This Time College Station-Bryan is not Different: the Current Recession

During a recession we expect to see employment decline, the jobless rate go up, the total wage bill shrink, and the overall consumption level contract. However, the impact of a recession varies across regions and metropolitan areas. Here we examine how employment, unemployment, and total wages changed during the last three recessions.  These include the early 2000’s recession (March 2001 to November 2001), the Great Recession (November 2007 to June 2009), and the ongoing Covid-19 recession starting in February 2020.
 
Over the last two decades, the College Station-Bryan metropolitan statistical area (MSA) has exhibited “lagged” recessions. That is, the negative effects of the recession on economic indicators such as employment and wages have been delayed relative to the broader economy-wide business-cycle. This can be attributed to the large portion of local employees working for Texas A&M University (TAMU), an entity that is not immediately impacted in the typical recession.  For instance, in the Fall of 2020 TAMU reported over 20,000 employees,[1] which was 17.8% of total nonfarm employment as reported in September 2020 for the local metro area.[2]
 
Typically, the stable employment offered by Texas A&M provides a steady and uninterrupted stream of income to a large share of the population that, in turn, keeps the local economy “running.”  Consequently, businesses in industries that are most affected by economic downturns, such as Food & Accommodation, Arts & Entertainment, and Retail Trade, may not experience declines as severe as in other areas. 
 
This has not been the case since the start of the current Covid-19 recession.  With this recession, the economic effects in the College Station-Bryan metro area are not so different from the other metropolitan areas in Texas.  The Covid-19 recession started over public concern about increases in Covid-19 cases and deaths.  That, and concern over the consequent burden on the healthcare industry, led to government restrictions that closed many businesses and caused a large decrease in local consumption and employment in private industry.
 
Figure 1 depicts the indexed value of nonfarm employment from the three recessions of the last two decades, in the order of their occurrence. Each line represents the indexed nonfarm employment for each of the large metropolitan areas of Texas, as well as for the entire state of Texas, the United States, and the College Station-Bryan MSA.
 
During the recession in the early 2000’s, nonfarm employment in College Station-Bryan (maroon) did not decrease like that of the US as a whole (light blue) or like the state of Texas as a whole (red).  In College Station-Bryan, nonfarm employment remained stagnant for about a year, but started to slowly increase by the second year of the recession and was 3% higher in January 2003 than March 2001. On the other hand, nonfarm employment both nationally and statewide continued to decline over the same period of time, each losing 2% of employment. The three Texas MSAs that experienced higher employment growth during this recession were all located on the Texas-Mexico border (light green).
 
The Great Recession, depicted in the middle graph, started in late 2007 and brought employment decreases across the board to all large Texas MSAs (gray), to the entire state of Texas, and to the U.S.  Nonfarm employment in the U.S. decreased by more than 5% by the third year from the start of the recession.  In strong contrast, nonfarm employment in College Station-Bryan (CSB) grew by 5% by the end of 2010.
 
The graph on the far right shows the last 16 months of nonfarm employment figures, indexed to February 2020. So far, Texas Metro areas, Texas, and the nation have suffered similar losses and are still hovering at levels below those recorded prior to the pandemic. During this recession, nonfarm employment in CSB sharply decreased to 87.5% of its February level by April 2020. The state and nation’s nonfarm employment level decreased by similar amounts over the same period, to 88.9% and 85.3%, respectively.  Since April of 2020, all of the employment levels have increased, although at different rates.

Fig-1-Employment-Indices.jpg
Source: Bureau of Labor Statistics; Federal Reserve Bank of Dallas.
 
Figure 2 shows the trends in the unemployment rate for the same areas during the three recessions of the last two decades. In each of the three figures, the unemployment rate in College Station-Bryan is generally lower than the rates in the major Texas MSAs and lower than the national and state rates.

Fig-2-Unemployment-Rates.jpg
Source: Bureau of Labor Statistics
 
Figure 3 depicts indexed inflation-adjusted total wage payments (sometimes called the ‘wage bill’) in the largest Texas MSAs, Texas, the United States, and College Station-Bryan. Total wage payments are indexed to quarter 1 of 2001 for the early 2000’s recession, quarter 3 of 2007 for the Great Recession, and quarter 4 of 2019 for the Covid-19 recession. In the early 2000s, College Station-Bryan showed a slight increase in total quarterly wage payments, increasing by 2.8% by the second quarter of 2003. The total wage payments at the state and national level both decreased moderately, reaching a low-point of 96.9% and 94.6% of initial total wage payments by the first quarter of 2003. By the second quarter of 2003, border metro areas all experienced increases in their total wage payments, from a low 0.6% in El Paso to a high 10.7% growth in Mcallen-Edinburg-Mission. 

During the Great Recession, total wage payments in College Station-Bryan increased significantly while the state and nation experienced decreases. By the fourth quarter of 2010, College Station-Bryan’s total wage payments had increased 6.4% since the start of the 2007 recession. In both the early 2000s and 2007 recession, we see a diverse set of trends in the wage bill, with some areas virtually unaffected while others suffering measurable losses. All areas suffered a loss in their total wages after the first quarter of 2020, but most have completely recovered. The U.S. wage bill shows growth of 2.9% in the first quarter of 2021 relative to the fourth quarter of 2019, before the start of the pandemic. College Station-Bryan total wage payments were 4.3% higher in quarter 4 of 2020 relative to the fourth quarter of 2019. Most metro areas in Texas, including all border metros, have regained pre-pandemic total wage payment levels. However, the total wage bill for Texas is still on its way to recovery and still below the pre-pandemic levels by 0.5% as of the fourth quarter of 2020. The graphs of indexed total wages generally follow a pattern similar to nonfarm employment.

Fig-3-Wage-Index.jpg
Source: Bureau of Labor Statistics; Bureau of Economic Analysis for the United States.
 
The takeaway is that the current economic downturn has impacted each metro area, the state, and the country in similar ways. The downturn was abrupt and the timing across areas was quite similar. This stands in sharp contrast to previous recessions, which spread more gradually, and more unevenly, across the country. The current trends in the economic indicators, along with the easing of restrictions, suggest that the national, state, and MSA-level economies are recovering. The rebound in employment is particularly crucial in the Hospitality and Leisure industry.  What happens in this industry by fall will give a much better indication of the extent of the local economic recovery.
 

References
Consumer Price Index (for inflation adjustment)
-U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], retrieved from FRED, Federal Reserve Bank of St. Louis; Seasonally Adjusted.
Nonfarm Employment
-U.S. Bureau of Labor Statistics, All Employees, Total Nonfarm, retrieved from FRED, Federal Reserve Bank of St. Louis; Seasonally Adjusted.
-Federal Reserve Bank of Dallas, Texas Workforce Commission, and Bureau of Labor Statistics, Total Nonfarm Payroll Employment for Texas State and Metropolitan Statistical Areas, two-step Seasonally Adjusted.
Unemployment Rate
-U.S. Bureau of Labor Statistics; Current Population Survey and Local Area Unemployment Statistics; Unemployment Rate, Seasonally Adjusted.
Wages
-U.S. Bureau of Economic Analysis, Gross domestic income: Compensation of employees, paid: Wages and salaries in the United States, retrieved from FRED, Federal Reserve Bank of St. Louis, Seasonally Adjusted Annual Rate.
-U.S. Bureau of Labor Statistics and Federal Reserve Bank of St. Louis, Total Quarterly Wages, State and Metros; retrieved from FRED, Federal Reserve Bank of St. Louis, Seasonally Adjusted.
 
[1] Texas A&M University,  University Semester Workforce Profile, Fall 2020, https://employees.tamu.edu/talent-management/_media/workforce/Fall-2020-University-Workforce-Profile-Part-02.pdf
[2] Bureau of Labor Statistics, nonfarm employment retrieved from the Federal Reserve Bank of Dallas; https://www.dallasfed.org/research/econdata/brysa.aspx.

Posted: June 17, 2021 by Dennis W. Jansen, Carlos I. Navarro, Andrew J. Rettenmaier