Texas Border EconomyTexas Border EconomyJames P. Gaines, Luis Torres, Wesley Miller, and Bailey Cuadra2017-09-18T05:00:00Zresearch-article
Texas Economy

​​​​July 2017 Border Summary

A tightening labor market led to robust economic activity along the Texas-Mexico border. Peso appreciation and the healthy Mexican economy stimulated cross-border trade activity. The border economies added 2,900 jobs, primarily in Brownsville and McAllen. Border housing demand continued to shift from the new home to the resale market, where inventories remained considerably lower.


The McAllen Business Cycle Index ticked up 1.7 percent annualized following an eight-month decline. Strong employment growth and increased earnings contributed to McAllen's recent economic expansion. The Laredo index reached 5.0 percent annualized growth as unemployment fell to a record-low 4.0 percent. Second-quarter declines in unemployment also pushed the Brownsville and El Paso indices up 2.8 percent and 3.7 percent, respectively.

Total border construction values fell 0.1 percent with a decline in nonresidential construction activity. Nonresidential construction values in Laredo peaked during November 2016 following United Independent School District's construction of a new ninth-grade campus. Despite the slowdown, investments in stores and restaurants advanced in Brownsville, El Paso, and McAllen. Total border residential construction increased 2.7 percent despite slowing in Brownsville and McAllen.

Border MSAs added 2,900 jobs1 as employment growth remained steady at 1.9 percent annualized. Annualized employment growth in Laredo trended upward at 1.9 percent, while gains in the service-providing industry supported growth in El Paso (1.0 percent). Increased manufacturing and maquiladora activity in Ciudad Juárez stimulated El Paso's service sector. Brownsville employment growth recovered from June's dip, climbing to 0.9 percent annualized, while McAllen maintained the strongest annualized employment growth rate at 3.5 percent.

The El Paso unemployment rate1 dropped to 4.3 percent, settling at the statewide and national average. Unemployment fell to 4.0 percent and 6.9 percent in Laredo and Brownsville, respectively. McAllen experienced the largest decrease in unemployment, falling from 7.9 percent in June to 7.3 percent.

The tightening labor market in McAllen drove real private hourly earnings up for the eighth-consecutive month, rising 7.0 percent year over year. In El Paso, earnings climbed 1.4 percent year over year, remaining $0.10 above the 2016 average. Wage growth in Brownsville and Laredo remained dismal, falling 5.7 percent and 9.9 percent year over year, respectively. Distributional shifts from goods-producing to service-providing jobs in Brownsville and Laredo contributed to the decreased wage growth.

The peso per dollar exchange rate2, an important determinant of border economic performance, appreciated 1.8 percent to $17.81, reaching its lowest level since April 2016. The peso devalued during the closing months of 2016 amid political concerns and rising U.S. interest rates. However, the value of the peso fully recovered, appreciating 16.8 percent since January. The total value of border trade activity increased 1.8 percent month over month and 9.0 percent year over year. Export activity outpaced imports by over half a percent amid increased Mexican demand.


Total border housing sales increased 1.5 percent, reaching 7.0 percent YTD growth. Home sales in Laredo struggled, falling 4.4 percent, as new home demand waned. Conversely, sales in Brownsville, El Paso, and McAllen rose 3.3 percent, 0.7 percent, and 1.7 percent, respectively.

Total border single-family residential housing construction permits declined 1.5 percent but maintained positive year-to-date (YTD) growth. The number of permits issued in McAllen and El Paso fell 11.5 percent and 2.9 percent year over year, respectively. The large drop in McAllen permits signaled builders' reactions to new-home surpluses. Construction permits also declined in Brownsville and Laredo, falling 4.1 percent and 0.7 percent, respectively. Total border single-family private construction values increased on a monthly basis in July. Construction values in Laredo and El Paso showed positive YTD growth but trended downward in Brownsville and McAllen.

New home months of inventory (MOI) expanded for each border economy with Laredo (3.3 months) posting the largest monthly increase at 10.3 percent. The supply of new homes listed in Brownsville (8.4 months) showed positive YTD growth for the first time this year, climbing above its 2016 average of 8.2 months. In McAllen, the supply of new homes listed increased 7.9 percent to 12.8 months. However, the MOI for homes under $200,000 was at 6.5 months, suggesting a more balanced market. The new home MOI in El Paso ticked up to 7.4 months as the supply of new homes listed between $200,000 and $400,000 expanded.

The existing home MOI in El Paso (4.8 months) continued to slide, falling 13.4 percent YTD. Similarly, the supply of resale homes listed in Brownsville (8.0 months) fell 2.8 percent YTD. In contrast, the resale MOI in McAllen (8.7 months) and Laredo (5.6 months) increased 1.7 percent and 5.6 percent YTD, respectively, and remained the only border metros to have positive YTD growth.

Demand for existing homes remained steady in the border metros as the average number of days on market (DOM) decreased in El Paso (88 days), Laredo (59 days) and McAllen (94 days). However, demand softened in Brownsville, where the DOM rose 3.0 percent to 113 days.

New home demand weakened in Laredo (92 days) and Brownsville (100 days) as the DOM climbed 10.4 percent and 7.7 percent, respectively. The El Paso DOM trended upward to 125 days, while the DOM reached 86 days in McAllen.

El Paso led the border metros with the highest new home median price of $172,429 followed by McAllen where the median price for new homes settled at $167,817. In Laredo, the median price for new homes decreased 7.8 percent to $167,527, and in Brownsville's new home market median prices fell 1.0 percent to $155,899.

The median price for existing homes was highest in Laredo at $162,835. McAllen, El Paso, and Brownsville's median prices in the existing market were more similar at $135,023, $130,805, and $126,067, respectively. New and existing home prices along the border remained significantly lower than the statewide median at $287,949 and $209,573, respectively.


1 Monthly numbers are reported instead of a 3-month moving-average for consistency.

2 Official numbers are reported instead of a 3-month moving-average for consistency.


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