Issue 1, January/February 2003
Federal Reserve Bank of Dallas

Regional Update

The Texas economy remains in a mild but prolonged recession, during which its employment has grown at roughly the same rate as the nation's. Absent a sharp drop in oil prices, such a development is unusual for Texas. Since 1992, Texas employment has grown at an annual rate 0.7 percent faster than the nation's. Interestingly, only 0.2 percentage point of that growth was due to Texas having larger shares of fast-growing industries. The other 0.5 percentage point was the result of Texas industries growing faster than their national counterparts.

Following sharp losses in 2001, Texas employment contracted slightly in 2002. The manufacturing sector has taken the brunt of the job losses. In October 2002, weekly hours worked in Texas manufacturing fell to 41.7, the lowest level since February 1991. The energy industry continues to contribute little; high energy prices are hurting other sectors but not doing much for oil field activity because the prices are not seen as sustainable. The construction sector continues to cool. The number of homes in inventory has risen to six months, the highest level since 1997. Total Texas mortgage loans past due rose to 6.4 percent in October, roughly the level of early 1991.

The Texas recovery could remain jobless until mid-2003. Texas' typical sources of strength—high tech, exports to Mexico, construction and energy—are unlikely to show much vigor in the early part of the year. In addition, many Texas industries are suffering from overcapacity and structural changes and are not responding to lower interest rates.

—Fiona Sigalla

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.