Keith R. Phillips

Mike Nicholson

English

Research Papers in Economics

RegionalUpdate
SouthwestEconomy    FEDERAL RESERVE BANK OF DALLAS • NOVEMBER/DECEMBER 2008 15
Chart 1 Texas Business-Cycle Index Falls in October
Percent* 
* Month-over-month, seasonally adjusted annualized rate.
NOTE: Shaded areas represent Texas recessions.
SOURCE: Federal Reserve Bank of Dallas.
–8
–6
–4
–2
0
2
4
6
8
10
12
#N/A
’08 ’06 ’04 ’02 ’00 ’98 ’96 ’94 ’92 '90 ’88 '86 ’84 ’82 ’80 ’78
Chart 2 Home Prices Still Holding Up in Texas
Four-quarter percent change
SOURCE: Federal Housing Finance Agency.
Index, January 2004 = 100
Chart 3 Texas Finance Jobs Contract in October 
SOURCES: Texas Workforce Commission; Bureau of Labor Statistics; seasonal and 
other adjustments by the Federal Reserve Bank of Dallas.
2008 2007 2006 2005 2004
98
100
102
104
106
108
110
112
Chart 4 Texas Leading Index Declines Sharply and Broadly
 Three-month change, August–October 2008 
NOTE: The Texas Lending Index combines eight components that anticipate changes in the Texas
business cycle.
SOURCE: Federal Reserve Bank of Dallas.
7.0 
7.1 
7.2 
7.3 
7.4 
7.5 
7.6 
7.7 
7.8 
7.9 
8.0 
8.1 
Texas 
U.S. 
Texas share of U.S.
financial activities jobs 
Percent 
.43 
–.90 
–1.61 
–1.75 
.33 
–1.38 
–.50 
–2.20 
–7.58 
Average weekly hours 
Help Wanted Index 
Texas Stock Index 
New unemployment claims 
Well permits 
Real oil price 
U.S. Leading Index 
Texas Value of the Dollar 
Net change in Texas Leading Index 
–8  –7  –6  –5  –4  –3  –2  –1  0  1 
–6
–4
–2
0
2
4
6
8
10
12
14
16
2008 2007 2006 2005 2004 2003 2002 2001 2000
U.S. Austin
Houston
Texas
Dallas
San  Antonio
Fort Worth
U.S. Slowdown Reaches Texas
Texas continued to do well after the U.S. 
went into recession in December 2007. As 
we end 2008, mounting evidence suggests 
that the state’s economy has begun to falter. 
The Dallas Fed’s Texas Business-Cycle 
Index flashed a warning of possible reces-
sion in October, posting a negative month-
ly change for the first time since July 2003 
(Chart 1).
The statewide index moves in tandem 
with its three components—Texas employ-
ment,  unemployment  and  gross  domestic 
product. Its recent movements reflect a slow-
down in job growth and a jump in the un-
employment rate from 5 percent in August 
to 5.6 percent in October.
Beige Book, the Dallas Fed’s anecdotal 
report  on  regional  economic  activity,  re-
vealed broad and sometimes deep deterio-
ration in November. Almost all respondents 
noted  declining  business  conditions  and 
worsening prospects for the economy. 
Since  firms  often  cut  temporary  jobs 
before permanent staff, demand at staffing 
firms often falls before overall jobs decline. 
In the Beige Book, staffing firms reported a 
falloff in demand for personnel and a large 
number  of  layoffs  across  many  industries, 
including manufacturing, financial services, 
information technology and accounting. 
The  Dallas  Fed’s  Texas  Manufacturing 
Outlook  Survey  suggests  that  production, 
shipments, new orders and capacity utiliza-
tion measures all declined sharply in Novem-
ber. Many respondents said tightening credit 
conditions were impacting their businesses. 
Texas exports have declined on net over 
the past three months due to the dollar’s ris-
ing value and faltering growth overseas.
Housing  inventories,  foreclosures  and 
delinquencies  continue  to  look  better  in 
Texas than the nation. Home prices, which 
grew  year-over-year  in  the  third  quarter, 
helped boost the state’s relative performance   
(Chart 2). Even so, Texas housing markets 
continue to erode. Homebuilding and resi-
dential construction employment are likely 
to remain weak for some time.
Energy  prices  have  plunged  in  recent 
months, and the rig count has begun to re-
spond. These declines will likely put down-
ward pressure on Texas job growth in the 
months ahead.
Financial-sector employment has been 
shrinking nationally for almost two years; in 
Texas, it has flattened out and will likely de-
cline in coming months (Chart 3). Troubled 
bank loans are increasing in the state. 
The Texas Leading Index, a gauge of 
economic prospects for the next three to six 
months, has fallen broadly and sharply in 
recent months (Chart 4). Six of the index’s 
eight components have declined. 
Despite these unsteady signs, Texas will 
likely continue to outperform the nation. Its 
housing sector is in better shape, the cost 
of living and doing business is lower, and 
energy still plays a positive role in the econ-
omy. Continuing declines in oil and natural 
gas prices, however, could erode the state’s 
relative strength.
—Keith R. Phillips and Mike Nicholson

Regional update : U.S. slowdown reaches Texas

http://dallasfed.org/assets/documents/research/swe/2008/swe0806g.pdf

Regional update : U.S. slowdown reaches Texas

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics