Austin job growth cools, but drop in labor force props up jobless rate


Highlights

The metro-area unemployment rate held at 3.2 percent in May, but the number of employed workers dropped.

Tight labor market conditions appeared to slow job creation, including at high-tech firms.

Austin-area employers slowed their pace of job creation in May, as the region’s tight labor market and, for some companies, uncertainty about the political environment helped keep payroll expansion in check.

Employers in the metro area added 1,200 jobs during the month, posting the slowest rate of payroll growth for any May since 2011, according to preliminary data Friday from the Texas Workforce Commission.

In fact, after adjusting the data for seasonal workforce patterns, the Federal Reserve Bank of Dallas said Central Texas employers essentially reduced payrolls during the month — making their deepest cutbacks in almost eight years.

After expanding or maintaining payrolls in each month for more than five years, local employers now have reduced job counts twice in the past four months, according to the Dallas Fed’s seasonally adjusted data.

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Of course, the Austin labor market is not collapsing. Annual revisions regularly reveal that Austin’s job growth is stronger than preliminary data suggest. And even if the volatile monthly data turn out to be precise, local employers still have expanded payrolls by 2.8 percent in the past 12 months — slower than past years but still robust compared with most metro areas.

Part of the slowing stems from a relatively positive place: the region’s tight labor market. The metro-area unemployment rate held at 3.2 percent in May, according to the commission’s preliminary data. The Dallas Fed’s seasonally adjusted data put the Austin rate at 3.3 percent — same as in April and still near the 15-year low of 3.1 percent set last year.

In Texas, the seasonally adjusted unemployment rate fell to 4.8 percent in May from 5 percent the prior month. The national rate ticked down to 4.3 percent from 4.4 percent.

Still, some possible notes of caution have emerged within Austin’s otherwise robust labor market. In addition to the cooling payroll growth, the area’s strong unemployment rate in May resulted from people dropping out of the labor force, not from more workers landing jobs.

The official labor force — essentially, people working or actively looking for work — tends to expand modestly in May, according to the historical data. Last month, however, both the labor force and the number of employed workers dropped by 0.6 percent.

It’s not unusual to see employment counts drop in May, as the school year comes to a close and employers pause before shifting gears into the summer. However, the region rarely sees so many people drop out of the labor force in May.

Local business and workforce officials cautioned against reading too much into data from one month.

Still, a marked drop in professional, scientific and technical services jobs during May only added evidence to some existing signs of slowing in that segment, which includes many of Austin’s high-tech occupations.

Employers in those industries cut 1,800 jobs last month, a decline of 1.8 percent, according to the commission’s preliminary data.

“Broader industry data suggest that both (high-tech) services and manufacturing weakened in first quarter of 2017, with services falling 1.5 percent and manufacturing slipping 0.2 percent,” Dallas Fed senior research analyst Christopher Slijk wrote in his latest Austin Economic Indicators report.

The slowing through the start of the year reversed a strong finish to 2016, particularly for tech services jobs, Slijk wrote.

Local workforce officials said they’d seen no evidence of any notable cuts at tech firms in the area. And over the past 12 months, payrolls at the area’s professional, scientific and technical services firms have expanded by 3.2 percent – healthy, but slower than the rates the segment posted in recent years.

“We have heard anecdotally that employers were/are being extremely cautious regarding filling currently open positions and/or posting new positions until the Texas Legislature concluded and the federal budget was solidified,” said Tiffany Daniels, director of communications and community engagement for Workforce Solutions Capital Area.

The tight labor market hits Austin’s high-tech scene as hard as anywhere, with its heated competition to attract key coding and programming skills. According to an analysis by the Greater Austin Chamber of Commerce, local high-tech firms have about 7,000 openings, but local schools are producing about 1,000 IT graduates a year.

While the competition is not as steep as in tech, regional health care and social assistance providers contined to add jobs at a healthy pace. Employers in those industries have grown payrolls by 5.6 percent over the past 12 months.

Those numbers show “why we need more registered nurse slots,” said Drew Scheberle, senior vice president at the chamber. “That’s why we are happy SB 2118 allows (Austin Community College) to offer a bachelor of science in nursing.”

Robust job growth in the health care sector also helps create more middle-wage positions for workers with less than a bachelor’s degree. While payrolls in high- and low-wage jobs continued to expand rapidly in Central Texas — local hotels and restaurants added 1,500 positions in May, for example — the region has seen solid growth across a range of traditional middle-wage jobs as well.

In fact, the region’s manufacturers, construction firms and other goods-producing employers have expanded payrolls by 4.2 percent over the past 12 months, compared with just 2.7 percent growth at service-providing firms.



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