2004 News Releases

For immediate release:
February 6, 2004

Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org

Dallas Fed Publication Explores the Texas Economy,
Small Banks and Maquiladoras

DALLAS—The latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy examines growth of the Texas economy, challenges faced by small banks, and employment and output declines in Mexico’s maquiladora industry.

In “Economic Recovery Gains Steam in Texas,” senior economist Jason Saving finds the state’s economy is stronger now than six months ago and considerably stronger than one year ago.

“Texas has not yet reclaimed its position as a national leader, but it seems to have caught up to the nation after spending a considerable period behind it,” he writes.
The big question now, according to Saving, is employment. Private-sector payroll employment shrank slightly during 2003 even as the state moved from recession to recovery.

However, there are hopeful signs that hiring will pick up in 2004. For example, business conditions are improving for some sectors of the Texas economy, consumer spending and consumer confidence are rising, initial claims for unemployment insurance are trending downward, and firms are expressing an increased willingness to hire. These suggest the ingredients for job growth are now in place—and points toward better times on the employment front in the near future, Saving states.

In “Small Banks’ Competitors Loom Large,” Research Officer Jeffery W. Gunther and senior economist Robert R. Moore document small community banks’ decline relative to their competitors both within and beyond the banking industry. Since 1984, small banks’ share of commercial banking system assets has fallen by almost half.

The authors raise the possibility that “the regulatory environment has evolved into one that not only no longer protects small banks but actually works against them.” Gunther and Moore conclude by suggesting that policymakers may need to assess regulations that might put small banks at a disadvantage.

In “Have Mexico’s Maquiladoras Bottomed Out?” Vice President William C. Gruben examines the country’s flagging maquiladora industry in terms of chronic employment volatility and sectoral differences. U.S. industrial production, exchange rates and wage rate fluctuations all play a role, as well as changes in trade policy and increased competition from other Latin American countries, from China and elsewhere.

With a U.S. recovery under way and the recent peso softening, however, Gruben concludes that “it is hard not to think that Mexico’s maquiladoras have already bottomed out, even with further declines in Mexico’s garment industry.”

Find the January/February issue of Southwest Economy online at www.dallasfed.org.

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