Tight labor market heightens premium on startups, education, exports


Highlights

The Austin metro area’s unemployment rate dropped to 2.9 percent in September.

When seasonally adjusted, the rate hit its lowest point since December 2000.

Austin’s rapid business and population growth have started to stretch its capacity, snarling highways, slowing job growth and making the region less affordable for many of its residents.

Yet, the metro area’s ability to sustain its entrepreneurial spark has allowed employers to continue adding jobs, and the region’s potential for increasing export activity could help build a more widely shared prosperity, as well.

Those potential growth areas become increasingly important in today’s tight labor market, in which employers are battling over skilled workers, raising wages and benefits, while easing their pace of payroll growth.

Preliminary data released Friday by the Texas Workforce Commission showed that metro-area employers added 8,300 jobs in September, but showed that the net gain came entirely from the public sector, which was boosted by the start of the school year and the end of the state hiring freeze.

Private employers slashed 2,200 jobs during the month, in line with seasonal payroll reductions despite unusually large job cuts at local bars, restaurants and hotels.

The strong public-sector hiring helped knock the regional unemployment rate down to 2.9 percent in September from 3.3 percent the prior month, the commission said.

The preliminary local data are not adjusted for seasonal workforce trends. However, calculations by the Federal Reserve Bank of Dallas put Austin’s seasonally adjusted jobless rate at 2.7 percent — down from 3 percent in August and reaching its lowest point in almost 17 years.

The seasonally adjusted Texas rate fell to 4 percent in September from 4.2 percent the prior month. The national rate fell to 4.2 percent from 4.4 percent.

“The Austin region remains highly desirable for university-bound students and millennials to relocate, making this a dynamic, growing job market,” said Drew Scheberle, senior vice president at the Greater Austin Chamber of Commerce. “This deep pool of talent continues to make our region attractive to both existing companies and potential new employers.”

Earlier this week, the chamber submitted a regional bid for the biggest prize among “potential new employers” — Amazon’s planned second headquarters, which the company said would employ 50,000 highly paid workers. Dozens of cities have filed bids in hopes of landing the facilities.

Yet workforce experts, including those at the chamber, noted that local startup activity and job creation typically have a larger, more broadly shared influence on the region’s economic prosperity.

To sustain that local growth, Scheberle stressed the need for improved education and job-training pipelines. Other area officials agreed.

“Employers are telling us that it is harder to hire for their current and immediate needs,” said Tiffany Daniels, director of communications and community engagement at Workforce Solutions Capital Area. “Future job creation and hiring needs may in turn be stalled if the current needs cannot be met and/or require costly and time-consuming recruitment from outside of the region.”

National workforce experts also noted the benefits that come with increased entrepreneurial activity, as well the gains exports can provide. Austin does well on the former, not as well on the latter.

On Thursday, the Ewing Marion Kauffman Foundation said Austin retained the No. 2 spot on its Kauffman Index of Growth Entrepreneurship. It was the third consecutive year Austin ranked second, trailing only the Washington, D.C., metro area.

The index measures the rate of employment and revenue growth for startup companies in a region.

“Young companies create an average of 3 million new jobs a year and have been responsible for almost all net new job creation in the United States in the last 40 years,” the Kauffman report said.

Austin remains, at its core, an entrepreneurial town. In fact, in the latest versions of Kauffman’s three related indexes – which measure startup, growth and more mature “Main Street” business activity in the country’s top 40 metro areas – Central Texas ranked second, second and ninth, respectively.

“It’s highly unusual” for a metro area to rank highly across all three measures, said Arnobio Morelix, a senior research analyst at Kauffman.

San Jose, Calif., for example, does very well on startup and growth indexes but ranked 30th on the most recent Main Street gauge.

Austin also remained remarkably consistent on the individual indicators that comprise the Growth Index, Morelix said. Most metro areas tend to see significant swings on those component measures from one year to the next.

Yet for all that startup and growth vibrancy, Central Texas lags when it comes to exports, which are key because they help bring wealth in from outside the region.

From 2008 to 2016, Austin’s economy grew an average of 3.8 percent a year — the second-fastest growth rate among the nation’s 100 largest metro areas, according to an analysis by the Brookings Institution. But over the same span, the region’s average annual export value grew just 1.7 percent, ranking 41st.

In 2016 alone, Austin ranked 34th in exports with roughly $10.2 billion, according to Brookings’ measurements, which differ from the official federal government data. Earlier this month, the Commerce Department’s International Trade Administration ranked Austin 26th, with $10.7 billion in goods exports.

According to the International Trade Administration data, Taiwan and South Korea dominate the list of destinations for Austin exports. Almost $2.7 billion worth of goods shipped from Austin to Taiwan, and almost $2.4 billion went to South Korea — much of the latter thanks to the presence of Samsung’s factory here.

Unsurprisingly, the computer equipment and semiconductors industries led the Central Texas list of export values, according to both Brookings and trade administration.

Finding ways to help increase exports, especially by encouraging small and midsize businesses to sell their goods and services overseas, brings more money into the region and helps generate more productive and higher paying jobs, said Joseph Parilla, a fellow at Brookings’ Metropolitan Policy Program.

That sort of job creation never comes with a ribbon-cutting or a splashy nationwide competition for proposals, Parilla said, but they’re the best fuel for a metro area’s economy.

“Three jobs from a new export deal here; five jobs there,” he said. “Those are the things that really build a local job base.”



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