D'Ann Petersen

English

Research Papers in Economics

RegionalUpdate
y all accounts, the sluggish economic
growth witnessed in the years following the
2001 downturn is a thing of the past. In
2005, the Texas economy gathered speed,
posting its best performance in five years.
Moreover, job growth in the Lone Star State
outpaced that of the United States, rising at
a rate more in line with its historical aver-
age. So far in 2006, signs continue to point
to a steady Texas expansion, with few
clouds on the horizon. 
Texas employment rose a solid 2.7 per-
cent in 2005, according to revised job data
released March 9 by the Texas Workforce
Commission (TWC). This pace of job expan-
sion was near Texas’ 35-year historical aver-
age of 2.9 percent and faster than national
employment growth. (2005 U.S. employment
growth was 1.5 percent, slightly below its
35-year historical average of 1.8 percent.)
Texas job growth last year was broad based
across major industries and metros. The
goods sector (natural resources and mining,
construction and manufacturing) provided a
substantial boost after displaying weakness
during most of the recession and recovery.
Texas labor market activity remained
positive in January, with job gains of 11,700
(1.4 percent annualized), according to data
released by the TWC and seasonally adjust-
ed by the Dallas Fed. The largest gains were
recorded in professional and business serv-
ices (3,200), educational and health services
(2,700), and trade, transportation and utili-
ties (2,500). The construction industry
added 1,700 jobs as demand for new homes
remained elevated and commercial con-
struction continued to edge up. Although
January’s overall employment growth was
more moderate than that recorded in 2005,
anecdotal reports, such as the Eleventh
District Beige Book, indicate Texas labor
market activity remains strong. 
Besides employment, other economic
measures suggest the Texas expansion
remains on track. The Dallas Fed’s Texas
Texas Economy on Solid Footing
Coincident Index—a business-cycle index
made up of current indicators—rose at a
solid 3.4 percent annualized pace in
January. Despite slower growth in the index
in late 2005 (mostly due to rising unemploy-
ment rates following the hurricanes), the
index gained ground overall last year, rising
at a pace of 3.6 percent—up from 2004’s
growth of 2.9 percent. 
Additionally, real Texas exports are
growing at a good clip, up 1.9 percent in
fourth quarter 2005 and 5.9 percent from a
year earlier. Because Mexico is Texas’ largest
trading partner, the country’s recent eco-
nomic pickup should give an added boost.
Moreover, elevated energy prices have
pushed the Texas rig count to its highest
level in about 20 years. Finally, a January
uptick in the Texas Leading Index confirms
the state’s economy remains on solid footing
for growth in the months ahead.
—D’Ann Petersen
B
Index, January 2001 = 100
Texas Leading Index on the Rise 
Texas Employment Growth Exceeds U.S. in 2005
Percent*
Elevated Energy Prices Boost Texas Rig Count
Index
Texas Coincident Index in Positive Territory
Texas
–2
–1
0
1
2
3
4
5
’05 ’04 ’03 ’02 ’01 ’00 ’99 ’98 ’97 ’96 ’95
U.S.
*Total nonfarm employment, December-over-December, seasonally adjusted, annualized rate.  *Month-over-month, seasonally adjusted, annualized rate. Shading indicates Texas recession.
–4
–3
–2
–1
0
1
2
3
4
5
6
7
’06 ’05 ’04 ’03 ’02 ’01 ’00 ’99 ’98 ’97 ’96 ’95
Rig count, weekly 
0
20
40
60
80
100
120
140
160
’06 ’05 ’04 ’03 ’02 ’01 ’00
200
300
400
500
600
700
Oil price
Natural 
gas price
Texas rig count
Nominal price, weekly (dollars)*
*Natural gas price is multiplied by 10.
90
92
94
96
98
100
102
’06 ’05 ’04 ’03 ’02 ’01
FEDERAL RESERVE BANK OF DALLAS • MARCH/APRIL 2006             SouthwestEconomy 15

Regional update : Texas economy on solid footing

http://dallasfed.org/assets/documents/research/swe/2006/swe0602g.pdf

Regional update : Texas economy on solid footing

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Research Papers in Economics