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Regional Economy
Texas Not Out of Recession Yet
Mine
Yücel and John Thompson look at the downturn in the Texas economy.
Texas followed the nation into recovery
at the beginning of the year. But Texas job losses resumed in May,
while the nation continued its anemic recovery. The current Texas
recession is shallower but will probably last longer than previous
recessions. The outlook depends greatly on the strength of the national
and global economies.
If we define recession as two consecutive
quarters of negative employment growth augmented by gross state
product (GSP) declines, Texas went into recession in April 2001.
Employment in Texas fell in the last three quarters of 2001, picked
up in first quarter 2002, but dropped again in the second quarter
(Chart 1). Employment plunged in July—at a 4.4 percent annual
rate—reinforcing the downturn. The August employment data (the most
recent data to date) show a very slight pickup of 0.7 percent growth
(annualized) for total Texas nonagricultural employment and 0.5
percent (annualized) for private employment. For the third quarter,
Texas is still down 1.9 percent (see Chart 1).
Chart
1
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Looking at output, Texas GSP growth
(Dallas Fed estimates) looks similar to U.S. GDP growth (Chart
2). Texas went into recession with the nation, registering negative
GSP growth in the first quarter of 2001. However, the state continued
with negative growth in the fourth quarter, in contrast to the United
States. Similar to the nation, Texas GSP grew in the first quarter.
The Dallas Fed’s GSP estimates for second quarter will be available
in October.
Chart
2
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The Dallas Fed’s Coincident Index is
a more general indicator, tracking current economic activity by
combining changes in employment, output and the unemployment rate.[1]
Chart 3 shows the index, along with the current and two previous
recessions. When the index turns negative, it is signaling recession.
As can be seen, the index is still in negative territory, implying
that Texas has not come out of recession yet.
Chart
3
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Anecdotally, the most recent Beige
Book—the Fed’s survey of business conditions—suggests that economic
growth weakened in August and that Texas is slightly weaker than
the nation. Texas seems to be lagging the nation in recovery because
we have a larger concentration of industries that declined during
this recession: transportation (effects of Sept. 11), high tech
(the telecom bust and beyond) and energy (weak oil and gas prices
in the fourth quarter).
At the national level, the question
du jour is whether the U.S. economy will double dip or not.
However, in Texas a more relevant query is whether the state has
even left recession. Given that the employment situation has yet
to show marked improvement, state output is still weak and the index
of coincident indicators remains negative, Texas is still in recession.
The current downturn will be shallower but more prolonged than other
recessions in recent memory. The extent and pace of the national
recovery will largely determine the rate of rebound in Texas economic
activity.
Note
| 1 |
This index
was developed and is maintained by Keith R. Phillips of the
San Antonio Branch of the Federal Reserve Bank of Dallas. |
|
Mine
Yücel is a senior economist and assistant vice
president and John Thompson is an associate economist
at the Federal Reserve Bank of Dallas.
SUGGESTED
CITATION:
Yücel, Mine and
John Thompson (2002), "Texas Not Out of Recession
Yet," Federal Reserve Bank of Dallas Expand
Your Insight, September 27, 2002, http://www.dallasfed.org/eyi/regional/0209recession.html
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