Texas economy is continuing to outpace the nation

San Antonio Business Journal - by Donna J. Tuttle

The Texas economy has been dragging its feet since January, but continues to outperform the nation, according to an update from the Federal Reserve Bank of Dallas.

"While signals remain mixed, there is increased sentiment that Texas economic activity will not rebound to its trend rate of growth until 2009," Fed senior economist Jason L. Saving notes.

Payroll employment rose in this region by more than 1 percent each month, but not with the same vigor it has in the past. Still, the growth is better than national payroll employment, which declined to negative figures starting in January.

What's more, Texas logged its best unemployment performance in almost 25 years in February -- falling to 4.1 percent.

Construction in Texas is stumbling. Employment in the construction industry fell at an annual rate of 3.8 percent in March, after a strong February.

"Construction contract values continued their January swoon, falling 4.4 percent in February and 5.2 percent in March," the Fed report reveals. "The decline was broad based across residential, non-residential and non-building construction."

The energy sector is the bright spot in the state's economy "providing what is perhaps the single most prominent sign of economic strength at this point," Saving wrote in his report.

Energy employment and Texas rig count hover near 20-year highs, and energy prices are skyrocketing to all-time highs.

Price pressures in the region are mounting all the way around. Texas manufacturers reported higher raw material prices in March and expect the trend to continue. Firms are raising their finished-good prices as fuel, metals and shipping materials become an increasing cost burden.

Texas export are growing, rising by 3.7 percent in January and 5.7 percent in February, outpacing national rates.