RELATED ARTICLE "Another Great Texas Boom," Southwest Economy, Issue 1, 2001 (Text or PDF)

Regional Economy
Texas Cities
January 2001

Dallas Fed Assistant Economist John Thompson takes look at five major metropolitan areas in Texas and how they fared in 2000.

Austin
Theories that Austin's super-tight labor market would eventually constrain job growth failed to materialize in 2000. Nonfarm employment surged ahead another 4.7 percent [1] (25,600 jobs) despite an average unemployment rate of 2.1 percent. The unemployment rate held at an unthinkable 2 percent—as it has since July. While job growth cooled in September and October (latest data available), this tapering probably owed more to the dot.com shakeout and NASDAQ volatility than to tight labor markets. In the first 10 months of 2000, job growth was led by a 10 percent jump (5,700 jobs) in durable goods employment, which includes high-tech manufacturing, and a 7.8 percent increase in wholesale trade employment. Transportation, communications and public utilities (TCPU) employment increased 5.5 percent, and services employment grew 4.3 percent over the same period.

High demand levels for software, semiconductors and consumer electronics continued to sustain the Austin economy. Fallout from the 1997 Asian financial crisis had a less-than-expected effect on the economy, thanks to pent-up demand for high-tech goods. Nevertheless, Austin was not immune to volatility in high-tech markets. As the dot.com center of Texas, Austin saw 3 major Internet companies fold in 2000. Eight more are expected to follow in 2001. Additionally, the PC and mobile phone business may cool as market absorption levels for these technologies begin to peak. Finally, falling equity prices may have affected spending for some high-end products. Sales of homes priced above $500,000 dropped off near the end of 2000, suggesting that new economy employees may not be "feeling" as rich. The economic and high-tech situation in Austin is still very good though. There seems to be no slowing in business investment as venture capital funding for the first three quarters of 2000 reached a record $1.3 billion on 102 deals, up from $407 million on 75 deals in the first three quarters of 1999. [2]

Dallas/Ft. Worth
Dallas' central location, pro-business environment and large airport hub, combined with a booming national economy, kept it on a solid growth path through the first 10 months of 2000. The local economy availed greatly from major construction activity, strength in the high-tech sector and robust international and domestic trade. Total nonfarm employment grew a whopping 4.8 percent (77,600 jobs) from January to October. Construction employment led all sectors with a 10 percent growth rate over the same period. Employment in transportation, communications and public utilities (TCPU) and services followed, increasing 7.9 percent and 4.9 percent respectively. Dallas continued its role as a major distribution center and retail outlet and saw jobs in wholesale and retail trade both increase by 4.2 percent.

Homebuilding in Dallas was particularly strong in 2000. Single-family building permits have increased 18.3 percent in the first 10 months of 2000.[3] An oversupply in the multifamily market squelched apartment building however. Multifamily permits dropped off 55.2 percent through October. While increased energy prices translated into statewide growth in mining employment, these jobs did not show up in Dallas. Mining employment declined 4.1 percent on the year due to industry consolidation and firm relocations to Houston. The Dallas labor market was among the tightest in the state. The unemployment rate dropped to 3.1 percent in October.

The Ft. Worth economy plowed ahead in 2000 and continues to benefit from economic synergies with Dallas. Overall nonfarm employment grew a solid 3.4 percent (22,200 jobs) in the first 10 months of 2000. Construction employment outpaced all sectors in Cowtown, increasing 13.7 percent over the same period. Finance, insurance and real estate (FIRE) jobs rose 5.8 percent, wholesale trade employment grew 4.5 percent and TCPU employment increased 4 percent. Recent investment in the Ft. Worth Alliance Airport and the adjacent industrial park have catalyzed an increase in economic activity. High-tech prospects in Ft. Worth are strong and continue to gain steam as evidenced by a recent American Electronics Association study which targeted the combined Dallas/Ft. Worth area as the fastest growing high-tech center in the country. However, Ft. Worth saw employment losses in mining and manufacturing in 2000. The October unemployment rate registered 3.3 percent.

El Paso
Spurred by steady growth in the maquiladoras, increases in the number of call centers and high levels of construction activity, El Paso's economy continued to chug along at a fairly strong pace. Overall nonfarm employment grew 2.6 percent (5,400 jobs) in the first 10 months of 2000. Much of this growth was fueled by firms tied to the maquiladora industry as service jobs in transportation, warehousing, finance, accounting and customs were rapidly added to the economy. TCPU employment rose 9.5 percent through October, while services employment increased 4.4 percent over the same period. The apparel industry in El Paso continues to suffer in NAFTA's wake, but many displaced workers have been absorbed by emerging maquiladoras.

El Paso continued to be a hot spot for call centers. Recent investments by State Farm, SBC and Providian Fiancial pushed call center employment to around 9,300 workers. The new call centers are increasing their reliance on modern information technology and demanding employees with better skill sets. As a result, wages in business services have been climbing. Construction employment through October increased 10.4 percent, retail trade grew 2 percent, but manufacturing employment declined. The October unemployment rate came in at a record low 7.9 percent.

Houston
The Houston economy continued to ride a wave of momentum triggered by the coincidence of a strong U.S. and global economy and high energy prices. In the first 10 months of 2000, Houston nonfarm employment grew 3.1 percent, adding 53,200 jobs to the local economy. Employment gains were led mostly by the service-producing sectors, with retail trade growing 3.9 and FIRE and TCPU employment both growing 3.4 percent. Manufacturing employment grew 3.1 percent, and services grew 2.3 percent. The unemployment rate in Houston fell to 4 percent in October, slightly above the national rate of 3.9 percent.

While higher oil prices stoked economic activity in Houston, employment growth in the energy sector was somewhat muted in 2000. Mining employment (which includes oil and gas extraction) only grew 2.1 percent in 2000, compared with 3.4 percent growth seen statewide. Construction employment grew 4.9 percent during the first 10 months of 2000. Single-family permits rose 4.2 percent in 2000 as Houston experienced rather strong demand for new homes. However, multi-family permits dropped 43.6 percent through October. The total value of construction contracts grew 7.3 percent, led by a strong increase in the value of non-building contracts.

San Antonio
Military downsizing and declines in mining and manufacturing employment dampened San Antonio's economic growth throughout most of 2000. However, relative strength in the service producing sector kept the local economy moving along. The combined effect of these forces had total nonfarm employment growing 1 percent (6,200 jobs) over the first 10 months of 2000. The labor market was squeezed tight like most Texas metropolitan areas, with the unemployment rate measuring 3.4 percent in October.

Kelly Air Force base is set to shut down the last of its operations in 2001. Employment at the facility has dropped from 20,000 in the early 1990s to a present level of about 2,400 employees, who will leave over the next several months. Mining employment decreased 5.9 percent even in the face of higher energy prices, and manufacturing employment dropped 2.2 percent through October. The San Antonio economy is still in good shape though. Wholesale trade employment grew 3.8 percent in the first 10 months of 2000 and retail trade increased 2.3 percent over the same period The peso's current strength relative to the dollar, combined with the near completion of downtown construction at the convention center, promises to stimulate increased retail sales. In addition to strength from the trade sector, business-services employment will continue to grow as call centers locate in San Antonio.

Other Texas Metros
The five major metropolitan areas mentioned make up almost 70 percent of total nonfarm employment in Texas. Twenty-one smaller metropolitan areas account for another 20 percent of total employment and the residual 10 percent comes from employment throughout the rest of Texas. Employment in the border region, which includes Laredo, Brownsville and McAllen, increased 6.4 percent from January to October. Job growth in the central region (Waco, Bryan, Killeen) came in at 1.2 percent for the same period. Employment in Abilene, San Angelo, Amarillo and Lubbock (farm belt) increased 1.9 percent. Gulf coast employment, which is made up of Brazoria, Beaumont, Galveston, Corpus Christi and Victoria, grew 2.1 percent. Job growth in north Texas (Texarkana, Longview, Tyler, Sherman and Wichita) was 1.2 percent and employment in the oil patch (Midland/Odessa) grew 0.1 percent.

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