher than the rate for country.


A Couple of Key Data Points to Better Understand the Current Depth of Unemployment

The unemployment rate in the U.S. was recently reported to be at 14.7% in April. Here is a link to the full report released by the U.S. Bureau of Labor Statistics. It is somewhat lengthy, but as always, it is worth a quick look, especially since this report contains some insightful information beyond the headline unemployment rate.

One insight is the difficulty in being able to correctly capture the data due to the unique situation caused by the pandemic. This is highlighted in the following statement from the report.

However, there was also a large increase in the number of workers who were classified as employed but absent from work. As was the case in March, special instructions sent to household survey interviewers called for all employed persons absent from work due to coronavirus-related business closures to be classified as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses (pp. 5-6).

As noted in the statement, they calculate that the unemployment rate would have been close to 20% if this data was accurately reported.

A second data point of note is that when those who are marginally attached to the labor force and the total employed part time for economic reasons are considered, the unemployment rate (technically referred to as U-6), was 22.8% in April (see Table A-15 in the report).

I hate to highlight more bad news, as if 14.7% of the labor force being unemployed was not bad enough, but in order to really understand the depth of the economic recession we are in, I think it is important to consider these figures.

Some definitions: Those marginally attached to the labor force include people who are not currently looking for a job but have indicated they would like to work and have looked for a job in the past 12 months. This also includes discouraged workers who have become discouraged about their prospects of finding a job and have dropped out of the labor force. Those employed part time for economic reasons are the workers who would like to work full time but can only find part time work.


GDP and the Role of Women in the San Antonio Economy

My colleague, Belinda Román and I, have been working on a study of a more accurate measure of the role of women in the San Antonio economy. The results were released this past Wednesday at the San Antonio Hispanic Chamber’s Women’s Award Luncheon. The presentation can be found here.

This is the first study done under our new Women in the Economy Research Program at the SABÉR Institute. There is still much to be researched in this area, but we began by calculating what the gross domestic product of the San Antonio metropolitan economy would be if the non-market household production activities were counted in GDP and if women received equal pay to men.

Household production includes, in part, activities like child care, yard work, preparing meals, house cleaning, maintenance and repairs of the house, and travel time related to such activities.

As of 2016, GDP in San Antonio was $109.3 billion, and with these adjustments, GDP would be about $149.1 billion. We are still working to complete the full report, but it will be released in July.




San Antonio 2018 Economic Forecast

I had the pleasure and honor of being on a panel at an event this past Friday hosted by Texas CEO Magazine in partnership with the Bill Greehey School of Business at St. Mary’s University in which I presented my economic forecast for the San Antonio economy in 2018.

The presentation can be found here.

Employment growth in San Antonio remains healthy but has been slowing a bit over the past twelve months, which follows a similar pattern to the other major metropolitan economies across the state through August. Given the length of the economic expansion, growth rates have regressed toward the long-term average. The unemployment rate in San Antonio is still quite low at 4.1% in August, but it has started to tick up over the past year.

Again, a similar pattern is occurring across the other major metropolitan areas, too. We are at the point in this phase of expansion where the economy is at or very near full employment, so growth is going to be driven by population growth and/or growth in productivity, so it is difficult to see that growth will be much greater than average, if it is at all in 2018. For next year, I believe we continue to see growth in San Antonio with employment increasing in the range 2.25-2.50%, which is around the historical average growth rate of 2.43%. I project that the unemployment rate in 2018 will probably be in the range of 4.00-4.25% in San Antonio in 2018.

You will also see in the slides that I think we need to consider the possibility of the U.S. economy going into recession in the next two to three years. This is simply due to the fact that the current expansion is already 100 months old, which makes it the third longest in history. If growth continues over the next two to three years, it will become the longest expansion in history.

If we learned anything in the last recession, it is that growth does not go on forever. The expansion is long in the tooth. As already mentioned, growth in the foreseeable future is going to come from population growth and/or higher levels of productivity. Given the trends in demographics with the aging baby boomer generation and limitations being put on immigration, it is difficult to see where the population growth is going to come from in the next few years. Boosts in productivity are, in part, going to be driven by technological change, and while that is exceedingly difficult to forecast, it is hard to envision from where the boost in productivity will come in the near future. With this in mind, it seems that the odds are pretty high that the economy will run out of steam within the next two to three years.

Of course, all of this is contingent on various risks, and the biggest risk I see at this point is political risk. The national and global political situation has injected a massive amount of uncertainty into the business and economic environment. This, in and of itself, can be a deterrent to economic growth, but it certainly makes economic forecasts more difficult.



Broad-Based Growth Continues in San Antonio

With the exception of the information sector, growth continues across all other sectors of the San Antonio economy through June of this year. The growth is lead by large increases in the construction, mining, and natural resources sector (just indicated as construction/mining in the chart) and the education and health sector. I suspect most of the employment gains in the former sector has probably come from the construction industry, but with the recovery of oil prices and activity beginning to pick-up in the Eagle Ford Shale area, the mining and natural resources industries have likely contributed their parts as well.

Growth in the education and health sector is probably driven by the continued strong expansion in the healthcare industry in San Antonio. Professional and business services (indicated as prof. services in the chart) has also shown some nice increases in employment growth this year.

The question is whether or not these sectors will continue to show strong growth.

As long as the economy keeps humming along, the construction industry is probably going to continue to grow, but there are indications that the economy is reaching capacity (as noted in my previous post) and housing prices are starting to move beyond the level of affordability for many folks.

Regarding the mining and natural resources industry growth, this is going to be driven, in part, by what oil prices do. I do not think anybody really knows where oil prices are headed over the next few years, but I think the experts feel like there will be some increase.

It seems to be a safe bet that the healthcare industry will continue to grow. However, many of the healthcare organizations in San Antonio receive a large portion of their revenues from federal government sources, so the wild card is what ultimately happens with healthcare policy and the federal budget. That may be more difficult to predict than oil prices.

Employment Growth by Industry San Antonio June 2017

NOTE: TTU is the trade, transportation, and utilities sector.


Feel free to contact me with any questions.