Austin is 'hottest job market in the country' as jobless rate drops again

The unemployment rate in the Austin area has slipped below 3% for the first time since the coronavirus pandemic began, coming in at 2.9% in December as the surging local economy continued to buck the damper of the fast-spreading omicron variant of the virus.

But the latest figures from the Texas Workforce Commission did include signs that omicron could be having a negative impact on some business activity in the region — with jobs in the leisure and hospitality sector dropping slightly for the first time in five months and the labor force down by a small amount overall compared with November.

On the whole, however, economists called the sub-3% jobless rate the latest indication that the Austin area is booming and that local employers in many industries are hiring new workers as fast as they can find them.

“Austin is still the hottest job market in the country, perhaps of any major metro area," said Peter Rodriguez, dean of Rice University’s Jones Graduate School of Business. "It is hard to imagine a major metro market with the ability to run any hotter than Austin is right now.”

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The local unemployment rate, which was 3.2% in November, has fallen steadily since June after spending much of the previous 12 months bouncing around in a range of about 5% to 6%, according to figures from the Texas Workforce Commission that haven't been adjusted for seasonal factors.

Dirk Mateer, a University of Texas professor and economist, called the 2.9% rate for December "a great number" and said he thinks it could drop below 2.5% this year amid the intense demand for workers in the region, spurred by the growing presence of such major companies as Tesla, Apple, Samsung and Oracle, as well by the large number of other businesses that have been relocating here.

The unemployment rate in the Austin metro area, which includes Travis, Williamson, Hays, Bastrop and Caldwell counties, registered 2.4% in December 2019, prior to the pandemic. It has improved significantly after shooting up to 11.8% in April 2020, when the shock of the coronavirus first slammed the economy statewide and nationally and triggered huge numbers of job cuts.

A jobless rate of below 2.5% "is about as (low) as you could ever expect an unemployment rate to go in a major metro area — that is full employment," in which just about everyone who wants a job has one, Mateer said.

"But the trends are in place (to get that low again), and they don't show any signs of abating," he said.

That doesn't mean every industry has been benefitting equally amid the rebound from the pandemic-induced downturn, however.

Hospitality-related businesses, including restaurants, nightclubs and hotels, were hit hard by the crisis because they rely on crowds and face-to-face interactions, and the latest figures from the Workforce Commission indicate the omicron variant might be giving them more difficulties.

Austin-area employment in the leisure and hospitality sector declined by 1,800 jobs last month, the first such downturn since August. The sector, which employed about 125,300 people in December, has added nearly 19,000 jobs over the past year despite the recent dip — but it remains about 9,000 short of the estimated 134,000 it had just before the pandemic and is among the few local industries yet to fully recover all of its job losses.

Mateer said Workforce Commission figures for January, which won't be released until next month, will provide a better sense of the impact that omicron has had on hospitality-related businesses and if it's continuing.

"The omicron variant probably played a small role" in the decline in hospitality-related jobs from November to December, he said. “If I am (a business owner) in leisure and hospitality and have been racked by the pandemic and have to see another variant coming along, of course I'm worried."

Local jobs in professional and business services, which includes the region's booming high-tech industry, also declined slightly last month, falling by 2,200 to 229,000. Still, jobs in the sector remain up by more than 26,000 from pre-pandemic levels, and economists chalked up the one-month dip mainly to seasonal hiring trends.

A number of other sectors of the regional economy logged job growth from November to December, including retail trade — which tracks closely with population gains — and the manufacturing and construction industries.

Rodriguez, of Rice University, said he expects the broad trends in Austin this year to be strong job growth and continued intense demand for workers, even if the ongoing pandemic and issues such as inflation present challenges for certain sectors.

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"There is nothing in this (December) data that makes me fear at all the path of growth" for the Austin area, he said. “I would say the only thing likely to apply the brakes in Austin is just the speed at which it can add infrastructure, housing and the people needed to work those jobs."

Growth in nonagricultural employment in the Austin metro area came in at 7.3% for 2021, according to figures from the Workforce Commission, a gain of 80,600 jobs. In terms of raw numbers of jobs, the region had regained all of its pandemic-related losses by August last year — three months before Texas overall achieved that milestone in November.

Statewide, the December unemployment rate came in at 5% on a seasonally adjusted basis, down from 5.2% in November. Unadjusted for seasonal factors, the statewide rate was 4.3% last month, compared with 4.5% in November.

The Texas Workforce Commission doesn’t immediately adjust its metro area data for seasonal factors. But the Federal Reserve Bank of Dallas released seasonally adjusted numbers for the Austin area Friday that pegged the local unemployment rate last month at 3.3%, down from 3.5% in November and from 5.2% in December 2020.

Overall, the December unemployment rate in the Austin area was the lowest among Texas’ major metro areas, according to the Dallas Fed, with the Dallas metro area second at a seasonally adjusted rate of 4.1%. The McAllen region in South Texas came in highest among the state’s major metro areas at 8.3%.

This article originally appeared on Austin American-Statesman: Austin unemployment rate below 3% in since start of COVID pandemic