|
Regional Economy
The
Metro Business-Cycle Indexes
May 2005
Keith
R. Phillips introduces a new series of indexes that show the broad
movements in local Texas economies.
The frequency
and severity of cyclical swings in a local economy are important
to businesses and consumers because they impact production and inventory
decisions as well as employment and unemployment. Analyzing the
overall direction of a local economy, however, can be difficult
and confusing. The handful of local economic indicators often gives
mixed signals. For example, if the unemployment rate increases and
so does job growth, it's not always clear whether the local economy
is picking up or weakening.
One way to solve
this dilemma is to design a composite index that aggregates the
movements of key economic indicators. Statistically optimal weights
can be chosen such that movements in the index best represent the
underlying comovements in the indicators and thus the underlying
state of the economy. The Dallas Fed has developed the Metro
Business-Cycle Indexes to show these movements in the metropolitan
areas of Austin–Round
Rock, Brownsville–Harlingen,
Dallas–Plano–Irving,
El Paso, Fort
Worth–Arlington, Houston–Baytown–Sugar
Land, Laredo, McAllen–Edinburg–Pharr
and San Antonio. Movements
in the indexes summarize the movements in locally measured nonagricultural
employment, unemployment rate, inflation-adjusted wages and inflation-adjusted
retail sales. The indexes are designed to measure the overall direction
of the economy but not the magnitude or level of local activity.
(See the component series to evaluate the total number
of jobs, total real wages
and retail sales and
the level of the unemployment
rate.)
The indexes
show clear patterns of recessions and expansions. While national
recessions have impacted local economies, the business cycles for
many areas often deviate from those of the nation and other regions
in the state. For example, high-tech cities Austin and Dallas were
hit hard in the downturn that began in early 2001 (Chart 1),
but the South Texas border cities continued to grow (Chart 2).
Chart
1
 |
Chart
2
 |
The indexes will
be published monthly on the Dallas Fed web site a couple days after
the state and metro employment and unemployment data become publicly
available from the Texas Workforce Commission.
Related
Dallas Fed Articles
“A
New Monthly Index of the Texas Business Cycle,”[PDF] Research
Department Working Paper 0401.
“Business
Cycle Coordination Along the Texas-Mexico Border,”[PDF]
Research Department Working Paper 0502.
“Composite
Index: A New Measure of El Paso’s Economy” Business
Frontier, Issue 1, 2003.
“A New Index
of Coincident Economic Activity for Houston,” Houston
Business, April 2003.
“Steady-as-She
Goes? An Analysis of the San Antonio Business Cycle,” Vista,
Winter 2004.
| Phillips
is a senior economist at the San Antonio Branch of the
Federal Reserve Bank of Dallas.
SUGGESTED
CITATION:
Phillips, Keith R. (2005), "The Metro Business-Cycle
Indexes," Federal Reserve Bank of Dallas Expand
Your Insight: Regional Economy, May 19, 2005, http://www.dallasfed.org/eyi/regional/0505indexes.html |
|
About
EYI | Global Economy
| U.S. Economy |
Regional Economy
| Free Enterprise
| Money & Banking
| Technology
Federal Reserve Bank of
Dallas | FRB
Dallas Publications
|
