June 2006

The Texas economy continued its upward momentum in April. The Dallas Fed’s Texas Coincident Index—a business-cycle index of current economic indicators—rose at a 2.8 percent annualized rate during the month (Chart 1). Year-to-date the index has increased at a solid pace of 3.1 percent (annualized).

Chart 1

According to data provided by the Texas Workforce Commission with seasonal and other adjustments by the Dallas Fed [3], Texas employment rose a modest 0.4 percent (annualized) in April (see table). The weak monthly growth conflicts with anecdotal reports that suggest the economy continues to expand at a strong pace. Given higher-than-expected upward revisions to 2005 employment data, along with positive anecdotal information from the Dallas Fed’s Beige Book, it appears unlikely that the state’s economy is slowing significantly. Since April 2005, Texas employment has risen 2.5 percent.

Texas’ Major Metros
Austin’s economy continued to grow at a vigorous pace in April, with its business-cycle index increasing 4.4 percent. The metro’s economy added 700 jobs (1.2 percent annualized) during the month, with most of the gains concentrated in the trade, transportation and utilities sector. Additionally, residential and retail building activity continued to buoy employment gains in the construction sector, and anecdotal reports suggested increased venture capital funding in the metro. Year-to-date, Austin has recorded the strongest rate of job growth (2.4 percent) among Texas’ major metros.

Despite an April slowdown, the Dallas economy has witnessed marked expansion in 2006, with job gains rivaling Houston’s (12,800 jobs, a 2 percent pace) and business-cycle growth of 2.2 percent. Since April 2005, the metro’s business-cycle index has risen 3.6 percent. An April dip in the index (-0.5 percent) was due to reported employment losses (across all sectors) of 2,200 in April, following gains of 6,700 in March. However, anecdotal reports suggest the metro will resume the stronger pace of growth seen earlier in the year. The professional and business services sector is reportedly witnessing strong job growth, and business contacts in the real estate industry continue to see increased in-migration and relocations.

Fort Worth’s economy continues to expand at a steady pace. The metro’s business-cycle index rose 1.7 percent in April, with employment growth of 1.0 percent. Job gains came mainly from the service sector during the month (trade, transportation and utilities, financial activities, and educational and health services), while goods sector employment was basically flat. Prospects for Fort Worth’s economy are positive. Population growth is robust, and several companies in insurance-related industries are reportedly relocating or opening operations in the area. For the year, the metro has added 4,700 jobs.

The Houston economy remains robust. The metro’s business-cycle index rose at an annualized rate of 3.1 percent in April and employment increased by 2,000. The energy industry continues to drive the local economy. Still, other sectors, including construction, are also contributing to economic growth. In particular, retail construction is at a record high. In addition, the educational and health service sector recorded strong job gains, reflecting, in part, the increase in permanent population from Louisiana (according to the latest estimates about 25,000 people in Harris County alone).

San Antonio’s economy expanded at a solid pace in April as its business-cycle index rose 2.3 percent. The index was boosted by job gains of 800, many coming from the service sector. Employment increased in the financial activities sector as Washington Mutual began hiring telephone bankers at its regional operations center. Robust residential and commercial building activity spurred construction employment during the month. Moreover, manufacturing payrolls rose in April, as Toyota and its suppliers continued preparing for the fall opening of the Tundra plant. For the year, the metro has posted a job gain of 2,600.

Texas’ Major Border Metros
Brownsville’s economy moderated in April as the metro’s business-cycle index rose at an annualized rate of 1.0 percent (Chart 2). This compares with growth of 3.2 percent since April 2005. Employment increased by 100 in April. Retail and commercial construction remain strong, boosted by population growth. For the year, the metro has added 800 jobs.

Chart 2

El Paso's business-cycle index slowed to 0.9 percent growth in April as employment dipped 0.5 percent. Job gains in the sectors of trade, transportation and public utilities, professional and business services and government were offset by losses in manufacturing, information, and leisure and hospitality. Despite the April slowdown, El Paso’s economy is expected to resume the more robust growth recorded over the past year. The metro’s business-cycle index has risen 3.7 percent since April 2005. The economy is expected to be fueled by growing manufacturing activity in the sister city of Ciudad Juárez and by the continued expansion at Ft. Bliss.

Laredo’s economy remains strong. The metro’s business-cycle index rose 4.1 percent in April with employment increasing 3.0 percent. Laredo’s economy benefits from its designation as the gateway for land-borne United States–Mexico trade. Although there are fewer maquiladoras associated with Laredo than other border metros, cross-border trade stimulates warehouse and transportation employment. The leisure and hospitality industry remains strong as restaurants move from crime-ridden Nuevo Laredo to Laredo. In addition, hotel occupancy is on the rise.

McAllen’s economy moderated in April. The metro’s business-cycle index rose just 0.9 percent during the month, a result of lackluster job growth (0.6 percent). The real estate and retail sectors remain strong; however, a drought has reduced the metro’s agricultural production. Year-to-date figures suggest the economy remains on track despite the monthly slowdown. So far in 2006, the McAllen business-cycle index has expanded at a rate of 3.7 percent, with employment growth registering a strong 3.8 percent.

Notes All growth rates are annualized unless otherwise noted. For a definition of the Texas Coincident Index, see Data Basics, Data Definitions. For more detail about the Texas metro business-cycle indexes see, "Dallas Fed Introduces Business-Cycle Indexes for Texas Metros," Southwest Economy, May/June 2005. The employment data used in this analysis have been benchmarked to TWC's fourth quarter 2005 CEW data and seasonally adjusted by the Dallas Fed. For more information about early benchmarking data please see, “Getting a Jump on Texas Employment Revisions,” Southwest Economy, November/December 2005. For more information regarding the importance of seasonal adjustment of economic data, see Data Basics, "Seasonally Adjusting Data." For more information about the procedure used to seasonally adjust metro-level data, see "Reassessing Texas Employment Growth," Southwest Economy, July/August 1993. For additional information or questions, please contact Laila Assanie at (214) 922-5191.