FRB Dallas - Regional Economic Update March-2011
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1 Federal Reserve Bank of Dallas Regional Economic Update The regional economy grew at a moderate pace, with exports, energy and manufacturing all stronger than six weeks ago. Em- ployment continued to expand in January, although at a slightly slower pace. Greater consumer confidence and a rise in the Texas Leading Index also hint at further economic growth. Home sales improved slightly, especially for higher-priced units, provid- ing hope for the still-sluggish construction sector. However, increasing price pressure, an unyielding unemployment rate and decreasing numbers of temporary workers may present areas of concern. Payroll Employment Outpaces U.S. Payroll employment rose at annualized rates of 4 percent in De- cember and 3.6 percent in January, outpacing the nation ( Chart 1) . In January, the trade, transportation and utilities sector added the most jobs, while the energy sector grew at the fastest pace. Encouraging signs for future employment include a marked decline in initial claims for unemployment insurance and more Beige Book contacts reporting moderate hiring. At the same time, growth of te mporary employment, often con- sidered a leading indicator of future economic activity, slowed to a 2.1 percent annualized rate in December and declined at an annualized rate of 16.3 percent in January, with 3,400 jobs lost. The Texas unemployment rate remained unchanged at 8.3 per- cent in January. Manufacturing Index Trending Higher Manufacturing employment rose at a 7 percent annualized rate in January. Primary metal and auto manufacturing accounted for a large portion of the growth, while Beige Book contacts also reported a slight uptick in high-tech manufacturin g, especially for smart phones and other hand-held devices. The Federal Re- serve Bank of Dallas’ Texas Manufacturing Outlook Survey (TMOS) production index, the best available measure of current economic activity in manufacturing, rose in February after dip- ping in January (Chart 2). The TMOS new orders index, a leading indicator, advanced slightly in February. Residential Construction Recovery Hinted The construction industry added jobs at a 1.4 percent annualized rate in January. Existing-home sales, t hough sporadic, have been on a slight upward trend in Texas over the past few months. The six-month moving average in all major metropolitan areas and the state as a whole increased in January for the first time since the federal tax-credit program ended last April, sug- gesting the residential real estate market may have finally begun recovering (Chart 3). Regional Recovery Endures March 16, 2011 All major metros saw declines in the months supply of housing inventory; in Texas overall, the time needed to sell the current stock of homes fell to 7.7 months in January from 8 in Decem- ber. Beige Book contacts noted increased foot traffic and “seriousness” among potential buyers. Contacts in construction- related industries, however, still reported flat demand for prod- ucts. These contacts expect conditions to remain little changed or improve slightly through the year. In Texas, serious mortgage delinquencies—mortgage payments past due 90 days or more—dropped on a seasonally adjusted basis to 2.9 percent in the fourth quarter from 3.4 percent in the third. -8 -6 -4 -2 0 2 4 6 8 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 Percent* Texas U.S. Chart 1 Total Nonfarm Employment Growing at Moderate Pace *Month/month, seasonally adjusted annual rate. SOURCE: Bureau of Labor Statistics. -100 -80 -60 -40 -20 0 20 40 60 80 100 2004 2005 2006 2007 2008 2009 2010 2011 Production Future production Index* Feb-'11 Chart 2 TMOS Produc tion Index Rises ; Future Index Near '07 High * Seasonally adjuste d. NOTE: Shade d area indicates Texas recession. SOURCE : Texas Manufacturi ng Outlook Survey. Index* Feb-'11 Chart 2 TMOS Produc tion Index Rises ; Future Index Near '07 High * Seasonally adjuste d. NOTE: Shade d area indicates Texas recession. SOURCE : Texas Manufacturi ng Outlook Survey.
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Transcript of FRB Dallas - Regional Economic Update March-2011
8/7/2019 FRB Dallas - Regional Economic Update March-2011
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1Federal Reserve Bank of Dallas Regional Economic Update
The regional economy grew at a moderate pace, with exports,energy and manufacturing all stronger than six weeks ago. Em-ployment continued to expand in January, although at a slightlyslower pace. Greater consumer confidence and a rise in theTexas Leading Index also hint at further economic growth. Homesales improved slightly, especially for higher-priced units, provid-ing hope for the still-sluggish construction sector.
However, increasing price pressure, an unyielding unemploymentrate and decreasing numbers of temporary workers may presentareas of concern.
Payroll Employment Outpaces U.S.
Payroll employment rose at annualized rates of 4 percent in De-cember and 3.6 percent in January, outpacing the nation ( Chart
1 ) . In January, the trade, transportation and utilities sectoradded the most jobs, while the energy sector grew at the fastestpace. Encouraging signs for future employment include a markeddecline in initial claims for unemployment insurance and moreBeige Book contacts reporting moderate hiring.
At the same time, growth of temporary employment, often con-sidered a leading indicator of future economic activity, slowed toa 2.1 percent annualized rate in December and declined at an
annualized rate of 16.3 percent in January, with 3,400 jobs lost.The Texas unemployment rate remained unchanged at 8.3 per-cent in January.
Manufacturing Index Trending Higher
Manufacturing employment rose at a 7 percent annualized ratein January. Primary metal and auto manufacturing accounted fora large portion of the growth, while Beige Book contacts alsoreported a slight uptick in high-tech manufacturing, especiallyfor smart phones and other hand-held devices. The Federal Re-serve Bank of Dallas’ Texas Manufacturing Outlook Survey(TMOS) production index, the best available measure of currenteconomic activity in manufacturing, rose in February after dip-ping in January ( Chart 2 ). The TMOS new orders index, a leadingindicator, advanced slightly in February.
Residential Construction Recovery Hinted
The construction industry added jobs at a 1.4 percent annualizedrate in January. Existing-home sales, though sporadic, havebeen on a slight upward trend in Texas over the past fewmonths. The six-month moving average in all major metropolitanareas and the state as a whole increased in January for the firsttime since the federal tax-credit program ended last April, sug-gesting the residential real estate market may have finally begunrecovering ( Chart 3 ).
Regional Recovery EnduresMarch 16, 2011
All major metros saw declines in the months supply of housinginventory; in Texas overall, the time needed to sell the currentstock of homes fell to 7.7 months in January from 8 in Decem-ber. Beige Book contacts noted increased foot t raffic and“seriousness” among potential buyers. Contacts in construction-related industries, however, still reported flat demand for prod-ucts. These contacts expect conditions to remain little changedor improve slightly through the year.
In Texas, serious mortgage delinquencies—mortgage paymentspast due 90 days or more—dropped on a seasonally adjustedbasis to 2.9 percent in the fourth quarter from 3.4 percent inthe third.
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'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Percent*Texas U.S.
Chart 1Total Nonfarm Employment Growing at Moderate Pace
*Month/month, seasonally adjusted annual rate.SOURCE: Bureau of Labor Statistics.
-100-80-60-40-20
0204060
80100
2004 2005 2006 2007 2008 2009 2010 2011
ProductionFuture production
Index*
Feb-'11
Chart 2TMOS Production Index Rises; Future IndexNear '07 High
* Seasonally adjusted.NOTE: Shaded area indicates Texas recession.SOURCE: Texas Manufacturing Outlook Survey.
Index*
Feb-'11
Chart 2TMOS Production Index Rises; Future IndexNear '07 High
* Seasonally adjusted.NOTE: Shaded area indicates Texas recession.SOURCE: Texas Manufacturing Outlook Survey.
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2Federal Reserve Bank of Dallas Regional Economic Update
and mining support employees rose by 2,700, a 17 percent an-nualized gain. Rig counts remained roughly stable in recentweeks as oil prices soared to two-year highs. West Texas Inter-mediate oil prices, reaching $104 per barrel in the second weekof March, have prompted new drilling. Natural gas prices remainlow, benefiting Gulf Coast petrochemical producers (Chart 4).
Exports Exceed Prerecession Levels
Exports grew at an annualized rate of 27.5 percent in fourth
quarter 2010 and have exceeded prerecession levels for threequarters ( Chart 5 ). One-third of the fourth-quarter growth wasattributable to China, which accounts for 6 percent of total ex-ports. The remainder was attributable to the rest of Asia, theEuropean Union and Mexico.
In terms of export sectors, petroleum and coal products ac-counted for 52 percent of total growth, agriculture and food for31 percent.
Raw Material Prices Rise
Beige Book contacts noted increasing raw material prices, andthere are new reports of firms planning to pass along thosehigher costs to finished goods. Wage pressures remain subdued.
Consumer Confidence Bolstered
Consumer confidence for the West South Central region, pre-dominantly Texas, continued to grow in February, reaching itshighest level since September 2008. The Texas Leading Index—the Dallas Fed’s composite of eight indicators that tend to foretelleconomic change—also exhibited a generally upward trajectory,suggesting the economy will continue growing at a moderatepace in the months ahead ( Chart 6 ).
—Yingda Bi and Jason Saving
……………………………………………………………………………………………
About the Authors
Bi is a research assistant and Saving is a senior economist andadvisor in the Research Department of the Federal Reserve Bankof Dallas.
8095
110125140155170185200215
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Index, January 2000 = 100*
Dallas
Fort WorthSan AntonioAustinTexasHouston
Chart 3Existing-Home Sales Finally Tick Up
* Six-month moving average.SOURCE: Multiple Listing Service.
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'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Texas rigcountNatural gas
price**
Oilprice
*Weekly.**Natural gas price is multiplied by 10.SOURCES: Wall Street Journal ; Baker Hughes Inc.; Haver Analytics.
Rig count*
Chart 4Rig Count Stable as Oil Prices Continue to Rise
Nominal dollars*
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'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
China Latin AmericaEuropean Union Texas totalMexico AsiaCanada
7%
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18% 15%
6%
other
Chart 5Real Texas Exports Continue ExpansionIndex, Q1 1997 = 100*
*Real dollars, seasonally adjusted.NOTE:Latin America excludes Mexico. Asia excludes China.SOURCES: Census; Wisertrade.
2010 Q4
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100105110115
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Chart 6Texas Leading Index Remains Near Two-Year High
TexasU.S.
Index Index
SOURCE: The Conference Board; Federal Reserve Bank of Dallas.
Even so, new data from the Federal Housing Finance Agencyhousing price index show slight declines in fourth-quarter hous-ing prices from both the third quarter and year-over-year.
Energy Grow s Amid Rising Oil Price
The energy sector continued a positive employment trend thatbegan in November 2009. In January, the number of oil, gas
