|Texas Border Economy||Texas Border Economy||James P. Gaines, Luis B. Torres, Wesley Miller, and Paige Woodson||2019-01-22T06:00:00Z||technical-report||Texas Economy|
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Note: Due to the ongoing Federal government shutdown, the release of multiple data series has been delayed, and they are not included in this report. The following analysis represents an overview of the Texas border economy based on the available data.
November 2018 Border Summary
Economic growth slowed along the border as hiring stood at a standstill. Despite maintaining historically low unemployment, wages failed to improve, weighing on the housing market through decreased affordability in combination with rising mortgage rates. Nonresidential construction values flourished, but recent lackluster permit activity weighed on residential projects.
Economic activity decelerated across the Texas border metros according to the
Dallas Fed's Business-Cycle Indices. Brownsville's index moderated, reporting 3.6 percent growth on a seasonally adjusted annualized rate (SAAR), while El Paso's fell to 1.6 percent after last November marked a two-year high. The Laredo index extended a nine-month contraction amidst negligible employment growth and falling wages. McAllen was the exception, where a boost in earnings and sustained low unemployment lifted growth to 5.8 percent, surpassing the statewide average of 5.0 percent.
Nonresidential projects lifted
total border construction
values considerably. Office/bank building investment picked up in Brownsville and El Paso, but the renovation of El Paso High School was the main driving force behind growth this month. The high school is one of 17 major construction projects funded by El Paso Independent School District's 2016 Bond. Residential values were lackluster as both single-family and multifamily construction dropped along the border. The exception was McAllen, where single-family projects supported residential improvement for the second straight month after a sluggish summer.
Nonfarm employment slowed in November after October revisions bumped growth up to 2.2 percent SAAR. El Paso employment contracted after an explosive past three months, shedding jobs in the professional/business services industry, though still maintaining the highest growth rate at 3.4 percent. Trade sectors suffered along the border as losses in Brownsville and McAllen held growth to 1.9 and 2.1 percent, respectively. Laredo gained jobs in professional/business services but struggled to counteract losses in retail trade and education/health services.
The announcement of the new agreement between the U.S., Mexico, and Canada at the end of September supported a positive trade outlook.
Manufacturing and maquiladora employment1 added 4,300 jobs in October, reaching an all-time high of 559,600 since the series began in July 2007. Matamoros and Reynosa also posted record highs of 59,600 and 128,200, respectively. Employment in Nuevo Laredo and Juarez rose to YTD peaks. Chihuahua was the exception, shedding 650 jobs but registering 4.2 percent YTD growth.
Despite a slowdown in hiring,
unemployment rates hovered around historical lows. El Paso slid to 4 percent, a record low for the metro, while Laredo matched the state's lowest unemployment rate since the series began in 1976 at 3.7 percent. Although elevated above the statewide average, the Rio Grande Valley balanced at all-time lows of 5.6 and 6.3 percent in Brownsville and McAllen, respectively.
Decelerated employment growth coincided with little change in private hourly earnings, which remained far below statewide levels. Wages in Laredo fell to the lowest level since June while earnings in El Paso remained stagnant. After adjusting for inflation, Brownsville recovered some ground after a three-month decline but remained the lowest-paying metro. McAllen was the exception with the highest wages at $18.73 per hour and 2.1 percent YOY growth after adjusting for inflation.
Border housing sales fell 3.2 percent in November, landing at 2.9 percent YTD growth. Activity in all four metros stepped back, but transactions in McAllen suffered the worst, falling 5.3 percent. Brownsville fared similarly; sales in the Rio Grande Valley dipped as momentum in the $200,000 and more price range paused. In Laredo, homes priced $100,000-$200,000 dominate the market. Activity in this cohort, however, slowed following a boom in October. A halt in inventory expansions for homes priced between $100,000 and $200,000 weighed on El Paso transactions.
months of inventory (MOI) of homes for sale varied across the border metros. Brownsville and El Paso inventories dropped to record lows at 8.3 and 4.1 months, respectively. On the other hand, the McAllen MOI ticked up to 8.2 months, an annual high, while Laredo's MOI balanced at five months.
On the demand side, the
average number of days on market (DOM) bounced back to more regular levels after drastic declines last month (excluding Laredo). The DOM in the Rio Grande Valley rebounded to 127 and 95 days in Brownsville and McAllen, respectively. El Paso averaged 100 days, just slightly above 2017 levels while Laredo's DOM stabilized at 59 days.
Changes in the distribution of housing sales accounted for an increase in the
median price. The median home price in El Paso and Laredo reached $154,800 and $168,300, respectively, as the proportion of sales transactions above $200,000 increased. Brownsville's median price increased for the sixth straight month to a record high of $161,700 amid slowing activity in homes priced less than $100,000. McAllen was the exception, where ample supply applied downward pressure to the price, resulting in a year-long low of $140,400.
1 Mexican manufacturing and maquiladora employment is generated by the Instituto Nacional de Estadística y Geografiía. Its release typically lags the
Texas Border Economy by one month.
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