May 23, 2007

The Texas economy expanded steadily in April. The Dallas Fed’s Texas Business-Cycle Index, an aggregate measure of the region’s current economic activity, rose at an annualized rate of 3.7 percent, matching the pace set year-to-date (Chart 1).

Chart 1

State employment increased by 18,600 workers in April—for annualized growth of 2.2 percent, according to data released by the Texas Workforce Commission with seasonal and other adjustments by the Dallas Fed [3] (see table). The labor market continued to tighten during the month—the Texas unemployment rate fell one-tenth of a percentage point to 4.2 percent.

Major Metros

Austin’s economy grew swiftly in April, its business-cycle index registering an 8.8 percent increase and employment expanding at a 2.9 percent pace. Continued business expansions and relocations boosted office and industrial occupancy rates and kept job growth positive in the trade and transportation and construction sectors, which added 500 and 400 jobs to payrolls, respectively. Healthy population growth bolstered demand for housing and improved apartment occupancy rates in the metro. Additionally, an expanding tourism industry led to job gains of 500 in the leisure and hospitality sector during the month.

The Dallas economy grew solidly in April, with its business-cycle index posing a robust 3.8 percent increase. Employers added 6,500 positions during the month, the most of any metro. Job gains were broadly based across industries, with professional and business services and financial activities leading the way. The two industries added 1,700 and 1,400 jobs, respectively—and their growth is helping bolster demand for office space. The large trade, transportation and utilities sector continued to expand during the month. Several upcoming transportation and warehousing projects are under way in the metro: Old Dominion Freight Line’s construction of a new 250-door terminal and the development of the Dallas Logistics Hub—a 6,000 acre distribution and manufacturing facility adjacent to Union Pacific’s Southern Dallas Intermodal Terminal, connecting with four major highways.

Fort Worth’s economy maintained its strong growth in April. Its business-cycle index rose at a rate of 6.3 percent, and payroll gains totaled 4,300 during the month, the second-largest increase among metros. Job increases in the service-producing sector offset a slight decline in the goods sector, which was likely related to a drop in area housing construction. The largest increase—2,200 jobs—came in professional and business services, which includes architectural firms, accounting companies, law firms and computer system design firms. An ongoing industrial expansion boosted payrolls by 1,400 in the trade, transportation and utilities sector.

The Houston economy decelerated in April. Its business-cycle index grew at an annualized rate of 3.6 percent, following an increase of 6.4 percent in March. Employers added 3,400 jobs during the month. Continued strength in the energy sector boosted payrolls in the construction and mining sector and architecture and engineering services by 1,000 and 700 jobs, respectively. Growth in the global economy benefited Houston—the nation’s largest port in international tonnage—by supporting job growth of 1,000 in the trade, transportation and utilities sector during the month. Houston’s manufacturing sector weakened further, with job losses of 1,700 in April and 2,700 year-to-date.

San Antonio’s economy remained vibrant in April. Its business-cycle index increased 6.7 percent, supported by job growth of 4.1 percent during the month. Employment growth in the leisure and hospitality sector remained strong, adding 2,100 jobs. Continued business relocations kept office space absorption positive and contributed to job gains in the professional and business services sector. Construction employment rose by 200, as industrial and commercial building activity offset a slowdown in the housing industry. Commercial projects under way include a $20 million endocrine research center, a $10 million tech center and an expansion at Northwest Vista College.

Border Metros

Brownsville’s economy grew at a moderate pace in April, with its business-cycle index rising 2.7 percent, while employment increased by 1 percent (Chart 2). Brownsville continues to be an attractive destination for retailers, with Kohl’s and Conn’s set to open new locations. Strong population growth has led to healthy job gains in the leisure and hospitality and the educational and health care industries.

Chart 2

El Paso's economy grew steadily in April, with the metro’s business-cycle index increasing 2.6 percent. Total employment remained flat, as gains in service-producing employment were offset by losses in the goods-producing sector. Business contacts noted a manufacturing deceleration in Ciudad Juárez that may have a negative impact on El Paso’s economy over the next few months.

Laredo’s economic activity continued to show some signs of strength in April, with its business-cycle index posting a 6.1 percent annualized increase. Total metro employment fell by 100 jobs during the month—a 1.4 percent rate—but is up 0.7 percent year-to-date. Retail sector activity slowed due to unfavorable weather conditions. Commercial border crossings continued to decline, which business contacts attributed to the high crime rate in Nuevo Laredo and a slowdown of the maquiladora industry in Mexico. On the plus side, the professional and business services sector added 100 jobs, and a new H-E-B Plus that opened in April created over 400 jobs.

McAllen’s economy continued to post strong growth in April, with its business-cycle index rising 5.6 percent and employment expanding by 4.7 percent. Healthy population growth fueled activity in the retail sector and boosted health care employment growth. Commercial building activity remains vigorous, with the expansion of a major medical facility under way, and construction of an $80 million mall—Shoppes at Rio Grande Valley—scheduled to begin in June.

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 fourth quarter 2006 by the Texas Workforce Commission, with seasonal and other adjustments by the Federal Reserve Bank of Dallas. 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.