July 2006

The Texas economy expanded at a good clip in June. The Dallas Fed’s Texas Business-Cycle Index—an aggregate indicator of statewide economic activity—rose at a 2.9 percent annualized pace, signaling continued expansion (Chart 1).

Chart 1

Texas labor market activity picked up in June, following modest employment growth in May (1.7 percent). Texas employment increased at a 4 percent annualized rate (32,200 jobs), according to data released by the Texas Workforce Commission with seasonal and other adjustments by the Dallas Fed [3] (see table). For the first half of 2006, job growth was moderate but fairly broad-based across both Texas major metros and major industries, and state payrolls rose by 111,300 jobs—a 2.3 percent annualized increase.

The Dallas economy maintained its expansion in June with its business-cycle index growing at a robust pace of 3 percent. The metro added 4,400 jobs during the month, for a year-to-date total of 28,200 (2.9 percent annualized growth). Much of the growth has come from the professional and business services sector, which has expanded at an annualized pace of 9.8 percent this year. This sector includes technical and scientific professions, accounting, legal occupations, architecture, engineering and computer design. Growth in the sector, as well as in financial services and educational and health services, has helped boost office construction to its highest point in five years, according to business contacts.

Fort Worth’s economy expanded strongly in June as growth in its business-cycle index revved up to 5.7 percent (annualized). The torrid growth was due to solid employment gains (4,000 jobs on net) during the month. For the year, the business-cycle index is up a more moderate 2.6 percent. The leisure and hospitality industry has been the job growth leader this year, with professional and business services coming in a close second. Fast population growth across the metro has also led to gains in construction employment—both residential and commercial construction are well above last year’s levels, according to contacts. Year-to-date, the metro has registered job gains of 7,500—a 1.8 percent annualized pace.

After growing robustly since the middle of 2005, Houston’s economy expanded more moderately in June, with its business-cycle index rising at an annualized pace of 1.9 percent. The moderation was due to slower job growth—0.3 percent during the month. Anecdotal reports suggest that a lack of qualified workers is restraining employment growth in several industries. Of the 600 jobs added, most came from educational and health services and the manufacturing sectors, the latter being boosted by strong energy-related demand. Additionally, hotel occupancy rates remained high. So far this year, Houston has added 19,600 jobs—a 1.7 percent annualized rate.

San Antonio’s economy grew at a vigorous pace in June. The metro’s business-cycle index rose a solid 3.8 percent, and employment posted a 3.5 percent increase (2,300 jobs). Driving job growth were gains in the service-providing sector. Professional and business services employment rose as Accenture began hiring employees for its new business service center. Payrolls in the financial services sector increased because some major U.S. banks continued to expand their operations in the metro. For the year, the metro posted employment gains of 7,300, a 1.9 percent annualized rate of growth.

Texas’ Major Border Metros
Brownsville’s economy picked up in June, following a slowdown in May. The metro’s business-cycle index grew at an annualized rate of 3.5 percent, and employment increased by 400 jobs during the month. Activity in the retail trade sector remained strong, and sales tax revenues were up substantially compared with last year. For the first half of the year, employment in Brownsville is up 3.2 percent—a gain of 1,900 jobs.

Chart 2

El Paso's economy grew at a rapid clip in June, with its business-cycle index posting a 4.7 percent increase. The metro added 1,100 jobs during the month, with most of the gains resulting from strong growth in the service-providing sector. Increasing manufacturing activity in the sister city of Ciudad Juárez and continued expansion at Fort Bliss are boosting growth in the metro. So far this year, the metro’s payrolls have increased by 3,700 jobs—a 2.8 percent annualized increase.

Laredo’s economy moderated in June, following brisk growth in the first five months of 2006. The metro’s business-cycle index rose 2.9 percent, and employment edged up by 300 jobs during the month. Homebuilding activity remained elevated, and permits issued for home construction are up compared with last year. Additionally, business relocations from crime-ridden Nuevo Laredo are giving the metro’s economy a major boost. For the year, the metro recorded the strongest rate of job growth (5 percent) among Texas border metros, posting a net increase of 2,000 jobs.

McAllen’s economy expanded at a healthy pace in June. The metro’s business-cycle index increased 8 percent, a result of robust employment growth (1,100 jobs). Activity in the retail and construction sectors remained strong, thanks to high oil prices and booming trade with Mexico. Halfway through the year, McAllen’s employment growth has registered a strong 3.7 percent increase—a 3,700 job gain.

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