Economic conditions - Texas ; Employment - Texas ; Unemployment - Texas ; Labor market ; Manufacturing industries ; Construction industry

Fiona Sigalla

English

Research Papers in Economics

SouthwestEconomy FEDERAL RESERVE BANK OF DALLAS • MARCH/APRIL 2008 15
RegionalUpdate Texas Economy Continues to Cool
Economic  growth  has  softened  in  Texas, 
and  evidence  suggests  that  some  business 
leaders are expecting continued weakness.
Texas job growth has been slowing since 
2006, when it posted a 3.3 percent increase. Em-
ployment rose 2.9 percent in 2007, and growth 
is likely to end 2008 around 1.5 percent.
Despite the slowdown, the state contin-
ues to grow much more rapidly than the na-
tion, with nearly all sectors of the economy 
adding workers at a faster pace over the past 
three  years.  In  2007,  one-third  of  private-
sector jobs created in the U.S. were in Texas, 
making  the  state’s  job  growth  three  times 
faster than the nation’s (Chart 1). 
The relative strength of the Texas con-
struction sector is particularly notable. The 
state’s construction workforce rose 5.6 per-
cent last year, while U.S. construction jobs 
declined 3 percent.
A number of recent indicators point to 
slower growth. Beige Book, the Dallas Fed’s 
anecdotal  survey  of  economic  conditions, 
has been reporting decelerating growth for 
over a year. In March and April, business ex-
ecutives expressed a great deal of uncertain-
ty about the outlook for growth, and some 
are cutting capital spending, paring invento-
ries and reducing or freezing employment.
Home sales are slowing, and after credit 
standards tightened in fall 2007, the drop has 
been as precipitous in Texas as in the rest of 
the country (Chart 2).
Most Indicators Soft 
The  Dallas  Fed’s  Texas  Manufacturing 
Outlook Survey has weakened over the past 
few months. Indexes for production, volume 
of  new  orders  and  volume  of  shipments 
have decelerated since mid-2007. 
Most indicators of current conditions re-
mained soft in April. Manufacturers perceive 
general  business  conditions  as  worse  than 
their own company outlooks (Chart 3).
The  Texas  economy  is  also  showing 
signs  of  strength.  Energy  activity  remains 
high, and real estate markets are in better 
shape  in  Texas  than  in  the  nation.  Home 
sales  have  slowed,  but  sharp  cutbacks  in 
home construction have helped keep Texas 
inventories from rising and price declines at 
bay. 
The  Texas  unemployment  rate  of  4.3 
percent remained well below the U.S. rate 
of 5.1 percent in March (Chart 4). Firms con-
tinue to have difficulty finding workers, ac-
cording to anecdotal reports.
Current  labor  market  conditions  echo 
those of the state’s early 1980s energy boom, 
which sent Texas unemployment rates be-
low the national average. For over 20 years—
between 1985 and 2007—Texas unemploy-
ment tended to be above the U.S. rate. But 
the state unemployment rate moved below 
and has steadily diverged from the U.S. trend 
since May 2007. 
Movements  in  the  Dallas  Fed’s  Texas 
Leading Index over the past several months 
point to slower growth but not to recession.
—Fiona Sigalla
Chart 4 Texas Unemployment Falls Below U.S. Rate  Chart 3 Manufacturers' Company Outlook Better than View of Business Activity 
Chart 2 Existing-Home Sales Dip 
*Six-month moving average.
Index 
Chart 1 2007 Employment Growth Stronger in Texas than U.S.
Percent 
SOURCES: National Association of Realtors; Texas A&M Real Estate Center; seasonal and other 
adjustments by the Federal Reserve Bank of Dallas.
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments
by the Federal Reserve Bank of Dallas. 
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other
adjustments by the Federal Reserve Bank of Dallas.
Leisure
& Hosp.
Educ. &
Health
Prof. &
Bus. Svcs.
Finance Info. Trade,
Transp.,
Utilities
Mfg. Const. Nat. Res.
& Mining
Total
General business activity, TMOS
NOTE: Each index, based on Texas Manufacturing Outlook Survey responses, is calculated by 
subtracting the percentage of firms reporting a decrease from the percentage reporting an 
increase. When all firms report activity has increased, an index will register 100.
Texas
U.S.
Percent* 
*Seasonally adjusted.
Index, January 2000 = 100* 
Texas
U.S.
–4
–2
0
2
4
6
8
10
12
Govt.
Texas
U.S.
2008 2007 2006 2005 2004 2003 2002 2001 2000
–100
–80
–60
–40
–20
0
20
40
60
80
100
Apr. Oct. June  Feb.  Oct.  June Feb.  Oct. June Feb. Oct. June
2004 2005 2006 2007          2008
Company outlook, TMOS
3
4
5
6
7
8
9
10
11
’08 ’03 ’98 ’93 ’88 ’83 ’78
SOURCE: Federal Reserve Bank of Dallas.
80
95
110
125
140
155
170
185

Regional update : Texas economy continues to cool

http://dallasfed.org/assets/documents/research/swe/2008/swe0802g.pdf

Regional update : Texas economy continues to cool

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics