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For immediate release: August 27, 2008

Dallas Fed Report Spotlights Minimum Wage Increases, Texas Economy, Measuring Inflation

DALLAS—The latest issue of the Federal Reserve Bank of Dallas' Southwest Economy features articles on minimum wage increases in Texas, the Texas economy and measuring inflation.

While rising minimum wages in Texas will increase the incomes of some low-wage workers, the hikes may boost employment costs and may hurt other workers’ chances of finding jobs, according to senior research economist and advisor Pia Orrenius and Agnes Scott College associate professor of economics Madeline Zavodny.

In “Higher Minimum Wage Looms Large in Texas,” the authors find Texas labor markets are more affected by minimum wage increases than other large states because Texas has more workers earning close to the minimum wage.

“…Texas workers have fewer years of education, are slightly younger and are much more likely to be immigrants from Latin America—all characteristics associated with lower wages,” Orrenius and Zavodny write.

The federal minimum wage increased from $5.85 to $6.55 in July and will increase to $7.25 in July 2009.   

A slowing national economy has dampened the Texas economic outlook, but energy and trade remain bright spots for the state, according to associate economist Laila Assanie and former research analyst Raghav Virmani in “Texas Economy Feels National Pinch.”

Despite slowing growth, the Texas economy is still outperforming the national economy, the authors find.

Energy employment grew 8.1 percent in the first half of 2008, and Texas employs nearly one of every two workers in the U.S. oil and gas extraction industry, Assanie and Virmani report. In addition, Texas exports surged 7.6 percent in the first five months of 2008.

Employment growth is expected to be between 1.5 and 2 percent this year, well below the state’s long-term average, Assanie and Virmani state.

In this edition’s “On the Record” conversation, senior economist Jim Dolmas explains various measures of core inflation, including the Dallas Fed’s Trimmed Mean PCE.

“Trimmed means exclude the items with the biggest price changes up or down in any month, regardless of the type of goods,” Dolmas said. “I think this approach is superior to routinely excluding food and energy, but I look at all the measures each month and don’t entirely discount any of them.”


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Alexander Johnson
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