McAllen only city to grow production, employment in 1Q 2009

McALLEN - The City of Palms is the only major city in the country that saw growth in employment and output during the first quarter of 2009, according to a national study of economic performance.

The total value of all goods and services produced in the McAllen area actually peaked during the first quarter of 2009 as the world-wide recession hit new lows, researchers with the Brookings Institute, a Washington D.C.-based think tank, found.

The MetroMonitor study released in June tracked economic indicators in the nation's 100 largest metropolitan areas. Researchers found that while no city has been immune to the economic freefall, recessionary woes have been unevenly distributed across the country's major cities.

"The variability in the impact of the recession in different places suggests that different places have different needs," said Howard Wile, a researcher with the Brookings Institute. "Some places that are hit harder are going to need more general state money."

Researchers tracked employment, the unemployment rate, wages, housing prices, gross metropolitan product and the number of foreclosed properties that did not sell at auction to determine a city's economic strength. Six Texas cities, including McAllen and San Antonio, made the list of the top 20 performing metro areas in the country.

McAllen bested the national average in every category except unemployment, which peaked in January at 10.1 percent, then started dropping again until last month, when it rose to 9.4 percent.

Job losses in manufacturing and production led losses in May, highlighting how recessionary woes beyond the Valley continue to addle the region. Auto suppliers and other maquiladoras in Reynosa have shed output and jobs, contributing to a 5.3 percent decline in employment in the Mexican state of Tamaulipas.

The downturn could ripple across the border, as maquiladora managers and laborers who live in the U.S. lose jobs or have their hours cut. Bill Gilmer, a senior economist with the El Paso branch of the Dallas Fed, said the downturn across the border is not a cyclical adjustment like previous recessions, but a more permanent shift.

Consumers will likely spend less than they did before the recession, even after recovery, making it unlikely that sales of autos or a host of electronics and appliances manufactured in Reynosa would return to pre-recession levels, Gilmer said.

"We had an overextended consumer that will pull back," Gilmer said. "We're going back to normal credit markets and so on. It's going to be a different world on the other side."

Homes sales are also below last year's rate and foreclosure filings continue to plague the real estate market. But overall, unlike most areas of the country, the market has appeared to stabilize.

The MetroMonitor study found that housing prices rose by 2.3 percent from the first quarter of 2008 to the first quarter of 2009. Prices overall are still below their peak prices, according to data from the Real Estate Center at Texas A&M University.

"We didn't have those big peaks ... or those big downward spirals," said Charles Marina, a Realtor with First American Realty. "We were the last area of the country to feel the downward pull and we'll be one of the first to recover. We've pretty much (already) started the recovery."

The overall recessionary decline, however, is not over, according to data from the Dallas Fed. The Metro Business-Cycle Index for the McAllen area, a measure of a region's nonagricultural unemployment, the unemployment rate, inflation-adjusted wages and inflation-adjusted retail sales, has continued falling through May of 2009. The index peaked in April 2008 and has declined ever since.