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Data Definitions

Texas Leading Index

The Texas Leading Index is a single summary statistic that sheds light on the future of the state's economy. It is designed to signal the likelihood of the Texas economy's transition from expansion to recession or vice versa. The index is a composite of eight leading indicators—those that tend to change direction before the overall economy does. These indicators include:

  • Texas Value of the Dollar
  • U.S. leading index
  • Real oil prices
  • Well permits
  • Initial claims for unemployment insurance
  • Texas stock index
  • Help-wanted index
  • Average weekly hours worked in manufacturing

For example, at the beginning of a recession, firms usually cut back on average weekly hours worked before they start cutting the number of employees. As another example, rises in initial claims for unemployment insurance imply that there are more people with job separations who do not expect to quickly find new jobs, signaling economic weakness. Variables that tend to move in the opposite direction of the economy, like initial claims for unemployment insurance, are first inverted so that their movements coincide with that of the broader economy. The index's lead time is three to six months

Texas Value of the Dollar

The Texas Value of the Dollar (TXVD), the Texas equivalent of the Trade-Weighted Value of the Dollar (TWVD), is an index of the weighted value of the inflation-adjusted dollar relative to the inflation-adjusted currencies of other countries. Each country is assigned a fixed weight based on the size of its export trade history. There are 48 countries in the TXVD, accounting for more than 95 percent of the Texas exports. Mexico is the largest country in this index, with 35.9 percent of the weight, followed by Canada (9.8 percent) and Japan (4.1 percent). Therefore, movements in the value of the Mexican peso will affect the TXVD more than movements in any of the other currencies.

The TXVD is one of the eight components of the Texas Leading Index. It is inversely related to the leading index. In other words, an increase in the TXVD affects the Texas Leading Index negatively, while a decrease in the TXVD gives it a positive boost. The TXVD is included in the index because it is an indicator of the price of Texas exports. When the value of the TXVD increases, these exports become more expensive for Texas' trading partners, resulting in a reduction in the volume of Texas exports.

U.S. Leading Index

The U.S. Leading Index is a composite of 10 key leading economic indicators. These economic variables include the factory workweek, new orders for consumer goods, new orders for nondefense capital goods, stock prices, initial jobless claims, vendor performance, building permits, money supply, consumer expectations and the spread between the 10-year note and the federal funds rate.

The U.S. leading index is a component of the Texas Leading Index because changes in aggregate national activity tend to precede changes of similar direction in the Texas economy.

Real Oil Prices

Real oil prices measure the inflation-adjusted value of a barrel of crude oil in the marketplace and are a leading indicator for the Texas energy industry. As such, real oil prices are one of the eight leading indicators included in the Texas Leading Index. An increase in oil prices tends to benefit the Texas economy, while it has a negative effect on most other states' economies.

The oil price series followed by the Dallas Fed is the West Texas Intermediate crude spot price, available daily in the Wall Street Journal. Prices are averaged by month and deflated using the Consumer Price Index.

  • Data Source:
    • Wall Street Journal

Well Permits

Well permits measure the number of permits issued for oil and natural gas drilling outfits. This variable is considered a leading indicator for the energy industry. In general, a large increase or decrease in the number of well permits issued is an indication of change in oil and gas industry activity. Well permits are reported by the Texas Railroad Commission and are available monthly.

Because of its forward-looking nature, well permits are one of the components of the Texas Leading Index. Although the energy industry plays a smaller role in Texas' overall economy than it did in previous decades, it still figures prominently into overall statewide economic activity.

Initial Claims for Unemployment Insurance

This variable is simply a count of the total number of initial claims for unemployment as measured by the U.S. Department of Labor. This particular variable is useful because it gives a timely assessment of the overall economy. Initial claims lead the economy in that they can indicate changes in labor market conditions. Rising numbers of initial claims may signal that layoffs are occurring. Initial claims is one of the eight leading variables used in the Texas Leading Index.

The Texas Stock Index, or “Texas 100”

The Texas 100 is a stock index of firms that used to be compiled by the Texas Comptroller of Public Accounts. The comptroller’s office stopped producing the index in 2010. It is presently produced by the Dallas Fed, based on the methodology previously used by the comptroller’s office. The index tracks monthly stock prices of the 100 largest publicly traded companies in the state, based on annual employment. It shows the current value of one dollar invested in each of the 100 companies in December 1997. The index is updated annually as firms move in and out of the top 100. It is available monthly from October 1996 to the present.

The Texas 100 is a measure of the financial health of Texas' largest companies and, as such, is one of the eight leading indicators included in the Texas Leading Index.

Help-Wanted Index

The Help-Wanted Index is a measurement of help-wanted advertising volume. The index used to be compiled by the Texas Comptroller of Public Accounts. The comptroller’s office stopped producing the index in December 2010. Presently the index is extended to 2011 by using numbers from the Conference Board's Help Wanted Online, which includes Internet and print ads. It is indexed to 1989 as the base year (1989 = 100). It indicates how many jobs employers are trying to fill, a measure of the supply of regional jobs. Because it measures companies' intentions to hire new workers, it is considered a leading indicator of changes in the economy and is a component of the Texas Leading Index. An upward trending help-wanted index suggests that businesses are planning to expand their payroll, which could indicate a strengthening of the economy. On the other hand, a downward trend in the index suggests that businesses are not anticipating expansion of their operations and are possibly expecting declining activity.

Average Weekly Hours

This series is the average of weekly hours worked by production workers in manufacturing industries. The Bureau of Labor Statistics' survey of business establishments—Current Employment Statistics—gathers data for this series. Average weekly hours worked is considered a leading indicator because it gauges employers' need to hire additional workers or lay off current employees. If demand for production increases, employers will ask their workers to work more hours and put off hiring additional workers until they're confident that the increased demand is unwavering. If demand for production holds up, businesses will be forced to hire additional workers, signaling a strengthening economy. On the flip side, if demand for production slows, employers will ask workers to log fewer hours before laying them off. A downward trend in average weekly hours can signal future layoffs and presumably a weakening economy.

Texas Business-Cycle Index

The Texas Business-Cycle Index is a single economic statistic that helps gauge the current state of the Texas economy. Changes in the index tend to coincide with changes in overall economic activity. In other words, during periods of economic expansion, the coincident index increases; when the economy contracts, the index falls. The Texas Business-Cycle Index is constructed using payroll employment, gross state product and the unemployment rate.

Texas Employment

Payroll Employment
The Bureau of Labor Statistics' payroll employment is a measure of the current number of nonagricultural-related jobs. Total job count is based on the BLS's Current Employment Statistics, a monthly survey of business establishments. The employment situation is one of the most widely followed economic statistics because of its timeliness, accuracy and importance in estimating overall economic activity.

Labor Force
Related to the payroll or establishment survey is the household employment survey, which estimates the labor force and the unemployment and employment rates. The labor force consists of all individuals 16 years or older who are employed or who are unemployed and searching for work.

Unemployment Rate
The unemployment rate is found by dividing the number of unemployed individuals seeking work by the labor force.

Employment results from the two surveys are not the same and can diverge from time to time. For an explanation of the differences, see the Bureau of Labor Statisticsoff-site.

Rig Count

The rig count is a weekly census of the number of active drilling rigs exploring for oil and natural gas in North America. The rig count, published by Baker Hughes, is available weekly from 1949 to the present.

The Baker Hughes rig count is an important indicator for the energy industry and Texas. Rig counts generally rise following increased oil and gas company development and exploration spending, which is influenced by the current and expected price of oil and natural gas (among other factors). Thus, the rig count reflects the strength and stability of energy prices.

Construction Contract Values

Construction contract values are construction "starts" measured in terms of contract award dollars. Data series are available for nonresidential and residential buildings and nonbuilding projects. The nonresidential category includes projects such as office buildings, retail stores, warehouses, hotels, schools, museums, hospitals, churches and government buildings. The residential series includes single-family homes, duplexes and apartment buildings. The nonbuilding sector includes projects such as streets and highways, bridges, dams, waste disposal, communications systems and airport facilities.

Contract value data are obtained from McGraw-Hill Construction Dodge, which gathers information on individual construction projects in the United States. At the Dallas Fed, contract-value data are deflated using the Consumer Price Index. Moreover, because construction data are typically quite volatile even after seasonal adjustment, the data are smoothed using a five-month moving average.

  • Data Source:
    • Dodge Construction Potentials, McGraw-Hill Construction, Dodge Analytics, 24 Hartwell Ave, Lexington, MA 02421, or www.construction.com off-site. For more information on available reports from McGraw-Hill Construction Dodge, contact Don Cotchen, Dodge Federal Government Account Manager, Washington DC (202) 383-3709.
      Note: Dallas Fed contract with Dodge does not allow republication of data.
  • Additional Information:

Building Permits

This variable measures the number of permits issued for housing units (single-family home or apartment) authorized for construction. Because permits precede construction, they are considered a leading indicator for the residential construction industry and the overall economy. Most of the construction begins the same month the permit is issued. The remainder usually begin construction during the next three months.

Building permit data for the United States, states, metropolitan areas and counties are released monthly by the U.S. Census Bureau. These data are available for both single-family and multifamily construction. However, month-to-month changes in seasonally adjusted permit data are quite volatile, and the Census Bureau suggests it may take four months to establish an underlying trend in permit authorizations. For this reason, many economists analyze the data using a moving average.

Texas Exports

This variable measures the value of exports originating from Texas. Because Texas producers sell globally, a rise or fall in international demand can have a significant impact on the Texas economy. For example, a weakening global economy translates into falling Texas exports, which has a dampening effect on Texas economic activity. Mexico is Texas' principal export market; thus, the strength of Mexico's economy is an important determinant of overall Texas exports. Texas exports a variety of products to its trading partners, with the majority of products coming from the energy, transportation, and computer and electronics industries.

Texas export data are available quarterly by contract from the World Institute for Strategic Economic Research (WISERTrade). WISERTrade produces state export data under an agreement with the Census Bureau. WISERTrade improves the census' unadjusted foreign trade data by filling in missing industry and state information using a calculation.The quarterly export data are available from WISERT from 1997 to the present.

Monthly export data are available from the Census Bureau. These data are calculated on an origin-of-movement-to-port basis.

Maquiladora Employment

This variable measures the number of manufacturing jobs in maquiladora plants in Mexico. Mexican maquiladora data are compiled and disseminated by Instituto Nacional de Estadística Geografía e Informática (INEGI) through its monthly survey Encuesta de la Industria Maquiladora de Exportación (IME). IME data are published monthly, usually with a three-month lag. It covers 17 states plus the Federal District and 31 municipalities. The employment section of the maquiladora survey includes hours worked and compensation data on laborers, technicians and administrative workers by gender.

Maquiladora manufacturing or assembly may be carried out under various operating frameworks. Generally, there are three ways to manufacture in Mexico under the maquiladora program: as a subcontractor, a shelter or a wholly owned subsidiary. In its simplest form, a maquiladora plant imports inputs from a foreign country, processes these inputs and ships them back to the country of origin. The advantage of maquiladoras is their ability to import capital and raw materials duty-free (from within NAFTA). When exporting back to the United States, as most maquiladoras do, tariffs are applied only to the value-added portion of the final product or service.

Maquiladoras have had a large economic impact on both Mexico and the United States, particularly in the border region. The rapid growth of the maquiladora industry in Mexico has made it that country's leading source of foreign exchange. Along the border, cities have grown rapidly with respect to both population and employment as a result of the growth of maquiladora industry.

Because of the shared border between Texas and Mexico, changes in maquiladora employment are important when evaluating the Texas economy. Maquiladoras have helped make Mexico Texas's foremost trading partner (destination for over 40 percent of Texas exports), and has generated growth and development along the Texas–Mexico border. Rising maquiladora employment creates greater demand for goods and services provided on the U.S. side. The influence of maquiladoras on the Texas economy has made maquiladora employment an important indicator of the region's economic conditions.

 

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