Texas Unemployment Rate Ranks 45th in the US, But Economists View It as a Positive Indicator of Economic Growth
Texas, known for its robust job growth, has recently added over 400,000 new jobs between August 2022 and 2023. Despite this impressive growth, the state’s unemployment rate is currently tied for the 45th worst in the country. The unemployment rate in Texas has remained stagnant at 4.1% for four consecutive months, which is below the national average of 3.8% in August. It is worth noting that the unemployment rate in Texas stood at 4% in February and has not returned to its pre-pandemic levels, according to data from the Federal Reserve Bank of Dallas.
Although a higher unemployment rate may initially seem concerning, economic experts argue that it is actually a positive sign of the state’s economic growth. The higher unemployment rate is reflective of the expanding labor force in Texas. The state has witnessed an influx of domestic migration, with more individuals choosing to relocate to Texas compared to any other state in the country. Additionally, many native residents are opting to stay in Texas, further contributing to the growth of the labor force.
Peter Rodriguez, dean of the Jones Graduate School of Business at Rice University, highlights the potential pitfalls of low unemployment rates. He explains that in some cases, a decrease in the unemployment rate can occur when frustrated individuals leave the labor force or even the state. In contrast, Texas has managed to maintain a higher unemployment rate due to its expanding labor force.
In August, Texas surpassed previous records and reached a labor force of over 15.1 million, marking a new state high. Prior to the pandemic, both Texas and the United States had an average labor force participation rate of around 63.4%. However, while the national rate has yet to fully recover, Texas boasts a labor force participation rate of 64.2% as of last month.
Pia Orrenius, Dallas Fed vice president and senior economist, emphasizes the advantages of a slightly higher unemployment rate. She explains that when labor markets are overly tight, it becomes challenging for employers to find suitable candidates for hiring. The larger hiring pool resulting from a higher unemployment rate benefits companies, especially smaller firms that are often experiencing rapid growth.
Orrenius further notes that as Texas continues to add jobs, the growing population and labor force can accommodate the rising demand for labor. However, recent reports indicate signs of change, as job growth in Texas has slowed down. In August, the state added 12,400 jobs, a decrease from the 28,200 jobs added in July. This decline, particularly the minimal job growth in the private sector, suggests a sharp slowdown.
The tech industry, which experienced significant job growth immediately following the pandemic, has also seen a slowdown in Texas. This aligns with national trends in the industry. Manufacturing, construction, technology, and real estate have been the sectors with the least job growth this year compared to the previous year. These sectors are highly sensitive to fluctuations in the interest rate.
Experts have noted the potential impact of remote work on Texas’ commercial real estate market. With a significant portion of the Austin workforce able to work from home during the pandemic, many businesses are facing challenges in bringing employees back to the office. This shift in work dynamics may result in underutilized office spaces, which will have both economic and practical implications.
Despite these changing factors, Texas continues to be a leader in job growth. The state’s unemployment rate, although higher than desired, is actually a reflection of its thriving economy and expanding labor force. Texas has managed to accommodate the rising demand for labor while providing opportunities for job seekers. As the state navigates through potential shifts, it remains well-positioned to maintain its economic growth and labor market strength.
