What is the employment situation in Texas, as well as in select Texas Metropolitan Statistical Areas (or MSAs), and how does it compare nationally? What was the impact of the pandemic and the pandemic-inspired business closures on employment? Where are we now, and what is needed to restore employment to pre-pandemic levels?
To examine these issues, we present a series of graphs and a summary table. Each graph shows the annual employment pattern for five years. Using monthly data, we look at each academic year from August to August. Our first year is September 2016 – August 2017, and we label this academic year or AY 2016-2017, with each subsequent year following this same pattern. Each line actually starts in August of the prior AY to identify where employment ended up in August of the prior year. For the current year, data from Texas and Texas MSAs ends in January and nationwide data ends in February. We graph the nonfarm employment series that has not been seasonally adjusted. This retains the seasonal patterns for each area and allows for monthly comparisons across the fiscal years.
Figure 1 shows the employment patterns in the U.S. The increase year-to-year in the three pre-pandemic years from August 2016 – August 2019 (represented by maroon, blue and grey lines respectively) indicates the growth in employment over the years. There are clear seasonal patterns, with a decline in employment in January, and a drop in employment in July. Overall, the three years are stacked on top of each other and show growth in employment over time. In fact, we might measure economic growth (in employment) by the upward shift in the lines depicting the first three years. Taking August 2016 to August 2019 as a simple measure of this growth. For the nation the upward shift was 4.6% in three years, or an annual growth rate of 1.5%.
The pandemic year, AY 2019-2020 (yellow) shows a similar pattern to the first three years up until February. In March, employment declined instead of increased, and in April, employment fell through the floor. This was the first two months of the pandemic, and was combined with consumers avoiding certain businesses and governments ordering other businesses to shut down. The drop in employment from February 2020 to April 2020 was 15.2% at the national level.
Finally, what is the current situation? First, the red line for AY 2020-2021 is below the maroon line for AY 2016-2017, indicating the employment is lower in each month of this year than it was in each month of the year four years ago! That tells you much of what you want to know about the current state of the national economy. So, how much would employment have had to increase in January 2021 to reach the level it had in January 2020 just prior to the pandemic? Employment in January 2021 would have had to have been 6.5% higher than it was in order to equal the employment level in January 2020. To keep this in perspective, employment grew 1.5% yearly over the prior three years, so a 6.5% increase in employment is quite large.
We turn to Texas employment in Figure 2. Texas shows a similar pattern to the U.S., except that Texas exhibited faster growth pre-pandemic and had a larger initial impact on employment due in large part to the decline in oil and gas prices that coincided with the pandemic. And yet, Texas is doing better on the recovery front. Texas’s employment declined 18.3% from February 2020 to April 2020. Texas’s employment growth rate from August 2016 to August 2019 was 2.1% annually. Finally, employment in Texas in 2021 has been basically equal to AY 2017-2018, or a level last seen three years ago. Texas’s employment in January 2021 would have had to have increased by 4.9% to reach the value it held in January 2020. While seemingly more favorable than the national situation, this 4.9% still represents over two years of the annual employment growth of the pre-pandemic period.
Among MSAs, the star of the Texas economy has been Austin-Round Rock shown in Figure 3. Its employment grew at 3.6% annually prior to the pandemic. It suffered a 23.5% decline from February 2020 – April 2020 during the beginning of the pandemic, but its current employment level is above the level two years ago and below the level from last year prior to the pandemic. Its January 2021 employment would have had to have been 2.4% higher to be at its January 2020 level. This is the best performance among the Texas ‘big four’ MSAs.
Second among the large MSAs in Texas is Dallas-Fort Worth-Arlington. As seen in Figure 4, this metro area saw an average annual employment growth of 2.5% before the pandemic. It suffered a 21.6% decline in employment in the first months of the pandemic, but today has employment basically at the level from two years past, and would have required a 3.3% increase in its January 2021 employment level to be at the same level it achieved in January 2020. Of course, for both Austin and Dallas metros, just getting back to last year’s pre-pandemic employment peaks is not good enough. Absent the pandemic, both areas expected continued growth in employment – and in the local economy overall – so that employment substantially above last year’s levels would have been expected.
If the above two MSAs are the relative high performers, the pandemic and the accompanying woes of the oil and gas industry have not been kind to Houston-The Woodlands- Sugar Land. The employment patterns for the Houston MSA are depicted in Figure 5. The Houston metro area grew annually at 1.8% in the three years before the pandemic, August 2016 – August 2019. The pandemic’s opening impact from February to April was a decline of 23.0% in the Houston MSA. More importantly, this year’s employment has been between the employment levels of three and four years ago, and in January, actually declined slightly and fell below the level of January 2017. In order to be at the January 2020 employment level, Houston MSA’s January 2021 employment would have needed to be 7.3% higher than the reported number.
The last of the ‘big four’ Texas MSAs is San Antonio-New Braunfels, and it has had an experience better than Houston but not equal to Austin or Dallas. The San Antonio MSA had annual employment growth of 1.9% pre-pandemic, and the pandemic initially caused a two-month decline in employment of 22.7%, as depicted in Figure 6. San Antonio MSA’s employment levels this year are basically equal to those of three years ago, and it would have taken a 4.9% increase in the reported January 2021 employment to match the level of January 2020.
Finally, we consider the College Station-Bryan MSA. This college town’s employment pattern follows the academic calendar with higher fall and spring employment and lower summer employment, as seen in Figure 7. Pre-pandemic, College Station-Bryan MSA’s employment had been growing at almost 2.7% annually. During the initial pandemic months, it fared somewhat better with a decline in employment of 18.8%, a terrible blow, but much less than the other MSAs we have examined. There was a strong recovery through the summer, and employment in the current period, AY 2020-2021, basically followed the pattern of two years ago, AY 2018-2019, until the January employment numbers came out. January employment suffered a large decline, basically putting employment at a level last seen three years ago The January 2021 employment level would have had to have increased by 5.7% to equal the January 2020 number.
This brief survey of employment patterns illustrates that employment in Texas has not fallen to the same degree as national employment. However, state employment from January 2021 is closer to employment in 2018 than it is to employment in 2019 or 2020. Within the state, Austin-Round Rock’s employment situation is the best among the four largest Texas MSAs, with employment in January 2021 ahead of employment in 2019, but still behind employment in January of 2020. Among the largest Texas MSAs, Houston has had the toughest go of it during the pandemic with current employment below the employment level of four years ago. Over the next few months, as widespread vaccinations lead to increased economic activity and increased movement in the direction of pre-pandemic normalcy, we will have a better understanding of the rate at which the state and MSA’s employment levels regain lost ground.