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For immediate release: December 20, 2005

Dallas Fed Publication Examines Labor Force Participation, National Economic Outlook And Texas Manufacturing Survey

DALLAS—The latest issue of the Federal Reserve Bank of Dallas' Southwest Economy focuses on the declining labor force participation rate, the national economy after the hurricanes, a new Texas manufacturing survey, revised Texas employment numbers and China's entrées into Latin America.

In "Opting Out of Work: What's Behind the Decline in Labor Force Participation?" economic analyst Helen McEwen, senior economist Pia Orrenius, and senior economist and vice president Mark Wynne find that the recent decline in the labor force participation rate has occurred as a result of both cyclical and long-term factors.

Long-term trends include falling youth and female participation rates. In fact, in the post-2000 period, the prime-age female participation rate has gone through its biggest sustained decline in more than 50 years.

In contrast, labor force participation for ages 55 and up has been on the rise since 1993. The authors state that longer life spans, a decline in defined-benefit pension plans, changes to Social Security and the increasing cost of health care could be responsible for many adults delaying retirement.

In "The National Outlook: Continued Growth Likely," senior economist and vice president Evan F. Koenig and senior economist Keith R. Phillips find that the probability of recession over the next few quarters is low despite a flattening yield curve, high oil prices, and the economic impact of Hurricanes Katrina and Rita.

Koenig and Phillips note that short-term interest rates invariably rise, relative to long-term rates, in advance of recessions. However, they argue that the recent narrowing of the gap between long-term and short-term rates has not proceeded far enough or long enough to be worrisome.

A forecasting model that uses oil prices and financial variables other than the yield curve tells a similar story. Moreover, recession probabilities do not appear to have risen appreciably in the wake of this fall's hurricanes.

"A New Barometer for the Texas Economy" details the Dallas Fed's new Texas Manufacturing Outlook Survey, a monthly assessment of the state economy based on manufacturers' responses to questions about their Texas operations.

The article is written by economist Fiona Sigalla, director of technical support and data analysis Franklin D. Berger, Southern Methodist University economics professor Thomas B. Fomby and senior economist Keith R. Phillips.

The survey's first release-launched in November-is an insightful measure of the Texas economy because manufacturers often are the first to see changes in economic conditions, according to the authors. About 80 participants are asked about issues such as changes in production, orders, inventories, employees and capital expenditures.

In "Getting a Jump on Texas Employment Revisions," Berger and Sigalla show that Texas job growth has been much stronger than indicated by the commonly used payroll survey published by the Bureau of Labor Statistics (BLS) and the Texas Workforce Commission (TWC).

By incorporating alternative data that BLS/TWC will eventually use to revise their estimates, the Dallas Fed's figures show payroll employment growing nearly a full percentage point faster over the September 2004 to September 2005 period than shown in the payroll survey. Berger and Sigalla expect these results to be confirmed when BLS/TWC publish their annual revision in March 2006.

China is utilizing diplomacy and investment in Latin America in what appears to be an effort to profit and ensure sources of supply-as well as to isolate Taiwan, writes William C. Gruben, director of the Center for Latin American Economics and vice president, in "Yuan Diplomacy: China, Taiwan Vie in Latin American Trade Arena."

While China's influence is strong in many parts of Latin America, Taiwan is diplomatically holding its own in Caribbean nations because of trade and investment linkages. However, Gruben writes, "Investments, whether in textiles or other industries, could turn up as carrots for DR-CAFTA countries that consider playing the mainland China side of the street."

Find the November/December issue of Southwest Economy online at


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