January 2007

The Texas economy grew at a good clip in November. The Dallas Fed’s Texas Business-Cycle Index—a measure of the state’s current economic conditions—rose at a 3.9 percent annualized rate during the month, just below the 4.1 percent pace recorded year-to-date (Chart 1).

Chart 1

The Texas labor market continued its expansion in November, although at a slightly slower pace. While still subject to revision, Texas employment data—released by the Texas Workforce Commission with seasonal and other adjustments by the Dallas Fed [3]—showed an annualized increase of 1.9 percent during the month. This compares with annualized job growth of 3.1 percent year-to-date (see table).

Major Metros
Austin’s economy maintained its expansion in November, with its business-cycle index rising 4.1 percent. Gains in the index were tied to strength in several sectors of the metro’s economy. Austin’s two largest private sectors—trade, transportation and utilities and professional and business services—recorded healthy growth of 2.9 percent and 7.5 percent, respectively. Construction employment also rose sharply and was driven by solid demand for retail, industrial and office space. Through November, the metro has added 20,700 jobs at a 3.2 percent annualized rate.

The Dallas economy moved forward at a solid pace in November. The metro’s business-cycle index rose at an annualized rate of 3.4 percent, and employment increased by 2.6 percent. Through November, the metro added 54,400 jobs, at an annualized pace of 3 percent. Employment gains remain broadly based across sectors. Construction employment continued to rise in November, in part due to strong demand for office and hotel space, according to business contacts. Service-sector job gains were robust during the month, with hiring in most major industries, including trade, transportation and utilities; financial activities; and educational and health services.

Fort Worth’s economy grew briskly in November with its business-cycle index rising at an annualized pace of 3.8 percent and employment increasing 3.3 percent. While construction employment eased from the strong growth seen in recent months, the service sector posted robust job gains in several sectors. Industrial expansions boosted employment in the trade, transportation and utilities sector, while the growing hotel sector boosted jobs in the leisure and hospitality industry. Financial activities employment, which has seen strong gains throughout the year, rose again in November. Year-to-date, the metro has added 23,300 jobs.

Houston’s economy remains vibrant. While slower than October’s hot pace, the metro’s business-cycle index grew at a strong annualized rate of 5.8 percent in November. During the month, 6,800 net jobs were added across a broad range of industries. The construction, mining and natural resources industry, which drove the economy for most of 2006, saw employment edge down in November, mostly related to a decline in residential construction and mining support activities. Still, the industry has recorded year-to-date growth of 9.7 percent. Trade, transportation and utilities added 900 new jobs in November, fewer than the 1,600 added in October. Anecdotal evidence suggests that this may be due to a slight slowdown in activity at the Port of Houston. Year-to-date, Houston leads the state in job gains with the creation of 85,000 jobs.

San Antonio’s economy continued to expand at a rapid pace in November, with its business-cycle index growing at a robust 5.6 percent. The metro added 1,700 jobs during the month, for a year-to-date total of 22,600—a 3.1 percent annualized rate. Much of the growth has come from the manufacturing, leisure and hospitality services, professional and business services, and education and health services sectors, each of which has expanded at an annualized pace of about 5 percent year-to-date. Growth in these service sectors has helped boost absorption of office space in the metro, which, through September 2006, is double that of the space occupied in all of 2005.

Border Metros
The Brownsville economy pushed ahead in November. The metro’s business-cycle index increased 4.6 percent, reflecting strong job growth of 3 percent during the month (Chart 2). Commercial and residential construction activity remains robust in the metro and has propelled job growth in the mining and construction industry. This sector has recorded the strongest year-to-date employment increase (10 percent) among the metro’s major sectors. For the year through November, Brownsville has posted an annualized employment increase of 3.9 percent—4,200 jobs.

Chart 2

El Paso's economy expanded for the third month in a row in November, after edging down in July and August. The metro's business-cycle index increased an annualized 3.3 percent during the month. Employment rose at a 1.8 percent pace, with information, professional and business services, and educational and health services posting gains. Following a recent downturn in Ciudad Juárez’s maquiladora industry, factory employment rebounded at a 2.9 percent pace in October, a good omen for the El Paso economy. Year to date, El Paso has added 3,300 jobs.

Laredo’s economy maintained its expansion in November, as its business-cycle index rose a vigorous 12.4 percent. Despite the strong increase in the index, overall employment growth was flat during the month, as job gains in the government sector were offset by declines in the private sector. On a positive note, recent upgrades to the International Bridge I may boost trade and tourism, which slackened because of recent kidnappings, according to business contacts. At 5.4 percent, Laredo’s employment growth year-to-date is the strongest among Texas metros.

McAllen’s economy continued on an upward path in November. The metro’s business-cycle index increased 6.2 percent, despite a 1.2 percent dip in employment. While employment growth has been volatile in recent months, the unemployment rate has been falling—registering the lowest point year-to-date in November. Anecdotal reports suggest strong sales are boosting retail employment. More than 700 people started new jobs in November as the Rio Grande Valley Premium Outlet Center opened its doors to shoppers. For the year through November, overall employment in the metro has increased by 6,900 jobs—a 3.8 percent annualized rate.

Notes All growth rates are annualized unless otherwise noted. 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. The employment data used in this analysis have been benchmarked to TWC's second quarter 2006 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 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.