April 23, 2007

The Texas economy moved ahead at a moderate pace in March. The Dallas Fed’s Texas Business-Cycle Index—an aggregate measure of the region’s current economic health—rose at an annualized pace of 3.6 percent, signaling continued expansion (Chart 1).

Chart 1

State payrolls grew by 13,100 jobs in March—a 1.5 percent annualized increase, according to the data released by the Texas Workforce Commission with seasonal and other adjustments by the Dallas Fed [3] (see table). While employment growth during the month was slightly below its 1.6 percent pace recorded year-to-date, the state’s labor market remained tight, with the unemployment rate at a six-year low of 4.3 percent.

Major Metros
Austin’s economy expanded at a robust pace in March, with its business-cycle index rising a swift 8.8 percent and employment expanding at 2.1 percent—1,300 jobs. Job gains were broadly based across industries, with employment growth in the manufacturing and professional and business services industries leading the way. Employment in construction recorded a brisk 4.9 percent increase during the month, boosted by healthy growth in the city’s office and high-end housing markets. An expanding tourism industry led to job gains in the leisure and hospitality sector, and venture capital investment in the metro remained solid. Additionally, recent announcements by more than 30 companies to relocate to Austin will further stimulate economic growth, according to business contacts.

The Dallas economy maintained its solid expansion in March, with its business-cycle index posting a 3.4 percent annualized increase. Employers added 4,000 positions during the month for a healthy annualized pace of 2.3 percent. Job gains were broadly based across goods- and service-providing sectors. Even as builders continued to pull back on home starts, construction employment rose by 500, buoyed by building activity in the apartment and office sectors. Professional and business services employment continued to rise strongly, recording growth of 9.4 percent. Nevertheless, telecommunications employment fell sharply, and announcements of coming layoffs suggest further declines.

Fort Worth’s economy picked up the pace in March. Its business-cycle index rose at an annualized 6.7 percent clip, and job gains totaled 4,300 during the month, the second largest increase among metros. Continued drilling activity in the Barnett Shale led to gains in energy-related jobs, while hotel and other nonresidential building boosted construction employment. In addition, despite some layoff announcements by area retailers such as Pier 1, the trade sector added jobs at a 6.8 percent increase. Leisure and hospitality jobs rose strongly, and further gains are expected as the Great Wolf Lodge—a 93,000-square-foot indoor area, with 402 family suites and a water park—currently under construction in Grapevine, is slated to open in winter 2007.

The Houston economy accelerated in March. Its business-cycle index rose at an annualized rate of 5.2 percent, a sharp pickup following growth of 2.4 percent and 2.7 percent in January and February, respectively. Monthly job gains of 6,000 helped drive the index’s strength. Employment growth was broad based, with seven of the 10 major industry sectors posting increases of 400 jobs or more. The strongest job growth came in the service sector, with educational and health services adding 1,400 positions and professional and business services contributing 1,000. Houston is beginning to see the pass-through effect of the recent energy boom. Energy companies have brought many workers to Houston, and the metro’s resulting population increase is necessitating job growth in the service sector.

San Antonio’s economy maintained its strong momentum in March. The metro’s business-cycle index increased 5.9 percent, supported by job growth of 1 percent (700 jobs) during the month. Employment growth was concentrated in the service sector, with the leisure and hospitality industry posting the strongest gains (400 jobs). The expanding manufacturing sector added 100 positions in March. Healthy population growth and continued business expansions boosted retail sales and propelled office absorption in the metro. In addition, recent announcements by Microsoft and the National Security Agency to build data centers bode well for continued employment growth in San Antonio.

Border Metros
Brownsville’s economy grew at a tepid pace in March, with its business-cycle index rising 1.7 percent (Chart 2). Employment increased by 2 percent (200 jobs), as employers in a wide array of businesses, ranging from fast-food chains to call centers, added workers to their payrolls. Construction employment growth was flat during the month, but business contacts report that commercial and residential construction activity in the metro remains strong.

Chart 2

El Paso's economy bounced back in March, after edging down over the the past two months. The metro’s business-cycle index rose 3.2 percent, and payroll employment expanded by 2.3 percent (500 jobs) during the month. Gains came from employment growth in the professional and business services, transportation services and construction industries. Business contacts say expansion at Fort Bliss is fueling construction activity and service-sector employment growth in the metro.

Laredo’s economy picked up in March. The metro’s business-cycle index rose at a strong annualized rate of 4.9 percent, and employment grew by 7.3 percent. The northern part of the metro area is undergoing an expansion that has brought retailers and new store construction. Because of the metro’s fast-growing population, the educational and health sector continues to add jobs at a fast pace, including 200 new positions in March. Several industrial or warehouse expansion projects have been announced recently, including a $40 million expansion of a just-completed $37 million manufacturing plant in Nuevo Laredo.

The McAllen economy maintained its strong upward momentum in March. Its business-cycle index exhibited annualized growth of 6.8 percent, and employment rose by 2.3 percent. Retail sales remain strong, with several new locations added by JC Penney and a new, 132,000-square-foot H-E-B plus! grocery store. In addition, a strong real estate market in both the residential and commercial sectors continues to attract investors from other areas of the U.S. A new $62 million convention center and a $30 million women’s hospital are indicative of the metro’s economic expansion.

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 third 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 Laila Assanie at (214) 922-5191.