ECONOMY

Austin jobless rate falls to 2.7%, lowest of 2018

Tight labor market expected to spur wage increases; state sees record low

Bob Sechler
bsechler@statesman.com
Crews work on the expansion project at Austin-Bergstrom International Airport on Sept. 26, 2018. The Austin metro area's unemployment rate dropped to 2.7 perecnt in October, the lowest rate for 2018, according to the Texas Workforce Commission.  [JAY JANNER/AMERICAN-STATESMAN]

Austin's unemployment rate slipped to 2.7 percent last month — its lowest point all year — amid a booming local economy that's enabling people to find jobs on average as fast they're entering the labor force.

The number of new workers in the region increased by 4,600 from September to October, according to the Texas Workforce Commission, but the October unemployment rate was still down from 2.9 percent in September as local businesses soaked them up and also cut into the ranks of the jobless.

"It's great news for workers," said Peter Rodriguez, dean of Rice University's Jones Graduate School of Business. “More jobs were filled (in Austin last month) than there were new entrants to the workforce."

Rodriguez said the strong demand for workers and the stretched labor market are likely to put pressure on local businesses to raise pay as they compete to hire, a pattern he noted has been slow to materialize in Austin and many other places statewide and nationally, particularly for low-wage earners in entry-level positions.

"It does signal the market should respond now going forward with higher wages," Rodriguez said.

For Texas overall, the seasonally adjusted unemployment rate came in at 3.7 percent in October, down slightly from 3.8 percent in September as the state added 32,300 nonfarm jobs over the one-month period.

The state's October unemployment rate was the lowest on record since the data started being kept in January 1976, according to the Texas Workforce Commission. 

Locally, October's unemployment rate of 2.7 percent, which isn't seasonally adjusted, was identical to the level recorded in October 2017, although the regional labor force has increased by 43,000 people since then to about 1.2 million. Prior to 2017, the monthly unemployment rate for October last hit 2.7 percent in the metro area — which includes Travis, Williamson, Hays, Bastrop and Caldwell counties — 18 years ago, when the labor force numbered about 750,000.

The workforce commission doesn't immediately adjust metro-level employment data for seasonal factors.

In the Austin area, wage growth has recently showed some signs of responding to the region's near two-decade-low monthly unemployment rates, but a clear trend has yet to emerge.

Average private sector hourly wages in the area rose 5.8 percent in September — to $29.91 — compared with the same month a year ago, after averaging gains of 2.9 percent through the first eight months of the year, according to the federal Bureau of Labor Statistics. Still, a preliminary October figure from the agency shows only a 1.6 percent increase compared with October last year.

Robert Phipps, co-founder of Austin-based financial advisory company Per Stirling Capital Management, said such month-to-month figures contain "a lot of noise" and often fluctuate. He said wages definitely are on the rise overall, pointing to first-hand experience to back up the view.

"We were hiring for a (receptionist) in Austin, and we actually had to extend the offer three different times because the first two people who accepted it emailed us back within a few days and said, 'I'm sorry, I can't take the job — I actually got a better offer,’” Phipps said.

Per Stirling filled the position a couple of weeks ago, he said, after increasing the starting salary nearly 18 percent, from $28,000 to $33,000.

"Wages are going up and (the labor force is) getting tighter and tighter — you can absolutely feel it," Phipps. “We are a very fast-growing company, and we are hiring constantly."

He said the Austin region's tight labor market is indicative of the area's strong economy and its desirability as a place to live and work. Still, he said it's "a danger sign" as well, because “extraordinarily low unemployment is nonsustainable by definition," and ultimately leads to wage pressure and inflation that slow economic growth.

Regardless, Gov. Greg Abbott heralded the record low statewide unemployment rate for October.

"This is not by accident — lowering taxes, removing regulatory barriers, and investing in our workforce and education system are the key to our successes," Abbott said in a written statement.

In the Austin metro area, payrolls expanded by 5,600 nonfarm jobs in October, compared to September. Nonfarm job growth in the metro area since October 2017 came in at 3.9 percent — for an increase of 40,400 jobs over the 12-month period.

Local employment growth last month was led by about 3,400 new jobs in the employment sector that includes retail and wholesale trade. Jobs in the sector are up by 12,700 over the past year, making it the category that has shown the biggest numerical gain locally over that time.

"That (sector) really tracks population growth directly," Rodriguez said. "It usually goes hand in hand."

Seasonally adjusted unemployment figures released for the Austin metro area by the Federal Reserve Bank of Dallas on Friday showed only minor differences from the workforce commission's data.

According to the Dallas Fed, the Austin-area unemployment rate came in at 2.8 percent in October on a seasonally adjusted basis, identical to September but a slight uptick from 2.7 percent in October a year ago. The unemployment rate in the Austin metro area last month was the lowest among large metro areas in Texas, the Dallas Fed said.