HIRING HEADACHES:

Chris Strader has increased starting pay at his North Austin pizza restaurant, instituted and seeded savings accounts as employee perks and has a "Now Hiring" banner out front that's been hanging so long it's approaching the status of permanent adornment.

On a recent morning, however, he and his two co-owners were working the early shift together anyway -- shredding cheese, seasoning pans and otherwise preparing for the daily rush -- because almost half a dozen job openings remain unfilled.

“I can’t remember the last time I had a full schedule” of hourly staff to cover an entire week, said Strader, who owns Conans Pizza North at 2438 W. Anderson Lane along with his sister Carly and brother Chad.

"I've been calling everyone who applies," he said. "Half of them don't respond, and then the half who do don't show up for the interview."

Tales of extreme hiring difficulties are nothing new amid the strong Austin economy that has stretched the local labor force to near capacity, fueling intense competition among businesses seemingly regardless of industry and providing qualified job seekers with their pick of opportunities.

"This is the tightest labor market that I have seen since 1999," during the height of the dot-com boom, said Bicycle Sport Shop owner Hill Abell, who noted that turnaround times for bike repairs at one of his five locations ballooned to as many as 10 days for a short time recently because of high demand and a dearth of bike mechanics. "It has reached a crisis level (and) it's really having a negative impact on our business."

But the hunt for employees might be about to get even more challenging.

The Federal Reserve Bank of Dallas recently flagged a slowdown in the growth rate of the Austin-area civilian labor force -- meaning the pool of potential workers that companies draw from when hiring.

According to the Dallas Fed, the region's civilian labor force increased by only 0.8% year-to-date through June on an annualized basis, down from annual growth rates of 2.7% in 2018 and 3.6% in 2017.

Data from the Texas Workforce Commission back up the trend, with the local labor force up 1.2% in June compared to the same month of 2018, the lowest year-over-year growth rate for June in 15 years. The labor force in the Austin region climbed by about 15,000 people -- to nearly 1.22 million -- through the 12 months ending in June, according to the workforce commission's figures, compared to average year-over-year growth topping 30,000 over the previous 10 years.

No need to move

Keith Phillips, the Dallas Fed's assistant vice president and senior economist, said the slowdown in Austin's labor force is likely attributable to ebbing in-migration of workers from other areas of the country -- which has been one of the spigots feeding Austin's boom -- because the broad U.S. economic expansion has enabled more people to find work in their hometowns and forego pulling up stakes for greener pastures.

“There's just a smaller pool of workers (nationwide) that are looking to move for economic reasons," Phillips said. "It is not a reflection of Austin losing its appeal. It's just that moving is costly and when opportunities are good where you are, people tend to not want to move.”

Phillips noted that Austin remains the top major metropolitan area in the state for domestic in-migration, and a recent ranking also put the city atop the heap nationally as well. According to networking site LinkedIn -- which compiles monthly workforce reports from information posted by its users -- Austin attracted more new workers than any other major U.S. metro last month, the 13th consecutive month it has held the top spot.

Still, a slowdown in the pace of labor force growth will further stretch the Austin area's taut labor supply, even if the overall number of workers continues to rise. The local unemployment rate has been scrapping near two-decade lows already, most recently coming in at a seasonally adjusted 2.6% in June.

Labor force growth "portends future labor market conditions," said Peter Rodriguez, dean of Rice University’s Jones Graduate School of Business. “What (the slowdown) suggests is that you will have an even tighter labor market going forward."

Phillips agreed with that assessment, saying Austin's unemployment rate "can't get too much lower" but will probably decline nonetheless through the remainder of the year.

The upshot is that local employers could be in for an even harder time finding enough workers to keep up with rising demand, he said, while consumers might notice higher prices or deteriorating service.

An extremely tight labor market isn't the kind of dilemma that tips an economy into a downturn, Phillips said, but it is likely to take some of the luster off the Austin-area boom, a trend he said might already be evident in the region's job-growth numbers.

Austin's "job growth this year has been good” at an annualized pace of 3.2%, he said. But "if it wasn’t for this tight labor market, Austin would be in the 4% range -- probably at least a full percentage point higher job growth.”

'The most challenging time'

Strader, of Conans Pizza North, is among the local business owners who would happily add to the region's employment figures if he were able to find enough people to fill his open positions. He has raised starting pay to $10 an hour plus tips, from the $8 to $9 range, and he recently opened $100 savings accounts for employees -- with plans to add more money periodically -- that they'll receive if they provide two weeks notice when they quit, a courtesy he said has become less common amid the booming job market.

"I'm raising wages as fast as I can, but there is very little margin in the restaurant business," Strader said. "We're selling record numbers of pizzas, but because (employee costs are rising), that has absorbed most of our profits."

The next step might be for the restaurant to stop operating its own pizza delivery service and instead use a third-party food delivery company, he said, simply because of the difficulty hiring people who want the job. He currently has about 20 employees overall, and would like that number to be above 25, he said.

Abell, of Bicycle Sport Shop, is in much the same boat. He recently instigated a paid training program -- starting at $9 an hour -- to teach bike mechanics to unskilled high school and college-aged students and outline a path for them to earn upwards of $20 a hour once they acquire the requisite technical abilities and experience. Average wages at his bike shops -- which employ about 120 people -- are up 15% to 20% over the past three years, he said.

“It's the most challenging time that I have experienced in 35 years of being in business" because of the tight labor market and Austin's rising cost of living, Abell said. Customer demand is strong, but "my cost of doing business is skyrocketing, and I am less profitable today than I was five years ago."