Issue 2, March/April 2005
Federal Reserve Bank of Dallas

Regional Update

Texas posted a steady employment gain of 1.3 percent in 2004 and 2 percent annualized in January 2005, underscoring its improving overall health since bouncing back from recession in August 2003. The Texas Coincident Index, an aggregate indicator of statewide economic activity, is in positive territory.

Overall, the state added 125,500 jobs in 2004, with nearly 85 percent of net job creation propelled by services. Seven out of 10 sectors contributed to an arguably broad-based Texas recovery. Increasing oil prices led to heightened energy activity, keeping the natural resources and mining sector afloat; and a late boom drove the construction and information sectors into positive territory in third quarter 2004. Except in manufacturing, which continued its job-loss streak in January 2005, Texas closed 2004—and started 2005—on a high note.

A deeper look into the manufacturing sector reveals the effect of restructuring—rising output and falling employment. With improved production processes, higher productivity of the existing workforce and a shift of focus from labor- to capital-intensive industries, the consequence is greater output per worker.

As manufacturing output burgeons in the wake of productivity increases, a weak dollar provides further impetus by stimulating export demand. Increasing domestic production for export bolsters several sectors, and railroads represent one such instance. Recent increases in oil prices have hurt railroads less than they have the trucking sector. In addition, increased shipping demand for such items as coal and heavy machinery for export and for domestic use has boosted railroad shipments. As a result, the 2,000 jobs gained in the railroad sector have, to some extent, been able to offset the 2,400 jobs lost in trucking.

—Raghav Virmani

Note For more information on employment data, see “Reassessing Texas Employment Growth” (Southwest Economy, July/August 1993). For TIPI, see “The Texas Industrial Production Index” (Dallas Fed Economic Review, November 1989). For the Texas Leading Index and its components, see “The Texas Index of Leading Indicators: A Revision and Further Evaluation” (Dallas Fed Economic Review, July 1990). Online economic data and articles are available on the Dallas Fed’s Internet web site, www.dallasfed.org. About Southwest Economy Southwest Economy is published six times annually by the Federal Reserve Bank of Dallas. The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Research Department of the Federal Reserve Bank of Dallas. Southwest Economy is available free of charge by writing the Public Affairs Department, Federal Reserve Bank of Dallas, P.O. Box 655906, Dallas, TX 75265-5906, or by telephoning (214) 922-5254.