Higher interest rates are slowing the real estate business, but the job market is proving to be more resilient, especially in Texas.
The state added nearly 73,000 workers in July, the second biggest monthly gain of the year. Through the first seven months of 2022, Texas has grown jobs at an annualized rate of 6.1%, far ahead of the U.S. rate of 3.8%.
The Dallas metro stands out even more, adding jobs at an annualized rate of 8.4%, according to the Federal Reserve Bank of Dallas.
What’s keeping the momentum going?
“People are flowing back into the labor force in our region,” said Pia Orrenius, senior economist at the Dallas Fed. “We’ve had so much labor force growth and we have a pretty high labor force participation rate – it’s actually recovered from the pandemic.
“Obviously, employers are eager to hire, as you can tell with these tremendous job gains,” she added.
A growing labor force provides the fuel for a fast-growing economy when employers are expanding. The civilian labor force includes workers 16 and over who have a job or are looking for one. The participation rate is the share of the population in the labor force.
Texas is outperforming on both measures, and that’s notable because the pandemic pushed out so many workers. Many were avoiding health risks or dealing with extra caretaking duties, and some took early retirement. A year after COVID hit, the U.S. labor force was down by over 4.1 million.
By July 2022, the numbers still had not recovered: The U.S. labor force was 623,000 shy of its February 2020 level.
Texas is a much different story: Its labor force rebounded to pre-pandemic heights in just eight months. And in July, Texas’ labor force had 634,000 more people than before the pandemic.
When companies relocate or expand in Texas, they often cite the workforce. That can refer to many things, from the share of college grads to unions’ penetration to the region’s work ethic. But to simply be part of the conversation, it all starts with having enough workers – today and in the future.
“The first thing we look at is labor force growth,” said Jay Denton, chief analytics officer at ThinkWhy, a Dallas-based software services company that focuses on jobs and pay.
The U.S. labor force has declined in three of the past four months, and that’s troubling, he said: “At some point, if the labor force doesn’t start to pick up and grow at a quicker pace, it’s inevitable that job growth has to slow down.”
That’s a major challenge nationwide and in many states. How has Texas flipped the script?
“People are still moving here for jobs,” Denton said. “It’s a trend that’s been playing out for decades.”
For all the focus on remote work since the pandemic, the vast majority of companies want employees to be on site at least a few days a week, he said. So when positions come open in Texas or Dallas, which happens a lot, they’re usually filled by locals or people willing to move here.
Texas easily led all states in population growth last year, adding over 310,000 residents, well ahead of runners-up Florida (up 211,000) and Arizona (up 98,000). Domestic migration was a big part of Texas’ growth, contributing a net gain of 170,000.
As Denton suggested, most are probably coming here to work.
Texas also has a large share of young people, and that contributes to higher participation rates and faster population growth. In July, Texas’ labor participation rate was 63.8%, which was 0.4 percentage points higher than in February 2020.
That may seem a small increase, but Texas has a population of nearly 30 million – and a fast-growing population at that.
In contrast, the U.S. labor participation rate was 62.1%, which was 1.3 percentage points lower than before the pandemic hit.
International immigration has been recovering, and that’s always been an important part of Texas’ outsized economic growth, Orrenius said. While those numbers lag, she cited cell phone data that shows Texas was again leading in interstate relocations through the week of August 8th.
“We’re seeing people continue to move to Texas,” said Thomas Vick, Dallas-Fort Worth regional director of Robert Half, a major staffing firm. “Things may be changing elsewhere, but that just seems to fuel more growth here – and quicker.”
In the first seven months of 2022, Texas’ labor force grew by just over 300,000. That’s more than double the increase for the same period in 2019.
Many companies tapped the brakes on hiring early in the summer, amid concerns about the Federal Reserve raising interest rates to combat inflation. Now they’re trying to hire at a fast pace, especially for contractors who can hit the ground running, Vick said.
“They’re starting to really get after this work that built up over the last couple of months,” Vick said.
It’s a chance for some to catch up, said Denton: “So many companies simply couldn’t hire before because there wasn’t enough talent available.”
Through July, Texas’ job growth outpaced the U.S. rate in all private-sector industries, according to the Dallas Fed. In professional and business services, one of the most important segments in Dallas-Fort Worth, Texas led the U.S. in annualized growth rate 6.1% to 3.8%.
In financial activities, Texas led 8.1% to 2%. In leisure and hospitality, Texas led 10.8% to 7.7%.
The big gap was in oil and gas: Through July, the energy segment grew at an annualized rate of 27.3% in Texas compared with 19.7% for the U.S.
Many of ThinkWhy’s clients want to know where to find the most qualified candidates. On its list of 150 job markets, Dallas-Fort Worth and Austin rank No. 1 and No. 2, respectively. Houston ranks sixth.
“As often as possible, we point clients to Texas because of the growing base of talent,” Denton said. “That’s where you’re gonna find a lot of people.”
Unemployment remains low, but the number of Texans quitting their jobs rose to 407,000 in June, the first gain in that metric in three months. That’s an indicator of strong confidence among job-seekers.
Combine that with higher wages and more flexibility in work hours and remote work, and it’s understandable why more Texans are joining or rejoining the labor force.
“There’s an opportunity to jump back in quickly – whenever people want to do it,” Vick said.
