| Texas Strong Despite Challenges | |
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| The Texas Economy: Almost a Boom | |
| By Fiona Sigalla, Federal Reserve Bank
of Dallas The Texas economy turned in a robust performance in 2006. Initial estimates suggest employment increased 3.2 percent and output growth could approach 5 percent. For most any other state, an expansion this strong would constitute a boom. But everything is bigger in Texas, and so are the booms. Overall 2006 economic activity was not on par with the great bursts of growth ignited by construction and energy in the 1970s and 1980s or high tech in the 1990s. Still, the current expansion is impressive, even by Texas standards. In 2006, the economy grew rapidly to accommodate heavy demand for energy and construction. Adding 316,000 jobs, the state surpassed 10 million workers for the first time. Homebuilding and exports reached record levels. According to Fed contacts throughout the state, shortages of equipment and qualified labor prevented growth from being even stronger. Activity was also restrained by weakening demand from a slowing U.S. economy and by high energy costs that dampened consumer spending. The Texas expansion began to moderate in the second half of 2006, and the state’s economy will likely grow more slowly in 2007. Somewhat slower growth in the U.S. economy in 2007 will soften demand for Texas products and services. Still, strong global ties should boost Texas sales, buoyed by healthy foreign economies. The energy industry likely will keep humming in the coming year as the state continues to supply the world’s drilling industry with equipment and services. The construction industry will also remain busy, although the boost will come more from nonresidential building as housing markets continue to slow. Overall, the Texas economy has enough momentum to fuel another good year in 2007. Job growth is projected to be between 2 percent and 2.5 percent. More of this feature at: http://www.dallasfed.org/research/swe/2007/swe0701b.cfm |
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