May 2006

The Texas economy moved ahead at a solid pace in March. The Dallas Fed’s Texas Coincident Index—a business-cycle index of current economic indicators—rose 3.1 percent (annualized) during the month and was up 3.4 percent from a year ago (Chart 1).

Chart 1

In addition, Texas’ labor market continued to expand in March, adding 17,400 jobs, a 2.1 percent annualized rate of growth (see table). Year-to-date, the state has added 49,500 new jobs on net.

Major Metros
Austin’s economy maintained its vigorous pace of expansion in March as the metro’s business-cycle index rose 4 percent. The metro also posted strong employment gains (1,500 jobs) during the month, with most of them in the trade, transportation and utilities and other service-related sectors. Government payrolls also increased as the U.S. Census Bureau began hiring temporary workers for its 2006 test census. So far this year, the metro has added 4,300 jobs.

The Dallas economy continued its upward momentum in March as its business-cycle index rose 2.5 percent. Employment increased at a 2.2 percent annualized rate, with gains coming mostly in the service sector, particularly professional and business services and health and educational services. Residential and commercial construction activity continues to strengthen in the metro, and anecdotal evidence suggests relocations and business expansions are helping drive the demand. Year-to-date, Dallas has added 11,600 jobs—outpacing the other major Texas metros.

Fort Worth’s economy rose at a good clip in March, with its business-cycle index up 2.8 percent (annualized) and employment up 2.4 percent. Many of the job gains during the month were concentrated in trade, transportation and utilities and construction and mining, with anecdotal reports suggesting an increase in industrial expansions related to the transportation industry. Professional and business services employment was also up. For the year, Fort Worth has added 3,700 jobs on net.

After growing strongly in the previous two months, Houston’s economy expanded more moderately in March, with its business-cycle index rising at an annualized pace of 2.9 percent. The moderation was due to slower job growth—0.9 percent for the month. Of the 1,800 new jobs added, most came from professional and business services and construction, mining, and natural resources—both sectors that are closely tied to the energy industry. The trade, transportation and utilities sector witnessed the largest job declines in March. Year-to-date Houston has added 9,700 new jobs.

San Antonio’s economy grew at a modest pace in March. The metro’s business-cycle index rose 2.2 percent and employment was up 1.4 percent. Increases in construction employment were fueled by the strong housing and retail markets as well as some military projects. Jobs rose in the financial services industry as some major U.S. banks continued to expand their operations in the metro. Year-to-date San Antonio employment has increased by 1,900 jobs.

Major Border Metros
Brownsville’s business-cycle index grew at an annualized rate of 2.5 percent in March, while employment increased at a 1 percent annualized rate (Chart 2). An expanding population in southeast Brownsville continues to fuel retail and commercial real estate activity. Moreover, anecdotal reports suggest retail sales in the metro overall remain strong. The metro has added 600 jobs year-to-date.

Chart 2

El Paso's business-cycle index rose 2.7 percent in March as the metro recorded strong job growth of 3.7 percent. Employment grew in practically all sectors, including gains in manufacturing, which had previously witnessed job declines. Construction activity remains strong, with housing prices rising rapidly as more people from the West Coast move to the metro, according to anecdotal reports. Manufacturing activity in the sister city of Ciudad Juárez, along with the additional troops heading to Fort Bliss, should continue fueling El Paso’s economy for the rest of the year.

With an annualized growth of 6.8 percent in its business-cycle-index and 10.6 percent in employment, Laredo, the “Gateway City,” continued to expand quickly in March. Retail employment and construction remain strong. Anecdotal reports suggest a major retailer added 280 jobs in March. In addition, restaurant construction keeps rising as Mexican restaurants move from crime-ridden Nuevo Laredo to Laredo.

McAllen’s economy grew strongly but a bit more moderately in March (February’s growth was 7 percent). The metro’s business-cycle index rose 4.4 percent (annualized) during the month thanks to annualized employment growth of 4.9 percent. Retail sales to Mexican shoppers and a strong maquiladora industry in Reynosa continue to provide steady growth for McAllen.

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 third 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 D'Ann Petersen at (214) 922-5190.