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For immediate release: June 10, 2009

Dallas Fed Report Highlights Texas College Premium, Maquiladoras, Energy, East Texas Economy

DALLAS—The latest issue of the Federal Reserve Bank of Dallas' Southwest Economy features articles on the Texas college premium, maquiladoras, the energy industry and the East Texas economy.

Factors such as technological change and international trade have accelerated the college premium in Texas, according to senior economist Anil Kumar in "College Pays Dividends—More So in Texas than U.S."

The college premium—the amount of additional wages paid to college graduates compared to high school graduates—is growing faster in Texas than the United States, Kumar states. The key seems to be rising demand for high-skilled workers relative to supply—a trend that has been somewhat stronger in the state.

 "In the long run, higher returns to education in Texas should encourage more high school graduates to get college degrees, a trend that may help mitigate the wage premium," Kumar writes.

In "The Maquiladora's Changing Geography," associate economist Jesus Cañas and vice president Robert W. Gilmer find Mexico's embrace of freer trade has resulted in important geographical shifts in maquiladora employment.

Three large sectors—textiles and apparel, electronics and transportation equipment—best illustrate how trade policies influence location, the authors say. For example, the end of the Multifibre Arrangement earlier in this decade negated Mexico's NAFTA trade preferences, forcing apparel companies to seek lower costs by moving plants away from the border to Central Mexico.

"In Mexico, the location of these plants is often based on short-term and local advantages, and their ties to the community and its suppliers are few," the authors write.

In addition, the authors find 12-month employment declines through February in Mexican border states, rivaling the losses of the 2001 recession.

In an "On the Record" conversation, Anadarko Petroleum Corp. chief executive and chairman of the Dallas Fed board Jim Hackett says several factors have caused recent volatility in oil prices, including an active hurricane season, the value of the dollar, political instability and increased global demand.

"Markets tend to be overbought or oversold, and you generally find the truth lies somewhere between the extreme highs and extreme lows," Hackett says.

Despite the recession, the upper East Texas economy's outlook is relatively strong, according to this quarter's "Spotlight."

The region's economic diversity lessened the impact of the recession, with unemployment rates in Tyler, Longview and Texarkana near or below the state's 6.7 percent average. The region's fastest growing industry is education and health services.


Media contact:
Alexander Johnson
Phone: (214) 922-5288