Although still outperforming the nation,> the Texas economy weakened toward the end of the year. Manufacturing and housing have been the most fragile sectors, but growth has moderated in other areas as well.Texas ; Economic conditions

Mike Nicholson

Mine Yücel

English

Research Papers in Economics

FEDERAL RESERVE BANK OF DALLAS • NOVEmBER/DEcEmBER 2007    15    SouthwestEconomy
RegionalUpdate
Although  still  outperforming  the  nation, 
the Texas economy weakened toward the end 
of the year. Manufacturing and housing have 
been the most fragile sectors, but growth has 
moderated in other areas as well. 
  After a robust increase of 3.9 percent 
through June, employment growth was 1.9 
percent  from  July  through  September  and   
2 percent in October. Both figures are sub-
ject to revision.
  The  goods  sector  has  been  the  ma-
jor drag on economic activity, reflecting the 
downturn in housing and related weakness 
in  manufacturing  (Chart  1).  Manufacturing 
jobs have been declining for the past three 
months, although employment gains remain 
positive for producers of wood, cement, pet-
rochemicals, machinery, paper and food. 
  The  single-family  housing  sector  re-
mains weak. Builders continue to pull back 
on new-home construction, leading to a per-
sistent fall in single-family building permits, 
contract values and housing starts (Chart 2).
  Sales  of  existing  homes  remain  on  a 
downward track (Chart 3). Inventories of ex-
isting homes for sale have risen to just over 
the equilibrium mark of six months. New-
home inventories are somewhat higher, rang-
ing from 7.6 months in Austin to 6.1 months 
in San Antonio. 
  Delinquent  subprime  mortgages  con-
tinue to inch up in Texas. The state’s de-
linquency  rate  is  higher  than  the  national 
average, but its foreclosure rate remains be-
low the nation’s.
  Nonresidential  and  nonbuilding  con-
struction has held up well despite the hous-
ing sector’s troubles. Demand for apartments 
has picked up and multifamily construction 
is robust, with permits on the increase (Chart 
4). Given the tighter credit conditions, peo-
ple who do not qualify for mortgages are 
seeking apartments.  
  As  oil  prices  have  climbed,  activity 
has increased in the energy industry. Even 
though the oil and gas extraction sector is 
less  than  2  percent  of  total  employment 
in Texas, it has added 16,400 jobs year-to-
date—making up 6.3 percent of the total job 
gains in 2007. The Texas rig count stands at 
Chart 4 Multifamily Building Picks Up the Slack  Chart 3 Existing-Home Sales Down
Index, January 2000 = 100*
Chart 2 Texas Builders Pull Back on Single-Family Homes 
* Five-month moving average, seasonally adjusted.
Index, January 2000 = 100* 
Chart 1 Employment Slowing Across Sectors (2006:Q3–2007:Q4)
Job growth (percent)* 
SOURCES: Census Bureau; McGraw-Hill Construction; F.W. Dodge; Bank of Tokyo-Mitsubishi UFJ;
seasonal and other adjustments to Texas data by the Dallas Fed.
SOURCE: Census Bureau; seasonal and other adjustments to Texas data by the Dallas Fed. 
* Quarter-over-quarter, annualized. Q4 value is for October 2007, annualized.
NOTE: Percent is industry employment share of total employment in October 2007.
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other
adjustments to Texas data by the Dallas Fed.
Oil & gas
extraction &
 mining support
Info. Const. Financial
activities
Mfg. Leisure &
hospitality
services
Prof. &
business
services
Educ. &
health
services
Govt. Trade,
transp.
& utilities
–6
–3
0
3
6
9
12
15
18 Real contract values
Permits
2007 2006 2005 2004 2003 2002 2001 2000
50
70
90
110
130
150
170
190
210
230
Housing starts
Texas
U.S.
2007 2006 2005 2004 2003 2002 2001 2000
90
105
120
135
150
165
180
*Six-month moving average.
SOURCES: Texas Real Estate Center; seasonal and other adjustments to Texas data by the
Dallas Fed.
Single-family permits
Multifamily permits
2007 2006 2005 2004 2003 2002 2001 2000
0
2
4
6
8
10
12
14
16
Thousands* 
*Five-month moving average.
860, with almost 85 percent of domestic rigs 
exploring for natural gas. 
  Texas  exports  were  up  5.5  percent  in 
the third quarter. The largest increases were 
12 percent to the European Union and 9.5 
percent to Latin America (excluding Mexico). 
Exports to Asia were up a meager 2.2 percent, 
while exports to China declined. The dollar 
has maintained strength relative to the peso, 
and exports to Mexico rose a modest 3.2 per-
cent in the third quarter. 
  Overall, employment data and anecdotal 
sources point to a weaker Texas economy, 
but one that is still quite healthy and stronger 
than the national economy.
  The Texas economic outlook is positive 
moving into 2008. Housing woes are belea-
guering  the  national  economy,  but  Texas 
housing markets, while weak, have held up 
better than many other areas of the country. 
Although high oil prices pinch Texas consum-
ers as much as those in other states, Texas 
gets an offset because it’s the nation’s top oil 
and gas producer.  
—Mine Yücel and Mike Nicholson
Texas Growth Slows 
but Remains Healthy

Texas growth slows but remains healthy

http://dallasfed.org/assets/documents/research/swe/2007/swe0706g.pdf

Texas growth slows but remains healthy

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Research Papers in Economics