Tight labor market helps push Austin wages higher — for some


Austin employers had it good for a long time.

Because so many people wanted to move here — especially during the recession and the early parts of the recovery, when the Central Texas job market was powering away from almost every metro in the country — companies here could get away with paying a little bit less.

But the luxury of lower wage pressures slipped away as other metro areas’ economies improved, Austin’s cost of living soared and the local labor market got tighter and tighter, a trend that continued in June.

The advantage has swung back toward workers, at least those with the right sets of technical, professional, trade and other skills. It’s precisely what economists would expect in a region where unemployment rates are near historical lows, the population is booming and companies continue to generate new jobs at a rapid pace.

All told, local employers created 4,400 jobs in June, up 0.4 percent from the prior month, roughly double the average increase for June since 2000, according to data from the Texas Workforce Commission.

After some recent cooling off from sizzling annual growth rates during the past four years, Central Texas job creation rates might be re-accelerating. Local employers expanded payrolls 2.8 percent over the past 12 months, edging back toward the speedy 3 percent threshold that has become commonplace for the metro.

That, along with some lighter-than-usual seasonal job cuts, helped limit the regular June increase in the metro area’s unemployment rate, which ticked up to 3.4 percent from 3.2 percent in May, according to the commission’s preliminary data released Friday.

The agency doesn’t immediately adjust its metro-level data for seasonal workforce patterns. However, seasonal adjustments by the Federal Reserve Bank of Dallas put the Austin-area jobless rate at 2.9 percent — down from 3.1 percent in May and back to levels not seen since the tail end of the dot-com boom.

Such a tight labor market – Austin’s adjusted rate is 1.7 percentage points lower than the state’s and 1.5 points lower than the nation’s is fueling faster pay hikes.

In the second quarter of 2017, wages for full time, private-sector workers in Central Texas increased 3.5 percent over the same period last year, according to the PayScale Index, which tracks wage trends based on data compiled by PayScale, an online salary, benefits and compensation information company.

That was the second-fastest wage growth in the country for the quarter, behind only San Francisco and in line with other metro areas powered by high-tech and other creative economy jobs. Like those similar cities, Austin’s wage growth was concentrated in high-tech, professional, skilled trades and other high-demand skill sets, said Katie Bardaro, PayScale’s vice president of analytics.

While wages in those fields spiked, Bardaro said, overall wage gains were more or less in line with inflation. So for most workers, raises merely kept pace with the rising cost of living.

Those gains might start to spread as more Austin-area employers face pressure to raise wages faster. But for now, the rich get richer – wages increase for workers with the right skills, as employers that need to draw the talent to feed their growth have to sweeten their offers to workers outside the area.

Austin “was tracking pretty close to the national wage change we were observing, but in 2014 it started to outpace it,” Bardaro said. “Employers are having to offer better wages to compete … especially in the tech hubs, where we’ve really seen strong wage growth over time and a real issue with employers being able to fill jobs because there’s not enough supply out there to fill demand for engineers, designers” and other high-demand skill sets.

Central Texas employers and consultants said that transition has been difficult for many Central Texas companies. Scott Haigler has seen it with his clients, as well as at his own firm, RSM, an audit, tax and consulting provider for middle market companies.

For years, the tight local labor market has forced many fast-growing companies to look outside for the talent they need, said Haigler, managing partner of RSM’s Austin office. He often had to bring workers in from the firm’s locations around the state and country, or lure in other people from other areas.

Companies used to have an easier time luring employees to Austin, before Central Texas real estate costs soared, traffic snarled and the advantage Austin had over other, then-struggling metro area economies narrowed. Now when workers balance compensation and cost of living, Austin as a destination might not look as stellar as it did eight or nine years ago.

That’s forced some difficult conversations with clients, Haigler said. He now tells them: “The market has changed and you’re going to have to pay a higher wage than you ordinarily would have.”

“Austin was fortunate for a long time in that it was a desirable place to live and employers didn’t have to raise wages,” he said. “That crossed over a couple years ago.”

A drive along most Austin roads will show you that hasn’t stopped workers from coming. In fact, the region’s official labor force — those working or actively seeking work — has risen 2 percent since June of last year, the commission data show.

LinkedIn tracks the movement of the millions of workers on its platform. Its monthly analysis for July shows Austin continuing to gain talent, trailing only Seattle and Denver in terms of the number of workers moving in.

For every 10,000 workers in the metro, 10.26 workers moved in from Houston in the last 12 months, the company said. San Francisco was second, with 7.49 incoming workers per 10,000 here.

A fair share move out as well, but employers hungry for scarce talent continue to pull workers in faster than they leave, according to the LinkedIn data.

“I don’t think it’s a bubble,” said Guy Berger, an economist the company. “There are always going to be political factors and the economics could change … but for the foreseeable future I don’t see that being the case.”

Austin will probably continue to grow faster because it has a lot of industries in which people want to work, Berger said. And as the LinkedIn analysis shows, many are willing to move for those jobs.

“People seem to like living there for obvious reasons,” he said. “But unlike San Francisco, Portland or Seattle – the other big net attractor cities – (Austin) seems less likely that housing costs will price people out of moving there.”



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