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New economic index shows moderate growth in Texas metro areas

For immediate release: May 19, 2005

DALLAS—A new set of metropolitan business-cycle indexes released by the Federal Reserve Bank of Dallas indicates that Texas’ major metropolitan areas have been growing moderately since mid-2003.

The Metro Business-Cycle Indexes—which will be released monthly—measure the direction of local economies in Texas metropolitan areas.

“Analyzing the overall direction of a local economy can be difficult because indicators can give mixed signals. For example, if the unemployment rate increases along with job growth, is the local economy picking up or weakening?” said Keith Phillips, senior economist at the Dallas Fed’s San Antonio Branch.

“Our new indexes combine key economic indicators into a single measure to give a more complete, less confusing picture of where local economies are headed.”

Below is a summary of economic conditions in selected Texas metropolitan areas as indicated by the Metro Business-Cycle Indexes:

Austin-Round Rock: After leading Texas’ major metros in economic expansion during the 1990s, Austin was hit hard by the high-tech bust that occurred in 2001, as the metro’s business-cycle index illustrates. Since mid-2003, however, Austin’s index suggests its economy has turned the corner and is once again one of the fastest-growing in the state.

Brownsville-Harlingen: The Brownsville-Harlingen business-cycle index shows that this area has outperformed the state and nation since 2000. Nevertheless, Brownsville-Harlingen’s economy has not performed as well as some other South Texas border areas, which is consistent with its index. This result is likely due to a sharp decline in apparel manufacturing, which historically has been an important industry for this metro.

Dallas-Plano-Irving: Dallas’ business-cycle index illustrates the devastating blows to the metro’s economy in 2001—both the high-tech bust and 9/11’s negative impact on the airline industry. Dallas’ business cycle this decade has followed a pattern similar to Austin’s except that its heavier concentration of airlines and telecommunications firms likely contributed to the larger downturn and the weaker recovery.

Fort Worth-Arlington: This traditional manufacturing center has mimicked the business cycle of the state overall.

El Paso: The El Paso economy has been growing since mid-2003 but at a weaker pace than Texas’ economy overall, according to its business-cycle index. A recent improvement in the maquiladora industry and growth in military-related employment may lead to stronger growth in the metro’s index in coming months.

Houston-Sugar Land-Baytown: Houston’s business-cycle index was stagnant from mid-2001 through mid-2003. Since then, however, Houston’s index has risen at a moderate pace. Expanding industries such as oil and gas, petrochemicals and health care are likely driving the improvement.

Laredo: According to its metro business-cycle index, the Laredo economy has expanded strongly over the past four years. This is consistent with the metro’s solid growth in industries such as transportation, warehousing and retail sales, which have benefited from increased international trade and a strong peso.

McAllen-Edinburg-Pharr: McAllen’s business-cycle index has grown robustly over the past four years. Strength in the metro’s economic indicators is closely tied to a stronger peso and a relatively healthy maquiladora sector in the border city of Reynosa.

San Antonio: San Antonio’s economy has expanded at a slightly faster pace than the Texas economy over the past four years, according to its business-cycle index. San Antonio’s economy has a smaller share of high-tech industries and a larger share of health care—a sector growing rapidly. These factors may have helped shelter San Antonio’s economy during the state’s economic downturn, unlike Austin and Dallas.

The Metro Business-Cycle Indexes summarize movements in locally measured nonagricultural employment, the unemployment rate, inflation-adjusted wages and inflation-adjusted retail sales.

“It’s clear from the indexes that the high-tech cities of Austin and Dallas were hit hardest by the downturn that began in early 2001. However, the indexes suggest that the South Texas border cities continued to expand,” Phillips said.

Indexes for each metropolitan area will be released monthly on the Dallas Fed web site. They can be found at


Media contact:
James Hoard
Phone: (214) 922-5307