Which Economic Crisis?

Recession or no recession, double-digit unemployment is nothing new in the Rio Grande Valley. Throughout the 1980s and 1990s, regional unemployment hovered around 20 percent, and the poverty rate was the highest in the country.

Times have changed at the tip of Texas, and economists now say the Valley may ride out the economic crisis more comfortably than the rest of the United States. Despite such optimism, the region is still plagued by the same structural problems that have long depressed its economy. Just ask one of the thousands of former factory workers who lost their jobs during the last decade.

In 1982, when Elizabeth Torres was 20, she landed her first job in a Levi Strauss & Co. factory in San Benito. Over the next two decades, she went from sewing buttons on pants to inspecting completed blue jeans, eventually earning $12.50 an hour plus health insurance benefits.

Torres was one of thousands of Valley residents who found stable employment with manufacturers like Levi’s, Fruit of the Loom Inc. and Converse Inc. after factories sprang up throughout South Texas in the 1960s. Those austere, concrete buildings transformed the Valley almost overnight, sign and substance that manufacturing was replacing agriculture as the region’s dominant industry.

“I figured I’d be working for them forever,” Torres says. “I never thought about leaving or working for anyone else.”

When the manufacturing industry began to erode in the 1990s, South Texas was hit hard. In 2002, Levi’s closed two factories in the Valley, including the one where Torres worked, firing more than 1,000 workers. Torres remembers hearing the news from her bosses. “They told us they were sorry,” she says, “that they would try to help us land on our feet.”

Federal programs and contributions from private companies enabled former factory workers like Torres, who dropped out of high school in ninth grade, to enroll in vocational programs or study toward a GED. The idea was simple: Retrain obsolescent laborers to specialize in computers, health care, or other marketable skills to prepare them for jobs outside of the dwindling manufacturing field.

Torres got a few months of computer training and a GED, but seven years later, she doesn’t see much use for her diploma. She’s working part-time as a receptionist at a Harlingen Econo Lodge, making $6.55 an hour with no benefits. Her friends from the Levi’s factory aren’t doing any better. “Some are unemployed; some are struggling like me,” she says. “There just aren’t opportunities like the ones we used to have.”

Torres has read the recent reports noting the Valley’s relative immunity to the country’s financial crisis. “It’s kind of strange to hear that we’re doing well, considering my own experience,” she says.

Unemployment has increased in the area, but less so than the national average. Consumer lending is on the rise. The Valley’s real estate market is stable. “With good economic development plans, a successful energy sector and strong international trade, the region hasn’t been quite as badly affected as much of the country,” says Ray Perryman, chief economist at the Perryman Group, who focuses his research on the border.

Recent statistics speaking to the region’s apparent economic stability have earned the Valley national attention. In mid-April, Forbes magazine wrote, “It seems this corner of Texas is a strong candidate to ride out the recession unscathed.” That assessment ignores the ongoing economic crises that have made life difficult for Torres and her former co-workers.

The Valley remains the poorest region in the United States, with a per capita income hovering around $18,000 a year. Though unemployment has declined from 18 percent to just over 10 percent in the last decade, the jobs that have emerged are mostly low-paying service positions, often without health insurance. Still, considering the population’s lack of education, city and county officials are proud of the gains.

“Are they being paid less than other areas? Yes. But they have jobs,” says Keith Patridge, president of McAllen’s Economic Development Council. “If we want higher wages, we need more educated workers.”

That calculus doesn’t make sense to Torres. She’s more educated now, schooled in computers and high school-level arithmetic. She’s earning half her Levi’s wage, with little hope of finding a full-time position-let alone one that pays more than $10 an hour, she says.

Between 2000 and 2004, nearly 3 million American manufacturing jobs disappeared, a consequence of the globalizing labor market and increasingly efficient-and less labor-intensive-technology. South Texas fought the national trend, in some cases adding new factories after Levi’s and Fruit of the Loom had left the region. Economic leaders encouraged companies to build twin plants on either side of the Rio Grande. If more than 50 percent of the production value of a product is added in the United States-even if the bulk of work is done in Mexico-the product can still be considered “Made in the U.S.A.,” a marketable distinction for many consumer goods.

In the years after Torres’ factory closed, manufacturing jobs in the Brownsville-Harlingen area declined steadily. Though far from the region’s dominant source of employment, it was still a viable industry, says Keith Phillips, senior economist at the Federal Reserve Bank of Dallas. If current trends continue, ripples from the financial crisis could lay the region’s manufacturing ambitions to rest. In South Texas, manufacturing is being pounded by the downturn.

“Consistent with shrinking domestic demand and ebbing overseas sales, manufacturers continued to draw down inventories [in Texas],” the Federal Reserve Bank of Dallas reported on March 30. As inventories fall, demand for labor declines as well.

When manufacturing jobs are lost, so are support jobs, including truck lines, maintenance and warehousing. “The impact of a manufacturing job is much greater than jobs in other industries,” Patridge says.

For a decade, the manufacturing industry’s boom-and-bust story has been mythologized in the Rust Belt, where unemployment has recently spiked. That narrative, with Detroit at its epicenter, has been woven into reportage on the financial crisis. In those stories, what’s being lost is the stuff of legend: American automobiles, steelworkers, a hard-working and fairly compensated middle-class lifestyle.

The Rio Grande Valley is far from the heart of American labor mythology. Take Cameron Park, the unincorporated colonia attached to Brownsville, about five miles from the U.S.-Mexico border. In 2000, the U.S. Census Bureau found it the poorest community in the United States, with a per capita income less than $5,000. It’s also home to a number of former factory workers, including some who worked alongside Torres. Others have worked for auto parts manufacturers like Trico Products Corp., a windshield-wiper producer that employs 600 people in Brownsville.

Before the current economic crisis, area leaders hoped to add hundreds of jobs by trying to bring automobile manufacturers to the Valley. One such program, the North American Advanced Manufacturing Research and Education Initiative, set the goal of adding 8,000 manufacturing jobs to the region by 2017. But with the economic crisis disproportionately affecting the manufacturing industry, the plan now appears far-fetched.

If the region’s factories continue to close-as plastics manufacturer Progressive Moulded Products Inc. and brassiere-maker Vanity Fair Brands LP did last year-a growing class of unemployed workers could emerge. Even before the current crisis hit, Torres had discovered that the Valley’s economy was unable to accommodate workers looking to transition between industries. Now that the crisis is touching South Texas, life beyond the factory could be particularly trying.

As the Valley looks to rebound, its location on the border will no doubt play a critical role. Nearly all the Valley’s economic leaders point to the region’s proximity to Mexico-and cheap Mexican labor-as a potentially saving grace. But lately, some companies have been reluctant to construct twin plants on both sides of the border, despite the economic advantages. “We try to recruit companies, but all they hear is how violent it is on the border,” says McAllen Mayor Richard Cortez. “It’s caused some companies to reconsider relocating here.” Cortez says that though drug-related violence has not spilled over to McAllen, the perception of instability has hurt the region’s economic prospects.

Alongside an increase in violence, Mexico is combating a rapidly declining currency. In the last six months, the Mexican peso has depreciated more than 30 percent against the dollar, a decline that has resonated across the border. Mexican consumers account for 25 percent to 35 percent of the Valley’s retail activity-about $2.3 billion a year in El Paso, Laredo, Brownsville and McAllen, according to a 2006 study by the Federal Reserve Bank of Dallas. If the downturn continues in Mexico, those cash injections may become unreliable.

Still, optimism is prevalent. Forbes ranked McAllen as the country’s best midsized city for jobs in 2009. Forbes didn’t mention that 37.5 percent of the metropolitan area’s residents live below the poverty line. Most of those residents, like Elizabeth Torres, don’t have the credentials to qualify for available jobs with the government or the school district. Ten years ago, in the factory that has since become a county office, there was an alternative. Now, Torres is not so sure.

Kevin Sieff is a reporter in Brownsville.