April 2006

The Texas economy continued to expand at a solid pace in February 2006. The Dallas Fed’s Texas Coincident Index—a business-cycle index of current economic indicators—rose at an annualized rate of 3 percent during the month (Chart 1), and was up 3.2 percent from a year earlier.

Chart 1

The Texas Labor market maintained upward momentum in February, with a gain of 16,200, a 2 percent rate, according to data released by the Texas Workforce Commission with seasonal and other adjustments by the Dallas Fed [3] (see table). Private employment (excluding government) rose at a somewhat stronger 2.3 percent rate.

Major Texas Metros
Austin’s economy continued to grow at a rapid clip in February with its business-cycle index increasing 4.1 percent. Growth in the index was boosted by strong employment gains (1,400 jobs) during the month, most in the service sector. Employment in the leisure and hospitality industry rose as a major lodging chain began hiring for its soon-to-open hotel in Bastrop County. In addition, payrolls in the construction industry continued to increase, fueled by a strong real estate market.

The Dallas economy continued on its upward path in February, posting a 2.7 percent increase in its business-cycle index, with job gains that surpassed those of the other major metros (3,900 jobs). Most of the gains were concentrated in the service sector, especially in the industries of professional and business services, and trade, transportation and utilities. Relocations and in-migration are playing a role in the metro's recovery, according to business contacts.

Fort Worth’s business-cycle index rebounded in February, rising 3.1 percent after growing 1.7 percent the month before. February employment gains were positive as well, with overall job growth of 3.0 percent (annualized). While the shutdown of a major mobile phone parts supplier contributed to job losses in manufacturing, gains in other industries—especially in leisure and hospitality and professional and business services—more than offset them. Fort Worth’s economy continues to benefit from increased natural gas drilling activity in the Barnett shale.

The Houston economy sustained its solid expansion in February as its business-cycle index rose an annualized 3.5 percent. The metro added 2,600 new jobs during the month, the majority of them coming from the manufacturing and professional and business services sectors—the latter related to services targeting hurricane evacuees from New Orleans. In addition, elevated energy prices continue to boost company profits, royalties and employment in drilling and oil and gas services.

San Antonio’s economy maintained its moderate expansion in February. The metro’s business-cycle index rose 2.2 percent during the month, and employment increased at an annualized rate of 2 percent (1,300 jobs). San Antonio continues to add jobs to its manufacturing sector as Toyota hires additional assembly-line workers in preparation for the upcoming Tundra plant.

Major Border Metros
Brownsville’s economy grew at a steady pace in February, with its business-cycle index rising an annualized 3.1 percent (Chart 2). Like other border metros, Brownsville is benefiting from a strong peso and related increases in retail sales. Further, a recent uptick in residential construction is contributing to job gains. Overall employment posted a 3.1 percent annualized gain during the month.

Chart 2

El Paso’s business-cycle index rose 3.2 percent (annualized) in February, as the metro recorded annualized job growth of 3.7 percent. The construction, trade, transportation and government sectors continue to spur the metro’s economy.

Laredo’s economy posted strong growth in February, with its business-cycle index up an annualized 5.9 percent (up 13.7 percent from a year earlier). Additionally, employment increased at a robust annualized pace of 7.5 percent. Construction remains one of the main drivers of employment growth in the metro as many new retail establishments have sprung up in recent months.

McAllen’s economy stayed strong in February as its business-cycle index grew at a rapid annualized pace of 6.1 percent. Sister city Reynosa is adding to the metro’s strength with its maquiladoras spawning new jobs in industries such as construction, tourism and professional services like accounting. Overall job growth in McAllen increased a sound 4.9 percent during the month (annualized).

Notes All growth rates are annualized unless otherwise noted. For a definition of the Texas Coincident 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 2005 CEW data and seasonally adjusted by the Dallas Fed. For more information about early benchmarking data please 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 D'Ann Petersen at (214) 922-5190.