Tight labor market, especially in tech, weighs down Austin’s job growth


Highlights

Austin metro unemployment rate rises to 3.4 percent in August, first increase in an August since 2008.

Local employers cut 1,900 jobs, trimming payrolls in an August for the first time since at least 2000.

Austin’s continuing economic boom makes it harder for companies to hire and pushes up wages.

The Austin high-tech job market keeps soaking up all the talent it can find, but even the largest sponges reach their saturation point.

While a recent report shows local demand for programming and other high-tech workers has remained at some of the highest levels in the nation, the metro area’s tight labor market and its dependence on outside talent to fill many of its jobs has slowed job growth sharply in the past 18 months.

The slowdown appeared to continue in August, as employers in Austin’s professional, scientific and technical services industries cut 1,700 jobs, according to preliminary data released Friday by the Texas Workforce Commission.

The sector – which includes many of Austin’s key software, web and other high-tech firms – has cut payrolls by 0.4 percent over the past 12 months, the commission data show.

While monthly workforce data is notoriously volatile, the drop in August continued a pattern of slowing job growth across the metro area, including in its tech industries.

The sector’s job losses fueled an overall regional payroll trim of 1,900 jobs during August – the first time Austin payrolls contracted in any August since at least 2000, as far back as the commission’s data go.

That helped nudge the regional unemployment rate higher, to 3.4 percent in August from 3.2 percent the prior month, the commission said. It was the first time the Central Texas jobless rate increased in an August since the recession in 2008.

The commission does not immediately adjust its metro-level data for seasonal workforce patterns. According to recently revised data from the Federal Reserve Bank of Dallas, the area’s seasonally adjusted unemployment rate held steady at 3.0 percent in August.

“August usually has been a recovery month for our region,” said Tiffany Daniels, director of communications and community engagement for Workforce Solutions Capital Area.

Daniels said Workforce Solutions has seen an increase in the number of layoff announcements during the latter half of this year. However, she said, those events accounted for less than 15 percent of the reported job losses in August.

All told, the number of Austin residents without a job but actively seeking work increased by 3.7 percent last month. The only other years the number of jobless Central Texans rose during August were 2008 (the recession) and 2001 (the dot-com bust).

Neither a recession nor a tech bust are relevant to Austin’s current economic environment. In fact, Austin might be suffering from too much of a good thing – with an especially tight labor market cooling the rapid growth of years prior. Nowhere is that more apparent than in the tech sector.

“Austin has grown so much certainly – both in terms of tech and just generally – it’s inevitable that we’ve seen places that have had fast growth see that slow down,” said Jed Kolko, chief economist at Indeed, the job-search site. “But Austin has stayed consistent over the past year.”

In July, Kolko and his colleagues analyzed Indeed job postings for 158 tech-related titles, and one trend stuck out: Higher-skill, higher-paying jobs were becoming more concentrated in eight primary tech hubs, while lower-paying tech jobs were spreading out to other places.

According to the report, 27 percent of all U.S. tech job listings emerged from those eight metro areas, including Austin, Seattle, Silicon Valley and Boston. More than half of the job postings for the high-level tech jobs, or those that pay more than $100,000, came from those same places.

Austin’s demand for high-tech talent looked a lot like Silicon Valley’s. In fact, outside of the San Francisco metro area, Indeed recognized Austin as the “closest cousin” to Silicon Valley based on those high-salary listings. Austin, with 40 percent of local job postings in the high-wage category, trailed only the San Jose and San Francisco metros by that measure.

“The differences between tech hubs, including Austin and other metros, are that higher-salary tech jobs are increasingly concentrated in places like Austin, while lower-paying (jobs) are spreading out,” Kolko said.

Job listings aren’t always an exact reflection of demand – for instance, a company might test the market by listing a position it doesn’t intend to fill. But the data from Indeed provide a good proxy, and the trends it discovered mesh with data suggesting an overall slowdown in tech job creation.

The Indeed numbers reflect demand for tech skills, regardless of the employer seeking them. So, it would include postings from companies in other industries that are looking for a specific, high-demand technical skill to support their business.

The workforce commission data, on the other hand, looks at the entire payrolls of high-tech firms, which might be having a harder time recruiting the numerous rank-and-file coders they need or are scaling back on workers with routine skills.

Tech employers long have lamented their struggles to find workers with the technical skills they need. According to a 2013 study by the Austin Technology Council, Austin produced about 1,500 degrees in 19 core high-tech occupations – far below the estimated 2,500 to 3,500 openings in Austin each year for jobs that require those skills.

Today, there’s more evidence that those skills gaps have grown more acute and, in the current tight labor market, have spread throughout other industries as well. New census data released this week showed median incomes in the metro area jumped to $71,000 in 2016, an increase of 4.8 percent from 2015 after adjusting for inflation.

That figure would encompass earnings in a range of industries and occupations. According to an analysis of job listings data by the Greater Austin Chamber of Commerce, software developers and registered nurses regularly swap the lead atop the list of high-demand skills each month.

Local employers listed 1,771 software developer jobs in August, according to the chamber’s analysis, trailing only the 1,915 openings for registered nurses. Virtually all of the most difficult jobs to fill required computer, programming and related technical skills, the report said.

“Tech jobs are still in demand,” said Kwee Lan Teo, the vice president of talent, development and acquisition at the chamber. “We are still seeing a healthy economy in Austin.”



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