Austin jobless rate slips to 3% as area economy stays hot

Concerns are mounting about slowing U.S. economic growth overall, but Austin's latest unemployment figures signal the local boom is continuing unabated.

The jobless rate in the Austin metro area eased to 3 percent in February, after an uptick to 3.3 percent in January sparked some fears that the hot regional economy might be cooling along with a deceleration nationally. But last month's unemployment rate came in below the year-ago rate of 3.1 percent and also registered its lowest level for the month of February in two decades, according to nonseasonally adjusted numbers released Friday by the Texas Workforce Commission.

"Broadly speaking, it's clear that a flattening of growth has arrived around the nation — but it has not arrived in Austin," said Peter Rodriguez, dean of Rice University’s Jones Graduate School of Business. "Austin does not look like the rest of the country."

Citing a slowdown in the U.S. economy, Federal Reserve officials said this week that they're unlikely to go through with initial plans to raise interest rates this year. Among other evidence of the cooling trend, job growth nationally nearly ground to halt in February, according to a U.S. Labor Department report this month.

But the Texas economy, and the Austin metro area's economy in particular, have been among the exceptions. Texas has continued to benefit from businesses adding jobs or relocating here to take advantage of the state's relatively low cost of living and taxes, Rodriguez said, while Austin has been disproportionately attracting many of those new workers because of its thriving high-tech sector and booming hospitality and construction industries.

Annual nonfarm job growth registered 2.3 percent last month in the Austin metro area — which includes Travis, Williamson, Hays, Bastrop and Caldwell counties — and 2.2 percent in Texas overall, according to the workforce commission.

Drew Scheberle, a senior vice president at the Greater Austin Chamber of Commerce, said Austin-area business activity and hiring have shown no signs of tapering off in 2019, despite the slight January uptick in the region's jobless rate that he noted still was low and "pointed to full employment."

The February figures "more accurately reflect what we hear from the companies we work with every day at the Austin chamber — robust job creation, numerous job openings and exciting expansions," Scheberle said.

Statewide, the February unemployment rate came in at a seasonally adjusted 3.8 percent, unchanged from January but down from 4.1 percent in February 2018, according to the workforce commission. The state agency doesn't immediately adjust its metro-level data for seasonal factors, but the Federal Reserve Bank of Dallas released seasonally adjusted numbers for the Austin metro area Friday that pegged the region's unemployment rate last month at 3 percent, a decline of 3.2 percent from January but identical to February 2018.

A national slowdown would take some of the shine off the Texas and Austin economies. But Rodriguez said the Fed's interest rate decision this week could delay that eventuality — or help prevent it entirely if the U.S. economy gets back on track.

The Fed's move "gives longer legs to the growth period in Austin than if they raised (interest) rates," he said. "I think that is going to mean that Austin is going to continue its boom" for the foreseeable future.

Still, a number of economists have warned that the tight labor market in the metro area risks choking off some of Austin's economic gains regardless of national factors. Rodriguez agreed with that assessment but said such a slowdown is most likely to show up in low rates of job growth as local employers struggle to fill open positions, rather than in the region's unemployment rate.

For the time being, however, he called Austin's job growth numbers solid, particularly given the "quality of the jobs" it has added in relatively high-wage sectors.

Hiring in the metro area last month was led by 3,600 new jobs in professional and business services, the industry category that includes most of the technology sector. Jobs in the category have climbed 3.4 percent since February 2018, bringing the total to 188,600.

The government sector added 2,700 jobs last month in the Austin metro area, according to the workforce commission, while the industry category that includes restaurants and hotels added 1,100.

Overall, the February unemployment rate in the Austin area was the lowest among Texas' major metro areas, according to the Dallas Fed, with the San Antonio-New Braunfels region in second place at a seasonally adjusted 3.4 percent. The McAllen region in South Texas came in highest among that state's major metro areas, at 6.5 percent unemployment.

Keith Phillips, senior economist at the Dallas Fed, said in a written statement Friday that "business outlooks (in Texas) improved in the first two months of 2019" after jitters arose in the fourth quarter last year regarding the national and global economies.

Still, he said, job growth in the state is likely to slow this year because of "historically tight labor markets, lower oil prices and continued uncertainty about trade restrictions."

The Dallas Fed is forecasting full-year job growth in the state for 2019 at 1.5 percent, compared with a 2.3 percent gain in 2018, Phillips said.