Inflation is on the rise across the country, and Texas has not been spared by rising prices. Economic experts say this is the worst national inflation crisis since the early 1980s. Though inflation rates have recently been exacerbated by the Russian war on Ukraine, federal data shows that prices have been on the rise long before that.
Texas small business owners say inflation is hurting their ability to hire and retain workers, forcing them to raise prices on consumers; 90% of respondents say inflationary pressures have worsened since January.
There are increasing signs that the Texas economy is slowing. The most recent jobs report showed state employment was flat in August. The unemployment rate rose slightly to 4.1 percent (from 4.0 percent in July), and labor force and wage growth also eased.
Real-time measures of economic activity, from the Dallas Fed’s Texas Business Outlook Surveys (TBOS), point to below-average growth in manufacturing production and service sector revenue and to lessening price pressures.
Labor Markets Show Indications of Softening
After the number of jobs grew at a torrid 5.6 percent annual rate during the first seven months of 2022, the expansion ground to a halt in August. On a month-over-month basis, job growth dropped from 7.6 percent in July to 0 percent in August.
Notably, the latest results represent a single month and are subject to revision. Nevertheless, other data sources also point to a sharp slowing in late summer. Household survey employment, for example, grew only 0.5 percent. Payroll hourly wage growth slid from 4.4 percent year over year in July to 2.8 percent in August. The labor force increased by just 1 percent on an annualized basis during the period.
Notwithstanding the recent slowing, Texas employment has expanded 4.9 percent this year, significantly faster than the national rate of 3.5 percent.
The slowing momentum is visible across a broad range of Texas industries. Trade, transportation, and utilities, professional and business services, education and health, construction and information sectors all experienced declining employment month over month in August.
A lack of employment growth and a slight increase in unemployment from July to August, along with fewer employers raising wages, are signs that Texas’ economy is slowing, economists at the Federal Reserve Bank of Dallas said in a report released Thursday.
The latest report said the number of employed Texans held steady at around 13.5 million last month, while the state’s unemployment rate increased from 4% in July to 4.1% in August. 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 grew 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. Texas’ nonfarm employment slowed in August, posting the smallest job creation since February 2021. Payroll expansion was mixed across industries with the biggest losses in management, manufacturing of nondurable goods, and wholesale trade. Additionally, the Dallas Fed’s annual employment forecast expects growth to slow in the second half of the year as a weaker U.S. economy outlook puts downward pressure on Texas companies.
In August the national unemployment rate ticked up 20 basis points to reach 3.7 percent. Texas’ unemployment rate remained above the national level in August at 4.1 percent. Even though the Texas rate has been higher than the national rate since COVID, the state’s workforce has been consistently more engaged with the state’s labor force participation rate at 63.8 percent versus the national rate of 62.4 percent. The national labor force rate still remains around 1 percent below pre-pandemic levels, whereas Texas recovered in the summer of 2022.
The number of Texans filing initial unemployment insurance claims dropped to the lowest it’s been in a decade, with only 41,900 applications filed. Claims have trended downward since the spike at the start of the pandemic, culminating in record lows not seen in decades. The increased number of job openings has contributed to this trend. Texas’ average weekly continued unemployment insurance claims trended up slightly month over month (MOM), but it remains on par with April’s lows. In general, the number of total claims nearly reverted to pre-pandemic levels.
The 2.8 percent YOY increase in Texas private employees’ average nominal earnings ($30.05) was not enough to overcome inflation, decreasing the state’s real private hourly earnings by 3.5 percent. Wages changed little in August with the largest paycheck increases coming from Dallas ($33.69) and Fort Worth ($32.63) at 0.46 and 0.33 percent MOM, respectively. Austin ($32.33) and San Antonio ($27.41) wages slipped by 0.24 and 0.18 percent MOM, respectively.
Hiring across the board in all major metros was stifled as Texas added only 16,400 employees to the payroll compared with over 70,000 added in July. San Antonio was the only metro to have a loss in employment, losing 2,400 jobs. Dallas and Austin had minor upticks in employment at 1,000 employees each. Houston bucked the trend with 15,600 additional jobs added in August. Meanwhile, San Antonio dragged the metric down with a reduction of 2,400 jobs.
Manufacturing
Economic concerns and mounting inflation have coincided with slowed employment growth across Texas, including the manufacturing sector. Texas’ goods-producing sector added 1,900 jobs in August. Despite manufacturing employment’s historically robust pace, record-high national inflation pulled down Texas’ average hourly manufacturing earnings ($27.62) as wages increased 0.01 percent, MOM, far from enough to counteract inflation. In addition, the Dallas Fed’s Manufacturing Outlook Survey dropped even further from the previous month as recession fears loomed.
As informed investors we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.
What is inflation, and how does it affect the job market in Texas?
Inflation is the general increase in the price of goods and services over time. It affects the job market in Texas by reducing the purchasing power of consumers, which can lead to a decrease in demand for products and services. This, in turn, can result in reduced job opportunities and a slowdown in job growth.
How does inflation impact job seekers in Texas?
Inflation can impact job seekers in Texas in a number of ways. As prices of goods and services rise, job seekers may find it more difficult to make ends meet, which can make it harder to focus on job searching. Additionally, inflation can lead to reduced job opportunities as companies may be less likely to hire new employees due to rising costs.
