Despite tight labor market, jobs growing at steady pace
Unemployment in the Austin metro area stays level at 2.7 percent.
Back around the middle of last year, workforce experts looked at the easing rate of Austin-area job growth and figured the inevitable had finally arrived: The region’s tight labor market was bringing expansion back to more reasonable levels.
In true Austin fashion, though, local hiring re-accelerated in the months since. And after modest job gains in December, it appears that the metro area’s payroll growth in 2017 will main- tain — and maybe even surpass — the pace set in 2016.
Last month wasn’t exceptional. Local employers added about 1,200 jobs in December, an increase of 0.1 percent from the prior month, according to preliminary data released Friday by the Texas Workforce Commission.
Those job gains, in line with typical December rates, helped hold the metro unemployment rate steady at 2.7 percent.
Yet, combined with a strong close to the year, Central Texas job growth increased 2.9 percent since last December. And that figure almost certainly will rise when the commission revises and benchmarks its metro-level
data in the coming weeks.
How much that figure might rise remains to be seen. The preliminary data for 2016 suggested job growth of just 1.9 percent, yet that figure jumped to 3.3 percent after the benchmarking process.
That was an exceptionally large change. Labor market data, based partly on surveys, can be harder to nail down in a preliminary model, especially for markets of the Austin area’s size and dynamism. But even a slight upward revision would put Austin once again back above 3 percent job growth.
‘Don’t need Amazon’
The Federal Reserve Bank of Dallas calculates seasonal adjustments and some benchmarking on the fly. On Friday, it pegged Austin-area job growth around 3.6 percent for 2017, up from 3.2 percent the prior year.
“So you don’t need Amazon, actually,” quipped Mine Yücel, senior vice president at the Dallas Fed. “It’ll just add to congestion.”
Yücel’s line — referring to Austin making the list of 20 finalists for Amazon’s $5 billion second headquarters project — got a good laugh from the crowd gathered Friday morning for the University of Texas McCombs School of Business 2018 economic forecast breakfast. Austin and the rest of the state show no sign of slowing this year, she said, and in fact statewide job growth is expected to accelerate.
Even the preliminary 2.9 percent payroll expansion rate would indicate “healthy growth” for the region, Yücel said after the event. And whatever the final figure, one probably shouldn’t expect Austin job growth to keep humming along in, say, the 4 percent range, as it did from 2012 to 2015.
Even the fact that it almost certainly will remain above 3 percent is notable in such a tight, fast-growing labor market.
“It’s hard to grow more when you’re already growing really fast,” Yücel said. “It will moderate.”
Tight labor market
Still, the job growth rate easily remained robust enough to not only to soak up the region’s labor force growth, but to pull more unemployed workers into jobs — thanks mainly to an increasingly tight market for workers.
According to seasonal adjustments by the Dallas Fed, the Austin metro unemployment rate held at 2.8 percent, remaining at levels last seen during the end of the dot-com boom in 2000.
That has pushed more employers to bring in workers they overlooked when the talent pool was deeper. The number of Central Texans looking for work but out of a job dropped to about 30,800 in December, down more than 13 percent from the same time last year, according to commission data.
A significant share of the remaining unemployed are chronically in that state, often with little education, few marketable skills or criminal backgrounds. In Austin and around the country, companies have pulled more of these workers back into jobs.
Austin employers continue to rely more heavily on workers migrating into the region, whether from around the state, around the country or around the world. But those pools appear to be dwindling, as well.
Proposed changes to federal immigration policy could limit international workers, Yücel said, and stronger labor markets around the state and the nation already have eliminated many of the incentives workers have to move to areas with economies like Austin’s.
So will Austin’s job growth finally slow? Probably not, given an expanding global economy that’s fueling exports and a business-friendly federal tax overhaul that’s already stoking demand across the state.
The NAFTA question
The renegotiation of the North American Free Trade Agreement, or NAFTA, could hinder the Texas economy. Mexico is the state’s largest trading partner, and the bulk of that trade is more along the lines of a supply chain — parts start here, go to Mexico for additional assembly and then come back to Texas for final production.
Whatever makes that harder or costlier is negative for Texas, which among the states has the fourth-highest share of jobs tied to exports, Yücel said.
At the UT forecast event, Stratfor editor-in-chief David Judson said analysts at the Austin-based geopolitical intelligence firm don’t believe NAFTA will go away. Negotiations will continue, he said, “but there’s too much at stake for it to disappear.”
Austin doesn’t depend as much on Mexico for its exports, most of which go to Taiwan and South Korea. But what’s good for Texas is usually good for Austin, too.
It’s probably safe to assume, then, that Central Texas companies will keep looking to expand — or more companies will look to Austin for expansion. In an already tight labor market, this should continue to push wages higher.
Austin will remain a destination for high-skill, technical talent — both high-tech and in skilled trades such as construction and manufacturing. And that, combined with the rising wages of a tight labor market, should keep bringing an inflow of educated workers.
But the continued strong job growth also could provide an opportunity to help enhance the region’s existing workforce, potentially bringing chronically unemployed workers back into jobs or helping current employees gain new skills and move up the income ladder.
As it is, the nation is near full employment and companies and employers are just beginning to feel the impact of the federal tax changes, said Drew Scheberle, senior vice president at the Greater Austin Chamber of Commerce.
“In this environment,” he said, “we believe those regions that are attractive to millennials, focus on increasing higher and public education outcomes, and develop the best mechanisms to upskill workers will be the communities that thrive.”