EDITORIAL
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EDITORIAL |
| Dynamic Growth in the Rio Grande Valley - Part 1 |
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 Its proximity to Mexico and fast-growing, binational job market are major factors in the Rio Grande Valley's economy. They're a large part of the reason employment has increased at a faster, steadier pace in the Valley than in the United States, Mexico or Texas as a whole (Chart 1).Despite rapid job creation, the Valley remains relatively poor. The McAllen-Edinburg-Mission metropolitan statistical area ranks last among the nation's 361 MSAs, with a per capita income of $15,184 a year, less than half the national average of $31,472. The Brownsville-Harlingen MSA comes in next to last at $16,308. The combination of rapid job growth and low income is unusual. In a study covering 1967 to 1997, Dallas Fed economist Keith Phillips found weak employment gains in other states' low-income counties-annual averages of 2 percent in Kentucky, 0.4 percent in West Virginia and 0.3 percent in Mississippi. Valley employment, by contrast, rose 3.4 percent a year over the three decades. More recent data confirm that the Valley is creating jobs at an above-average rate, a trend that dates back to at least 1969. The McAllen MSA posted the strongest gains of all the Texas-Mexico border metros from 1997 to 2003, with employment growing an average 4.6 percent. Brownsville's 3.1 percent job growth was nearly twice as fast as Texas' 1.6 percent. National job creation over this period was 1.2 percent.  The years of strong job growth have whittled away at the Valley's once-high unemployment rate. McAllen's jobless rate fell from 25.1 percent in April 1990 to 6.6 percent in December 2005. Brownsville's dropped from 16.1 percent in April 1991 to 6.1 percent in December 2005.These trends raise several questions. What sectors have contributed to the Valley's rapid job growth? How does Mexico shape the Valley's economy? Will the stripping away of trade barriers in Central America and the Dominican Republic mean new competition or new opportunities? Can the Valley continue to create jobs? Can it begin to close the income gap? Economic Drivers The Rio Grande Valley abuts the Gulf of Mexico at Texas' southern tip and stretches roughly 100 miles along the river that separates the United States from Mexico (see map). The region encompasses Cameron, Hidalgo, Starr and Willacy counties, which had a combined population of nearly 1.1 million in 2005.  In terms of earnings, two sectors account for nearly half the area's economic activity. The largest contributor to income is government, which includes local, state and federal workers as well as public school and university employees (Chart 2). This sector accounted for more than a quarter of Valley earnings in 2004, well above the 18 percent state average.The Valley's second-largest sector is health care and social assistance. At 20 percent of earnings, the 2004 share was two-thirds higher than the 12 percent of a decade earlier. Over the same period, health care's share of the national economy rose much more slowly, going from 9.5 percent to 10.8 percent. The state is slightly below the U.S. average at 10 percent. Retail trade earnings made up almost 10 percent of the Valley economy in 2004, just about matching the state average. Mexican nationals cross the border to shop year-round. Tourist traffic includes Winter Texans, mostly retirees from the Midwest and Canada who spend several months in the Valley, attracted by warm weather and low living costs.  Spending by Mexicans and other visitors makes Valley retailing an important export sector, a rarity in nonborder cities. The percentage of sales to nonresidents averaged about 35 percent in McAllen and 26 percent in Brownsville over 1978-2001 (Chart 3). This number is considerably higher for Laredo, the main port of entry for U.S.-Mexico land-borne trade, and much lower for El Paso, which relies more heavily on the maquiladora industry in Cuidad Juárez.Agriculture has historically been one of the Valley's cultural and economic mainstays. The annual harvest remains an important source of income and jobs in rural areas, but agriculture's overall share of the Valley economy has been declining for more than three decades (Chart 4). By 2004, farming accounted for less than 1.4 percent of total earnings, making it one of the smallest sectors.
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