June 9, 2008

The Texas economy expanded at a moderate pace in April. The Dallas Fed’s Texas Business-Cycle Index [1]—a gauge of the region’s current economic conditions—increased an annualized 3.3 percent, a deceleration from the 4 percent growth recorded in 2007 [2] (Chart 1).

Chart 1

State employers added 11,600 workers to payrolls in April—a 1.3 percent annualized increase, according to data released by the Texas Workforce Commission with seasonal and other adjustments made by the Dallas Fed [3] [4] (see table). Year-to-date, the state has posted annualized job growth of 2.3 percent, a slowdown from last year’s strong 3.2 percent pace. The Texas labor market remained tight, with an unemployment rate of 4.1 percent.

Austin’s economy remained on track in April, with its business-cycle index increasing 2.2 percent and a gain of 1,100 jobs. The service sector continued to expand, with professional and business services leading the pack (400 jobs). Educational and health services also saw strong gains, boosted by the ongoing expansion of health care facilities. On the goods-producing side, the construction and mining sector expanded 7.4 percent, buoyed by a pickup in commercial and multifamily building activity in the metro. Layoffs at computer makers and chip manufacturers resulted in a 4 percent decline in manufacturing employment, however.

Dallas economic activity picked up somewhat in April. The metro’s business-cycle index rose 2.4 percent in April, following a 1.3 percent increase in March. Dallas employers added 2,600 jobs in total. For the first time in recent months, the goods-producing sector grew faster than the service-providing sector. The goods sector expanded by 4.5 percent, over four times the rate of services. Much of this growth was in construction employment, which expanded by 1,100 jobs (10.6 percent). Anecdotal reports suggest the increase in construction jobs is rooted in the nonresidential and multifamily sectors.

Fort Worth’s economy picked up substantially in April. Its business-cycle index rose 3.5 percent after expanding 1.6 percent in March. Employment picked up markedly, with employers adding 1,900 jobs. The bulk of these gains were in the service-providing sector, which is seeing spillover from drilling activity in the Barnett Shale. Boosted by ongoing hotel construction, employment in the leisure and hospitality sector performed best, growing 10 percent. The education and health, and trade, transportation and utilities sectors also performed well, expanding by 6.2 percent and 5.9 percent, respectively.

Houston’s economic expansion continued in April with its business-cycle index growing at an annualized rate of 3.4 percent. Payroll employment grew at a 1.4 annualized pace, which represents more than 3,000 new positions. The goods-producing sector was responsible for the large gain, while the service-producing sector held steady. Within the goods-producing sector, construction and mining posted a strong annualized growth rate of 10.9 percent, as the energy industry remained strong. On the services side, gains in the trade, transportation and utilities, and financial activities sectors offset declines in professional and business services. Houston’s housing market remains weak, and inventories inched up from last year, although they remain well below the nation's average.

San Antonio’s economy continued to expand in April, with its business-cycle index rising 3.9 percent. Job creation in the private sector was solid at 1.7 percent (1,000 jobs). Expansion of medical facilities boosted job gains in the education and health services sector (900 jobs), while ongoing commercial building activity led to gains of 200 in construction and mining employment. Retail activity remained healthy, and anecdotal reports suggest that the NCAA Men’s Final Four tournament may have brought the metro an estimated $140 million.

Border Metros

Brownsville's economy experienced moderate growth in April, with its business-cycle index rising 1.8 percent (Chart 2). Jobs increased at a 2.9 percent pace. Employment growth occurred primarily in the service-providing sector—with gains in leisure and hospitality and education and health services. Construction projects include a Kohl’s store and an $8 million surgery wing at Valle Baptist Medical Center.

Chart 2

El Paso's economy continued to expand in April, with its business-cycle index increasing 4.9 percent. Metro employment grew 4.4 percent during the month as gains in service-providing sectors outpaced losses in manufacturing. Economic activity continues to rise despite sluggish U.S. economic growth and weakening manufacturing activity in Juárez—the Mexican city bordering El Paso—where more than 10,000 manufacturing jobs have been lost this year.

The Laredo business-cycle index increased at a strong pace of 6.9 percent in April, and total employment posted 2.7 percent growth. Construction and mining jobs rose significantly, as retail-related construction projects continued to fuel the local economy.

McAllen's economy posted robust growth in April. The metro business-cycle index rose 5.7 percent, and employment increased 5.2 percent. Government and professional and business services sectors recorded strong job growth during the month. As the single-family home market continues to weaken, McAllen developers have increasingly turned to condos, and several new projects have been announced or are under construction.

Notes For a definition of the Texas Business-Cycle 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. All growth rates are annualized unless otherwise noted. The employment data used in this analysis have been benchmarked to TWC's fourth quarter 2007 CEW data and seasonally adjusted by the Dallas Fed. For more information about early benchmarking data, see “Getting a Jump on Texas Employment Revisions,”Southwest Economy, November/December 2005. For more information on the importance of seasonal adjustment of economic data, see Data Basics, "Seasonally Adjusting Data." For more information on 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 D'Ann Petersen at 214-922-5190.