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For immediate release: March 10, 2011

Dallas Fed: Texas Economy to Ride Higher in the Saddle This Year
Report also examines Texas’ oil and gas sector, U.S. education system,
Mexico’s maquiladoras

DALLAS—The latest issue of the Federal Reserve Bank of Dallas' Southwest Economy features articles on the Texas economy in 2011, the state’s oil and gas sector, the U.S. education debate and Mexico’s evolving maquiladoras.

Find the first quarter 2011 issue at:  

The Dallas Fed’s forecasting model projects Texas job growth at 2.5 to 3.5 percent this year, according to senior research economist and advisor Keith R. Phillips and assistant economist Emily Kerr in “Texas Economy to Ride Higher in the Saddle in 2011.”

Movements in the Dallas Fed’s Texas Leading Index suggest 261,000 to 374,000 jobs will be added in the state this year, the authors say. This pace of growth is consistent with the Texas unemployment rate falling to about 7 percent by the end of 2011.

Exports and manufacturing, particularly high-tech, should continue to grow at a moderate pace in 2011, and consumer spending should increase at a slightly quickened pace, Phillips and Kerr say. The energy sector will also continue to be a positive.

Two factors likely to restrain Texas economic growth in 2011 are persistent weakness in construction and the state budget deficit’s downward pressure on fiscal spending, the authors note.

In “Oil and Gas Rises Again in a Diversified Texas,” vice president and senior economist Mine Yücel and senior research analyst Jackson Thies find the oil industry is still contributing positively to Texas output and employment, though in a less-pronounced way than during the oil boom 30 years ago.

From 1997–2010, a 10 percent oil price increase led to gains of 0.5 percent in state GDP, 0.36 percent in employment and 6.2 percent in the rig count, according to a model developed by the authors. By comparison, from 1970-87, a 10 percent oil price increase led to gains of 1.9 percent in GDP, 1 percent in employment and 10 percent in the rig count.

“The Texas economy has undergone a major sectoral shift in the past 40 years,” the authors write. “The economy has evolved from one dependent on oil and gas in the 1970s and early 1980s to one in which oil and gas extraction accounts for just 2 percent of employment and 11.5 percent of output.”

In an “On the Record” conversation, Lori Taylor, associate professor at Texas A&M University’s Bush School of Government and Public Service, says results from the Organization for Economic Cooperation and Development’s Program for International Student Assessment test are evidence the education system in the United States is broken.

“We spend more than nearly every other country on K–12 education, and our performance is mediocre at best,” Taylor says. “We have to make education reform a policy priority and rethink almost everything about how we go about accomplishing our educational goals.”

Students from the U.S. performed at or slightly above the OECD average in reading, at the OECD average in science and significantly below the OECD average in math, Taylor notes. Among the 34 OECD countries, the U.S. ranked 14th in reading, 17th in science and 23rd in math.

In “Trade Conference Explores U.S.–Mexico ‘Common Bonds,’” associate economist Jesus Cañas, economist Roberto Coronado and vice president Bill Gilmer review presentations from a recent Dallas Fed conference, “U.S. –Mexico Manufacturing: Common Bonds.”

Though Mexico lost many of its low-wage, low-skill jobs in the apparel and textile industries after the 2001 recession, Mexico has seen a growing role in North American auto parts production and auto assembly, the authors report. Speakers at the conference included Cañas, who said the maquiladora story is increasingly about higher-skilled jobs and greater compensation, not just the number of jobs.


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